6. Figure out what to do with your 401(k)
Rolling over your 401(k) into an IRA once you retire saves you from having to foot a big tax bill and you can continue earning dividends on what you’ve saved. In some cases, however, your employer may allow you to leave your 401(k) where it is until you’re ready to start pulling the money out. Just make sure you’re looking at all the administrative fees that go along with leaving it behind since that can eat into your returns.
Cashing it out and taking a lump sum is another option but it can be an expensive one. If you’re over age 59 1/2 when you drain your account, you won’t have to pay an early withdrawal penalty but the whole amount is still considered taxable income. If you’re taking out hundreds of thousands of dollars, that could push you into a substantially higher tax bracket, which means even more money you’ll owe.
When retirement is looming on the horizon, making the smartest financial decisions possible is crucial. Keeping these six points in mind can ensure that you continue to prosper in your golden years.