What are my options for the money that is in my 401(k) or other pension plan?
Usually there are four broad choices, each with different advantages and disadvantages: 1. Leave it invested in the company plan. This is the 3rd worst option. In most plans, at the death of the plan participant, the beneficiary will be paid out the benefit in a lump sum, thereby creating a taxable event for the entire distribution. 2. Annuitize and receive an income for life. This is the 2nd worst option for most people unless the retiree has no professional financial advice, no stock market experience or ability, or is mentally incompetent. Only as a last resort should the money be given to an insurance company for an annuity. 3. Withdraw the account balance, pay taxes and then invest the funds. This is the worst option. Under no circumstances do this. 4. Rollover to an IRA or other pension fund, paying no taxes and continue to defer the income tax. This is the best option. Then begin monthly withdrawals as needed, maintaining your investment program.
