FREE NEWSLETTER
This is a major financial decision for retirees. 25% of retirees over 60 still have their savings in a 401k plan, 5 years after retirement.
There are advantages for each option.
IRA
401K
There are many more pros and cons for each. Much will depend on individual situation.
If you are already a retiree, which option did you pick and why? Are you happy with that decision? What would be your advice to others?
If you are planning to retire soon, which option are you considering and why?
I moved my funds into an IRA for simplicity – everything in one place – and for better choices – my 401k had some lousy choices compared to the options available at Schwab.
When doing Roth conversions as I have for the past couple of years, I roll over from my traditional 401(k) to Roth IRA. And since both are at Fidelity, if the funds are in money market, it takes only one day.
I am looking into this option. Thanks!
I was thinking about this topic last week because a recent Clark Howard article on 401(k) safety (https://clark.com/personal-finance-credit/investing-retirement/is-a-401k-safer-than-an-ira/ ) reminded me to look into whether my 403(b) retirement accounts have ERISA protections like a 401(k) does. It ends up my 403(b) does not have ERISA protection. Apparently some 403(b) providers do meet the requirements for ERISA protection, and some don’t: https://www.standard.com/brokers-advisors/retirement/in-the-loop/erisa-vs-non-erisa-403b-plans-primer ; https://blakeharrislaw.com/blog/retirement-income-and-protection-plan . State protection of tIRA and Roth IRA assets from creditors varies with state, as Jonathan provided a table of.
Putting this together, for my combination of tIRAs, Roth IRAs, inherited IRA, non-ERISA 403(b)s, and non-retirement accounts, for my particular state, I found that the majority of my savings is not protected from creditors.
I have some creditor protection from a high level of auto liability insurance, plus the liability insurance within my homeowners policy. I also have an umbrella liability policy, for additional coverage. But after reviewing my current numbers I realized I was far from adequately protected from creditors, so I tripled my umbrella liability coverage, largely to make up for the lack of ERISA protections on my 403(b)s. Fortunately, umbrella liability coverage is very cheap compared to many other insurance products.