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Max Out 401k Annuities Before Transfer


Many retirees will transfer their 401k plans to 401k annuities at retirement in order to receive lifetime income.  This transfer, usually of just a part of your 401k savings, will ensure that you can meet your expenses in retirement and also that your savings will last as long as you do.  Forbes magazine’s Ashlea Ebeling gives “10 tips to boost your 401k balance.”  If you follow these tips, you’ll help ensure that you have enough money to transfer to a 401k annuity and have money left for other investments.

First of all, make sure that you are contributing the maximum amount your employer will match.  For a time when the economy was at its worst many companies were no longer matching 401k contributions, but many have started matching again.  If you are lucky enough to get a raise or bonus, save at least some of that money in your 401k.  You were already living off the previous salary anyways, why not save the salary bump for your future?  When the time comes each year to update your 401k plan, increase your contribution amount instead of leaving it the same.

Consider contributing to a Roth 401k if it is offered by your employer.  This allows you to contribute after-tax money so that you don’t have to pay taxes when you are receiving monthly payments.  Never use your 401k for a loan or for a hardship.  Do your best to find another way to get through financial hardships and if you must use your 401k, make sure that your hardship actually qualifies as a hardship under the 401k plan terms.

Make sure that your spouse is contributing to any available 401k plans as well.  If you have 401k plans at any old jobs, consolidate those into your current plan so that you can manage them all together.  Be sure to look at your investments at least yearly and look for changes you can make to benefit you.  Don’t just let your money sit in the same accounts without re-evaluating.  Even if you have reached the age where you can withdraw your money without penalties, don’t take your money out if you are still working.  Wait to transfer to 401k annuities until you really need the monthly payments to meet expenses.

Written by Rachel Summit

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