When approaching or entering retirement, it's possible you'll need to consider accumulated savings made into one or more 401(k) accounts from previous employers. Once you've reached age 59 ½, you can generally begin making withdrawals from these accounts without the 10% additional federal tax that may apply to earlier withdrawals, although ordinary income taxes may still apply and plan rules can vary. There may also be alternatives to withdrawing 401(k) funds, such as continuing to invest those assets based on your financial goals and circumstances.
Plans that have been active for a considerable amount of time may have accumulated at a significant rate while simultaneously keeping your current tax bill lower since contributions are made with pre-tax dollars. But this must be considered when beginning to withdraw from the plan as income will become taxable.
If you're still on the way to your retirement years and able to put aside more money than at the beginning of your career, a 401(k) can offer substantial annual contribution limits, subject to IRS limits and the terms of the plan.
We're here to help guide you towards a plan that directs your assets into retirement vehicles best suited to your goals moving forward.
401(k) and IRA planning covers more than just contributing during your working years. It also includes deciding what to do with old employer plans, choosing between Traditional and Roth structures, and coordinating these accounts with your broader retirement income and tax strategy as you approach retirement.
If you have a 401(k) from a previous employer, you generally have a few paths to consider:
Leave it in place with your former employer's plan, if permitted
Roll it into an IRA, which may offer more investment flexibility and consolidated management, but may also involve different fees, protections, and withdrawal rules.
Roll it into your current employer's 401(k), if your new plan accepts rollovers
Cash it out, though this typically triggers taxes and, if done before age 59 ½, an early withdrawal penalty
We help evaluate which option fits your goals, taking into account fees, investment options, and how the account fits with the rest of your retirement plan.
Both are tax-advantaged retirement accounts, but they differ in a few important ways. A 401(k) is employer-sponsored and typically offers a limited investment menu chosen by the plan provider, along with higher annual contribution limits. An IRA is opened independently and generally offers a broader range of investment choices, though contribution limits are lower. Many retirees end up using both account types, and the mix matters when it comes to structuring withdrawals and taxes later on.
Based in Ashburn, we help clients throughout Loudoun County and the Northern Virginia and DC Metro area evaluate old 401(k) and TSP balances from federal, government contracting, and corporate careers, and coordinate those accounts with IRAs and other retirement assets as part of a complete plan.
These are specialized employer-sponsored retirement plans. A 403(b) is for non-profit and educational employees, a 457 is often for government workers, and a 401(a) is a customizable plan for certain public or non-profit employees. Understanding their features can help you maximize benefits and avoid penalties.
A LIRP uses a permanent life insurance policy's cash value as a tax-advantaged way to supplement retirement income. While it may offer tax advantages and a death benefit, fees and policy costs should be considered. Whether a LIRP is appropriate depends on your financial goals, income, and existing retirement savings. LIRPs may be considered by some higher-income individuals who have already maximized contributions to other retirement vehicles, depending on their individual circumstances.
A non-qualified retirement plan doesn't meet the requirements for qualified plan tax treatment, although some non-qualified plans may still provide tax-deferred growth. These are often used by employers to offer extra benefits to executives, such as deferred compensation agreements. Unlike qualified plans, they lack the same protections and may have different tax implications.
You can take a loan, a hardship withdrawal, or roll funds into another account, but each option has rules and potential penalties. Withdrawing early may trigger a 10% penalty and income taxes, reducing your savings significantly. Alternatives such as emergency savings or a Roth IRA ladder may be worth considering before tapping retirement funds, depending on your circumstances.
A 401(k) rollover is the process of moving funds from an old employer's 401(k) into another retirement account, such as an IRA or a new employer's plan, typically without triggering taxes when done correctly. It's a common step for consolidating accounts accumulated across a career.
A Traditional 401(k) is funded with pre-tax dollars, reducing your taxable income now, with withdrawals taxed in retirement. A Roth 401(k) is funded with after-tax dollars, so qualified withdrawals in retirement are generally tax-free. The right choice often depends on whether you expect to be in a higher or lower tax bracket in retirement.
In most cases, yes. You can contribute to both a workplace 401(k) and an IRA in the same year, though income limits may affect whether your IRA contributions are tax-deductible if you're also covered by an employer plan.
It's likely that you have one or more 401(k) plans that have been churning along for years. Now that it's time to plan for retirement, fill out the form below and let Abich Financial help you evaluate how your retirement savings may fit into your overall retirement strategy.