What to Do With Your 401(k) When You Retire
By the time you're ready to leave the working world for good, you may have quite a balance saved up in your 401(k). So what exactly should you do with all that money to help guarantee a well-funded retirement? Here are a couple of possibilities you might pursue (plus one you definitely shouldn't).
A Roth IRA makes a nice complement to traditional, tax-deferred retirement savings accounts such as the 401(k). With your standard 401(k) you get a tax break on the contributions you make to the account, but once you retire and start taking money out, you'll have to finally pay the IRS the taxes on that money. A Roth account works the other way around: There's no tax break on your contributions, but the money you take out of the Roth account is tax-free. If you have both a tax-deferred and a Roth account, then once you retire you can choose how much to take out from each account every year in a way that minimizes your tax bill.
As an added bonus, Roth accounts are not subject to required minimum distributions (RMDs), so you have more control over your withdrawals if at least some of your money is in a Roth IRA.
Source: Fool.com
