Common knowledge has always been that when a person retires from a company they either take a lump sum check and stick in an IRA or have the company convert their 401(k) into a monthly income check. Either way, they were no longer in the company’s 401(k). According to Jeff Opdyke (free), it may be time to reconsider the status quo.
The article points out the following:
Keeping your nest egg in the company 401(k) can be smart. But make sure your plan offers the following features first:
- The fees are lower than you’d pay in an IRA.
- The investment options are as good as — or better than — an IRA’s.
- It allows for partial distribution of your assets.
- It allows a nonspouse beneficiary to stay in the plan if you die.
One major con I can see to keeping money in the company’s 401(k) plan is that a retiree may lose the opportunity to pass tax-free income to their beneficiaries through a Roth IRA. Of course, this is assuming that they actually have a Roth IRA for that purpose.
Anyway, the article brought up an interesting alternative for retirees to think about (as if they don’t have enough to think about already). For those who are confused by all this, go see a financial planner who specializes in retirement planning and living.