What Should I Do With My $920k 401(k) When I Retire?

Core Insights - The timing of retirement significantly influences financial planning and investment strategies, with younger individuals advised to invest in higher-risk assets while older individuals may need to adopt a more conservative approach [4][3][2] Investment Strategies - Younger investors, such as those aged 45, can benefit from leaving their 401(k) invested in higher-risk assets like an S&P 500 fund, potentially accumulating around $9.1 million by age 67 at an average market return of 11% [1] - As life expectancy increases, financial advisors may recommend maintaining a stock-heavy portfolio into the mid-60s, allowing time for recovery from market downturns [2][3] - A general rule suggests that the further one is from retirement, the more aggressive the investment strategy can be, shifting to a more conservative approach as retirement approaches [3][4] Retirement Planning - Key elements of retirement planning include income allocation, tax planning, and spending balance, with a focus on generating fixed income from savings and Social Security benefits [5][6] - For example, a 63-year-old earning $100,000 annually and saving $20,000 per year could potentially accumulate $1.75 million by age 70, generating annual income of $70,000 at a 4% withdrawal rate [7] Managing 401(k) Post-Retirement - Upon retirement, individuals have several options for managing their 401(k), including keeping it in place, rolling it into an IRA, converting it to an annuity, or considering Social Security benefits [10][13][15][17] - Rolling over to an IRA allows for greater control over investments and potential elimination of management fees associated with a 401(k) [13][14] - Annuities provide guaranteed monthly payments but may lose value against inflation and lack growth potential [15][16] Social Security Considerations - Social Security benefits are influenced by lifetime earnings and the age at which benefits are collected, with full benefits available at age 67 [18][19] - The average Social Security benefit is currently $1,976 per month, translating to $23,712 annually, with variations based on the age of collection [20][21] Long-Term Financial Planning - Effective retirement planning must account for taxes, inflation, and longevity, with strategies to mitigate the impact of these factors on retirement savings [22][24] - It is essential to plan for potential expenses such as long-term care and to ensure that savings last throughout retirement, potentially into the mid-90s [24][25]