Employer-sponsored retirement plans, like 401(k)s, are designed to encourage saving during your career but are not efficient when it comes time to take money out.
How Withdrawals Are Funded
Many 401(k)s don’t enable choice when investments are sold. Some plans sell pro-rata (every investment is sold based on its percentage of your account). Others use a hierarchy-based approach where investments are sold in a predetermined order, often cash and low-risk assets first, which would leave your remaining investments skewed toward riskier assets. Both methods would mean you’re taking unnecessary risks and leaving investments not aligned to your needs.
Mandatory Tax Withholding
401(k) distributions are typically subject to mandatory 20% federal income tax withholding, regardless of whether this is the right amount for you or how you would like to pay. Effectively, it requires taking an extra 25% of taxable income to realize the same amount of cash.
Required Minimum Distributions (RMDs) and Account Aggregation Rules
Once you reach age 73 (or 75, depending on your birth year), the IRS requires you to take a minimum amount from retirement accounts each year. With 401(k)s, you must calculate and withdraw the RMD from each one separately.
Consider rolling 401(k)s into an IRA for several advantages:
Broader investment choices – 401(k)s typically have a limited menu of investment options which may or may not suit your needs in retirement.
More flexible withdrawal strategies – including the ability to choose exactly which assets to sell and when.
Customizable tax withholding
Ability to aggregate RMDs – If you have multiple IRAs, you can choose to take your combined RMDs from a single account, reducing the likelihood of missing one and incurring a penalty.
If you’re approaching retirement, now is the time to review your options and develop a withdrawal strategy that aligns with your goals, not just your plan’s default settings.
Call us today to learn how we can help. 404-941-2800
Navigating the complexities of financial planning requires trust, transparency, and a commitment to your best interests. At Integras Partners, we proudly embrace our role as fiduciary advisors, ensuring that every recommendation and strategy is aligned with your unique goals and values.
The Fiduciary Difference
Being a fiduciary means we are legally and ethically obligated to always act in your best interest. Unlike some financial advisors who may earn commissions on products they sell, Integras Partners operates on a fee-only basis. This structure limits conflicts of interest, allowing us to provide unbiased advice tailored solely to your financial well-being.
Building Long-Term Relationships
We believe that effective financial planning is rooted in understanding you—your aspirations, values, and life circumstances. By fostering long-term relationships, we can adapt your financial strategies to life’s changes, whether it’s a career transition, family milestone, or market fluctuation.
Transparent Communication
Transparency is key to building trust. We take the time to explain our investment strategies and the rationale behind any changes. Our clients receive regular updates, including quarterly performance reports and market commentary, ensuring you’re always informed about your financial journey.
Holistic Financial Planning
Our approach goes beyond investments. We offer comprehensive financial planning services that encompass tax efficiency, retirement planning, estate considerations, and legacy goals. By addressing all aspects of your financial life, we aim to provide a cohesive strategy that supports your long-term objectives.
Peace of Mind Through Market Cycles
Market volatility is inevitable, but with Integras Partners, you can have confidence in your financial plan. Our investment strategies are designed to withstand market fluctuations, focusing on long-term growth and stability. This resilience allows you to focus on living your life, knowing your financial future is in capable hands.
Choosing a fiduciary advisor like Integras Partners means placing your trust in a team dedicated to your financial success. Our commitment to unbiased advice, personalized planning, and transparent communication ensures that your financial journey is guided with integrity and expertise.
Talk to us and get some personal guidance.
Call us today to learn how we can help. 404-941-2800
As we age, living situations and health needs will change. Parents and their children avoid planning for them, for very understandable reasons:
Parents don’t “want to be a bother”. Kids “don’t want to pry” into their parents’ lives. Money conversations can be tense. Parents don’t want to choose one child over another to take important roles in making health and financial decisions.
Our Generational ConversationsTM program helps adult children and their elder parents navigate planning for Housing, Care Management, Financial Continuity, Legal Strategies, and Security.
We want to help. As families get together over the holidays, it’s a great time to broach these subjects. Click here to download our free Themes for Family Conversations. We wish you all the joys of the holidays and everyone in your family a little extra peace.
Call us today to learn how we can help. 404-941-2800
Working with Integras Partners brings confidence to your financial journey. We help clients not worry so much about money, knowing that an expert is minding your investments.
Many individual investors let emotions and procrastination impact their decisions – hesitating to buy when prices fall and feeling eager to invest when markets are strong. A disciplined advisor provides steady, informed guidance to improve your financial outcomes.
August through October are historically the weakest and most volatile period for stocks and bonds alike. This year appears to be exceptional. Few expected the strength and resilience demonstrated by financial markets in the third quarter. The S&P 500 Index® posted a stellar 5.77% gain, posting year-to-date gains of 22%. Unlike recent years, the gain was not due to only a few large tech and communications stocks. We’re seeing overdue and much preferable broadening of stocks showing positive returns, and not just from the largest U.S. companies, but in small-caps and foreign markets as well.
The economy remains strong as the Fed begins its interest rate cutting cycle. Not too hot, and not too cold. Just like the story of a lost girl, everything is now “just right”. The Fed is done raising rates, employment strength continues, and economic growth is solid. These conditions amount to a “Goldilocks Scenario”, just about perfect to sustain corporate earnings growth and stock gains. Earnings growth should accrue to the value and small cap sectors, which until recently have lagged the large tech-dominated themes that were driving the market. At Integras Partners, we have been increasing our client allocations to these undervalued areas of the market for several months.
With lower relative prices, small-caps in particular should become even more attractive to investors, given that this Goldilocks scenario lasts for a while. We saw some confirmation of this in the third quarter as the lower P/E stocks began to outperform.
Integras Partners makes it easier to stay invested by actively managing client portfolios across our time-horizon strategies. We do this by keeping low-risk investments to provide for near term goals, allowing you more comfort with keeping longer-term investments intact through market swings. We can help you capture the long-term gains that volatile markets generate over time with less stress.
First, let’s look at the three types of accounts by their tax treatment.
Tax-Deferred Retirement Accounts are funded with untaxed dollars (contributions are tax deductible, either through salary-deferral or on your tax return). However, future withdrawals are fully taxed as ordinary income. Examples include 401(k)s and traditional IRAs.
Taxable Accounts are funded with after-tax dollars. Dividends and gains from sales receive preferential tax rates. Because you’re paying taxes in the years that income or sales occur, withdrawals aren’t taxed. These are usually mutual fund and stock accounts.
Roth Account contributions are not tax deductible. However, they grow tax-free forever, and withdrawals are never taxed.
It’s best to spread money across these three account types while you are working. This will give you some flexibility to manage your taxes in retirement, which could help your money last longer. Having different types of accounts also provides options for early retirees.
Optimal investment and withdrawal strategies are different for everyone. Factors include age, tax brackets, employer plan features, and investable income. Powerful retirement planning is best done well in advance and then annually while taking distributions.
Retirement planning is one of the most important things that we do for clients. We would be happy to discuss your situation and how we might be of service.
