What Should You Do With Your 401k When You Retire?

10 snips

Jul 15, 2025

Deciding what to do with your 401(k) at retirement can shape your financial future. Discover the pros and cons of keeping your 401(k) versus rolling it into an IRA. Uncover special IRS rules for penalty-free withdrawals for those aged 55 to 59½. Explore six key factors influencing your decision: cost, control, investment options, and more. Delve into advanced strategies like in-plan Roth conversions and Net Unrealized Appreciation for company stock. Tailoring your approach to fit your retirement timeline and tax strategies is essential!

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ADVICE

Keep 401k If Age 55-59½

If retiring between ages 55 and 59½, keep your 401k with your current employer for penalty-free withdrawals.
Rolling to an IRA would trigger the 10% early withdrawal penalty until age 59½.

ADVICE

Keep Pre-Tax 401k For Roth

Keep pre-tax funds in your 401k if doing backdoor Roth IRA contributions to avoid aggregation penalties.
Rolling pre-tax funds into an IRA complicates taxation of those conversions under IRS aggregation rules.

INSIGHT

Compare 401k And IRA Costs

401k fees have decreased recently but can still be higher than IRA fees.
Always compare the all-in cost of your 401k plan versus potential IRA options before deciding.

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Your 401(k) is likely your largest retirement asset—so the decisions made about it can have a lasting impact. This episode explores the pros and cons of keeping a 401(k) versus rolling it over to an IRA.

Learn when it makes sense to stay in a 401(k), especially for those retiring between ages 55 and 59½, when a special IRS rule allows penalty-free withdrawals not available in IRAs. Keeping pre-tax funds in a 401(k) may also support more efficient backdoor Roth strategies.

Six key factors influence the decision: cost, control, investment options, account consolidation, ease of use, and coordination across accounts. The discussion also dives into advanced strategies—such as in-plan Roth conversions, the tax treatment of after-tax contributions, and Net Unrealized Appreciation (NUA) for company stock.

The right choice depends on individual retirement timelines, tax strategies, and long-term financial goals. This episode helps uncover what to consider before making a final decision.

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Advisory services are offered through Root Financial Partners, LLC, an SEC-registered investment adviser. This content is intended for informational and educational purposes only and should not be considered personalized investment, tax, or legal advice. Viewing this content does not create an advisory relationship. We do not provide tax preparation or legal services. Always consult an investment, tax or legal professional regarding your specific situation.

The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.

Comments reflect the views of individual users and do not necessarily represent the views of Root Financial. They are not verified, may not be accurate, and should not be considered testimonials or endorsements

Participation in the Retirement Planning Academy or Early Retirement Academy does not create an advisory relationship with Root Financial. These programs are educational in nature and are not a substitute for personalized financial advice. Advisory services are offered only under a written agreement with Root Financial.

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