I’m 55 and am getting closer to retirement – what do I actually do with my 401(k) once I leave?

A lot of people make a point to save diligently in a 401(k) during their working years. And you’d think that would be the hard part, right?

But actually, many people find it easy to fund a 401(k). They sign up to contribute money out of their paychecks and just keep doing that throughout their careers.

The tricky part can sometimes arise once retirement rolls around and it’s time for that money to be spent.

That’s the situation this Reddit poster is in. They’re 55 years old and they’re getting ready to retire. And they’re wondering what to do with their 401(k) now.

The poster here has a few options. But I’d also suggest they get help navigating them.

First, cover the basics

It’s not uncommon to leave money in a 401(k) plan during retirement. So the poster doesn’t necessarily have to find a new home for their savings. But what they do have to do is figure out how to spend it safely.

So what I’d say to do is map out a retirement budget. That’s not an easy thing to do when retirement is 20 years away. But the poster here is 55 and clearly thinking about retirement. So they probably have a good idea of what their living expenses will look like.

From there, the poster needs to figure out a safe withdrawal rate to avoid spending down their 401(k) too quickly.

For many years, experts recommended starting with a 4% withdrawal rate and adjusting future withdrawals for inflation. But whether that works for the poster will depend on their retirement age, how long they expect to need their money to last, and how their funds are invested.

Speaking of which, the poster needs to make sure their 401(k) is invested appropriately for their age and situation.

If all of their money is in a target date fund, that might solve the problem, since these funds are designed to adjust savers’ risk profiles based on where they are in life. Otherwise, they might need a professional to look at their 401(k) and offer guidance on re-allocating their assets.

The poster should also be mindful of required minimum distributions, which will apply to their 401(k) unless it’s a Roth account. However, those won’t apply until the poster’s mid-70s, so they do have some time to worry about that aspect.

It’s a good idea to get help

It’s a wonderful thing that this poster has built up a 401(k) balance. So many people find themselves approaching retirement with little to no money saved.

But this poster’s hard work should not go to waste. So what I’d suggest they do is sit down with a qualified financial advisor and get their input on how to manage those funds.

An advisor can tell them if their investments are appropriate given their impending retirement. And an advisor can also help them come up with an ideal withdrawal rate that gives them access to the funds they need without increasing their risk of running out of money. Plus, an advisor can help the poster manage their required minimum distributions, even if they’re not going to be on the table for many years.

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