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I’m retiring. What should I do with my retirement plan savings?

Read time: 5 to 6 minutes

If you’re thinking about retiring—or you’ve already retired—one of your key decisions is what to do with the money you’ve saved in your retirement plan account. But before you make that decision, you should create your overall plan for retirement; our guide, Create your roadmap to retirement, can help. 
 

You’ll start with outlining your goals, understanding the risks you may face, and determining all the resources you may have available. From there, you can prioritize what's important to you and prepare for the future. Having a retirement plan can help you achieve your goals and minimize your risks.

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HELPFUL HINT

While the guide can help you do this on your own, planning for retirement can be overwhelming. Many people turn to professionals for help—especially if their situation is complex. Check out what advice and guidance options may be available to you through your retirement plan. If you’re rolling over to a Vanguard IRA1, you’ll also have a range of advice options.

Stay in your plan

Pros and Cons Table

Pros Cons

 

  • You can keep your investment selections.

  • The plan may offer low-cost investment options not available elsewhere.

  • You won't pay taxes on your money until you take a distribution or withdrawal.2

  • Your plan may offer you the flexibility to take partial distributions or installment payments.

  • If you have a plan loan, you can use electronic bank transfers to continue making payments.3

  • Your plan may offer advice and money management services.

 

  • You can't continue contributing to the plan.

  • You usually need at least $5,000 or $7,000 in your account, depending on plan rules.

  • Your withdrawal options may be limited, depending on what the plan offers.

  • Once you reach age 73, you'll need to begin taking required minimum distributions (RMDs). Note: Roth money is not subject to RMDs.
Stay in the plan

Roll over to an IRA

An IRA is a personal, tax-deferred account that gives investors an easy way to save for—and continue to invest in—retirement. You can move your money to an IRA, which offers a wide assortment of investment options.1

 

If you're interested in this option, consider a Vanguard IRA®. Why? The average Vanguard fund expense ratio is 84% less than the industry average.4 Over time, that can mean more money in your account—whether you leave your money in the plan or roll it over to a Vanguard IRA.

 

You can consider a traditional or Roth IRA, depending on your situation. You can also explore whether a Roth conversion might make sense for you.

Learn about traditional vs Roth IRAs, conversions, and more

Pros and Cons Table

Pros Cons

 

  • IRAs typically offer more investment choices and fewer restrictions than employer-sponsored plans.

  • You'll have access to Vanguard's advice services to manage your investments—even if advice wasn't available in your previous employer's plan.

  • You won't pay taxes on your money until you take a distribution or withdrawal.2

  • You may have more flexibility to use the money.

  • You can choose between a traditional or a Roth IRA.

 

  • An employer plan may offer investments at lower costs than those in IRAs, depending on your investment choices. Your costs may vary based on your mix of investments.

  • Once you reach age 73, you'll need to begin taking RMDs from a traditional IRA. Note: Roth money is not subject to RMDs.

Want to open a Vanguard IRA?

Call us at 888-387-5534.

Helpful hint

If you invest in a company stock fund in your plan, please consult a tax advisor for more information on the tax treatment of company stock.

Roll over to an IRA

Cash out your savings

You can cash out your entire retirement plan balance when you leave an employer. But that could have a major impact on the ability of your savings to sustain you through retirement. And you could owe a lot of money to the IRS. Add up all the taxes, and it could mean years of progress wiped out in a single day. So carefully consider this option before you act.

Pros and Cons Table

Pros Cons

 

  • The money is yours to use now as you like.

  • You can use the money for emergency expenses or to help you pay off debt.

 

  • The federal government withholds 20% toward your taxes before you get your check.

  • If you cash out before age 59½, you will owe a 10% federal penalty tax on the money. (Some exemptions may apply.)

  • Cashing out your savings means your money will no longer be invested, so it won't be able to grow.

Helpful hint

Take time to weigh your withdrawal options. You may want to talk them over with a financial advisor.

Cash out my savings

Know your options—and get help if you need it

If you’re going to continue to work during retirement, you may be able to roll over your retirement plan balance to a new employer’s plan. Check out this article that outlines all the options for job changers.  

 

When you’re ready to make your decision, we’re here to help.

 

Just call us at 888-387-5534.

Check out all the options available to you through your retirement plan

1 Whether you keep your money where it is, move it to an IRA, or move it to another employer's plan depends on your situation and preferences. Some things to consider are available investments and services, fees and expenses, and protection from creditors. Also consider withdrawal penalties, required distributions, and the tax effects of moving company stock to an IRA. There are other factors too. Weigh the pros and cons before you make your decision.

 

2 Taxes: Taking money from your retirement account can affect how much you’ll have to pay in taxes. You’ll owe taxes on pre-tax money. You won’t owe taxes on Roth earnings as long as you are age 59½ or older and it’s been at least five years since your first Roth contribution. If required by law, Vanguard will withhold some taxes for you. You may need to pay a 10% federal penalty tax if you take money out early.

 

3 If you have a loan and leave your employer, you can pay back the loan in full or continue making payments using electronic bank transfers. But if you don’t choose either of these options, the unpaid balance will be reported to the IRS as a withdrawal. That amount may then be subject to income tax. And if you’re younger than age 59½, you may also owe a 10% federal penalty tax.

 

4 Vanguard average mutual fund expense ratio: 0.07%. Industry average mutual fund expense ratio: 0.44%. All averages are asset weighted. Industry averages exclude Vanguard. Sources: Vanguard and Morningstar, Inc., as of December 31, 2024.

Whenever you invest, there’s a chance you could lose the money.

 

The performance of a company stock fund depends on the price of a single stock, which can move up or down dramatically. So this type of fund can be riskier than a stock mutual fund, which may own hundreds or thousands of stocks.

 

Before you invest, get the details. Consider the fund’s objective, risks, charges, and expenses. The fund’s prospectus (or summary prospectus, if available) will tell you these important facts and more. So read it carefully. Call Vanguard at 800-523-1188 to get one. Or you can find one at vanguard.com.

Vanguard does not provide individual tax advice. You should consult your tax advisor before making any decisions as to your specific circumstances.

 

Advisory services are provided by Vanguard Advisers, Inc. (VAI), a registered investment advisor. Eligibility restrictions may apply. VAI cannot guarantee a profit or prevent a loss.