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Considering Leaving Your 401(k) with Your Employer in Retirement: Pros and Cons

Doug Kronk • November 22, 2023

Retirement decisions can often feel overwhelming, especially when it comes to managing your hard-earned savings. Lately, I've observed an intriguing trend among retiring clients—more employers are offering the option to retain your funds in their 401(k) plans post-retirement. This shift prompts a reconsideration of the traditional approach to retirement savings, presenting both opportunities and considerations worth exploring.


Evolution of Perspective


Employer-sponsored 401(k) plans, once seen merely as a savings vessel, are now emerging as potential income streams during retirement. To accommodate this shift in perspective, many plan sponsors are incorporating in-plan annuities into their employees' investment choices.


As retirement approaches, you might find yourself with the option to leave your assets where they currently reside. Here's a closer look at the pros and cons to weigh while making this pivotal decision.


Pros of Keeping Your 401(k) with Your Employer


Fee Savings: Sticking with your employer's 401(k) could mean savings on fees. Institutions often secure funds at better rates, potentially reducing costs for you.


Access to Stable Value Funds: These funds within a 401(k) offer stability akin to money market funds but with potentially higher interest rates.


Federal Protection: Federal laws shield 401(k) funds from creditor judgments, providing a layer of protection, excluding certain circumstances like IRS tax liens or spousal/child support orders, including bankruptcy.


Annuity Options: Some plans offer annuity choices, promising consistent, guaranteed payouts resembling a pension throughout your life.

Cons of Not Rolling Over Your 401(k) to an IRA


No New Contributions or Employer Matches: After retirement, you won't be able to make fresh contributions or benefit from employer matches.


Limited Investment Choices: Compared to the broader array in an IRA, a typical 401(k) might offer a more restricted selection of investment options.


Complexity in Management: Managing multiple retirement accounts could become cumbersome. Consolidating them into a single IRA might simplify your financial oversight.


This is indeed a weighty decision, and your unique circumstances will heavily influence the right choice. I'm here to guide you through this process. Once you have an approximate retirement date in mind, it's wise to inquire about your options. Even better, let's connect and review these choices together. Remember, I'm just a call or email away, always ready to assist.


Taking the time to weigh these factors will ensure your retirement strategy aligns perfectly with your financial aspirations and needs.

Optimizing Your Employer-Sponsored Retirement Plan: Best Practices

By Doug Kronk • June 26, 2024
As a small business owner, offering a comprehensive 401(k) plan is a key strategy to attract and retain top talent while promoting long-term financial health for your employees. Here are five best practices to ensure your plan is effective and beneficial for everyone involved: 1. Automatic Enrollment Automatic enrollment is a powerful tool that can significantly boost participation rates in your 401(k) plan. By making it the default option, employees are automatically enrolled unless they opt-out. This approach has been proven to be effective: 84% of employees with auto-enrollment participate in their 401(k), compared to just 37% without it. 2. Matching Contributions Offering matching contributions not only incentivizes employees to save more for retirement but also helps attract and retain top talent. On average, employers match 4.5% of their employees' contributions, according to a 2021 report from Vanguard. This can significantly enhance the retirement savings of your employees and demonstrate your commitment to their financial well-being. 3. Financial Education and Guidance Providing financial education and guidance can empower your employees to make informed decisions about their retirement savings. This can include educational materials, seminars, and complimentary one-on-one consultations with a financial advisor. By equipping your employees with the right knowledge, you help them maximize the benefits of their 401(k) plan and improve their overall financial health. 4. ESG Options Incorporating socially responsible investment options, also known as ESG (Environmental, Social, and Governance) funds, can appeal to employees who prioritize ethical investing. ESG options are particularly popular among younger workers, with 52% of Millennials investing in these funds, compared to 32% of Gen X and just 14% of Boomers. Offering these options can enhance employee satisfaction and engagement with the retirement plan. 5. Low Fees High fees can erode retirement savings over time, so it's crucial to offer a 401(k) plan with low fees. Evaluating and comparing the fees of different plans can help ensure that your employees retain more of their hard-earned money. This not only benefits them but also reinforces your role as a responsible and caring employer. The Importance of Benchmarking Your Plan Benchmarking your 401(k) plan is essential to ensure it remains competitive and effective. We recommend benchmarking your plan annually, but no less often than biennially. This process involves comparing your plan’s features, fees, and performance against industry standards and other similar plans. Regular benchmarking helps identify areas for improvement, ensures compliance with regulations, and keeps your plan attractive to current and potential employees. Encouraging plan sponsors to routinely have their plans benchmarked by outside professionals, such as ourselves, ensures that they are staying in good graces regarding their ERISA responsibilities. This external review can provide valuable insights and help maintain the highest standards for your retirement plan. If you have any questions about these 401(k) best practices or would like to discuss how to improve your current plan, please don’t hesitate to reach out. We are here to help you navigate the world of retirement planning and ensure your plan meets the needs of both you and your employees. Schedule a Consultation/Meeting with us today to learn more about optimizing your employer-sponsored retirement plan.

How “Higher for Longer” Interest Rates Can Impact Your Investments

May 2, 2024
The stock market has had a rough ride this past month. The S&P 500 index closed out April at 5035.69, down over 200 points (-4.2%) since the close of March. Investors have become pessimistic and frustrated, and it’s largely because the deep interest-rate cuts that the market expected early in the year just aren’t materializing. The “good news” coming out of the Fed’s May 1 meeting was that Chairman Powell didn’t see any new rate INCREASES on the horizon. While there will certainly be opportunities to make money in a high interest rate stock market, investors would be well-served to evaluate their holdings and potentially make some changes.
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