Retirement Asset Inventory: Planning For The Next Chapter
Retirement Asset Inventory: Planning For The Next Chapter
If you're considering retiring in 2025, you may have questions about how to rollover money from your 401(k) to an Individual Retirement Account (IRA) and how to take distributions. Which accounts will fund this next chapter in your life? Retirement is a major adjustment and requires careful planning to avoid making mistakes. To ensure a smooth financial transition, think about different assets that will support your life after retirement, including your 401(k), stock options, pension, and other income sources.
401(k) Plans
Decide what to do with your current 401(k). You generally have three options:
- Leave the assets with your soon-to-be-former employer.
- Roll them into an Individual Retirement Account (IRA).
- Take a distribution (note: this last option can result in a hefty tax bill). If you hold company stock in your 401(k), check for special rules regarding Net Unrealized Appreciation (NUA). You may have more options than you think, especially if the stock has appreciated significantly.
Company Stock Options
Do you have stock options you haven’t yet exercised? Review the terms and expiration dates, and explore your choices. Company stock often involves complex tax implications—especially if held within your retirement plan—so consider consulting a tax advisor. Other Employer Benefits Your 401(k) might be your most significant benefit, but it’s not the only one worth evaluating:
- Does your employer offer retiree medical coverage?
- Can you continue other benefits, such as life or dental insurance, at group rates? Review what’s available and factor it into your retirement plan.
Pensions
If you’re fortunate enough to have a pension, several critical decisions await:
- Should you start collecting at retirement or delay?
- Should you roll a lump sum into an IRA, or opt for a monthly annuity payout?
- If choosing annuity payments, which option fits your needs best?
These decisions should align with your broader financial situation and your ability to manage a lumpsum payout effectively. Unless you need immediate income, rolling a lump sum into a tax-deferred account like an IRA is often the most tax-efficient route. If you earned a pension from a former employer, contact them to confirm your benefit details and ensure your contact information is current to avoid delays when you begin distributions.
Other Financial Resources
Over your working life, you’ve likely accumulated a collection of assets beyond a 401(k) and pension. Take inventory:
- Employer retirement plans (401(k), 403(b), etc.)
- Traditional and Roth IRAs
- Pensions
- Stock options or restricted stock units (RSUs)
- Social Security
- Taxable investment accounts
- Annuities
- Cash, savings, CDs
- Cash value in life insurance policies
- Business interests
- Real estate holdings
Now’s the time to review these resources and develop a strategy to use them effectively to support your desired lifestyle. It is also a great time to roll over and consolidate accounts of like kind. Regarding Social Security, you may not consider it an asset, but just like an annuity, the income stream has significant value. You can begin taking it at age 62 but doing so reduces your monthly benefit. Waiting until your full retirement age (67 for those born after 1960) or delaying until age 70 will increase your benefit. Deciding to take Social Security early or later may significantly impact your overall financial plan.
Determine Your Income Needs
Build a realistic retirement budget then compare your projected expenses to your expected income from the sources above. This analysis will help you understand whether your current assets are enough—or if you need to adjust your plans. Also, map out a plan for which assets to draw on first and how to coordinate withdrawals throughout retirement.
Next Steps
Statistically, people find the time after retirement to be the best years of life, but reaching this chapter with comfort takes thoughtful, proactive planning. CLICK HERE for a complete financial checklist of items to consider when preparing for retirement. If you don't have a financial advisor helping you transition into retirement, reach out to the fiduciary financial planners at Hurlow Wealth Management Group. For over two decades, we have been helping Midwest Millionaires successfully retire. If you want to find clarity, make decisions with confidence, and feel comfortable in retirement, reach out to schedule a free consultation.
