"I don't need my 401k"

[jebmke]

We are 71; I haven't had to draw from any of our assets in quite a while. We plan to give it all away over time.

 

[Surewhitey]

One point is that some do not actually calculate what they will bring in when they retire... I had one sister ask me about her ability to retire and after putting everything down I told her she should retire that day!!! She was going to be making about 120 to 150% of her current salary with everything she had... this included her savings and IRAs...

This is us. NW has been consistently over the total earned for the past 5 years, especially so for the past 2. DW has a modest pension eventually & both of our SS's. She's finally thinking about joining the party, I think.

We will try to stretch the post tax to 65 & then focus on Roth rollovers prior to the RMD's @75.

 

[pjigar]

We haven't retired but I have two words for you: Money is fungible. Most people plan retirements very conservatively because it's a big one time event. People who don't plan for retirement never have this problem!

 

[latexman]

I rolled my 401k into my tIRA and my Roth IRA. No 401k anymore, so I guess I didn't need my 401k.

However, I'm withdrawing from my tIRA and my Roth IRA strategically right now to control our income, minimize IRMAA, and to bridge us while I defer my SS until 70. I'm 67. We have my pension, DW's pension, and DW's SS cash flowing right now. When I reach 70 and start my SS, and DW adds on her spousal SS, we won't need to withdraw from my tIRA and my Roth IRA for expenses. We'll have to take RMDs at 73, of course, but the monies in my tIRA and my Roth IRA should only be needed for BIG bumps in the road and BTD opportunities.

 

[street]

We haven't retired but I have two words for you: Money is fungible. Most people plan retirements very conservatively because it's a big one time event. People who don't plan for retirement never have this problem!

You got that Right! Just about everyone could be well set for retirement if they had a plan.

 

[Gumby]

In my experience it is always better to have and not need than need and not have.

 

[athena53]

You never know until the end what you’ll need. What if they end up in memory care for 5 or more years. My guess is that they’ll need their 401K then. If not, then the heirs win the lottery. I’d rather have it and not use it the need it and not have it.

That's my thinking. I'm 71 and haven't touched mine in the 10 years I've been retired other than some minimal Roth conversions. Likely scenario is that DS and DDIL will inherit a (low) 7-figure IRA and have to withdraw it over 10 years if the laws don't change. Nice problem to have.

 

[disneysteve]

My 401k is about 7.5% of our portfolio. I highly doubt I’ll ever need that money.

 

[mystang52]

Financial part of retirement is simply calculated: Income less spending. Our 401k's, now Rollover IRA's, have not been tapped because our pensions and SS exceed our spending style. But we didn't know that in the years we were contributing. I can honestly say we didn't deprive ourselves during our w*rking years, but we also did not spend foolishly. Better safe than sorry.

 

[REIJM]

One of the podcasts I listen to was talking about scenarios where you're leaving money, sometimes a significant amount, to heirs after you pass, and how having that money in a traditional 401k or IRA can be a financial burden to your heirs because of the 10 year withdrawal window.

Depending on how old you were when you had your child(ren), they may be in their 40's or 50's when you pass, aka their prime earning years. This can be an "issue" for them because the required withdrawals they make are going to be taxed at their highest marginal tax rate, and if they're in a well paying career, they can lose a good chunk of those funds to taxes.

Doing Roth conversions alleviates this tax concern for your heirs because you've already paid the taxes on the money when you converted it, likely at lower tax rates than what they will be forced to pay.

I was already planning on doing Roth conversions when we reach to point of ER, but that was a point I hadn't thought about, as we will likely (hopefully) be in a scenario where we can leave a good amount of money to those who are still here after we pass.

 

[aja8888]

People brag at parties. Not important. But I'll bet the surviving spouse will find use for it.

The surviving spouse.......and His/Her new partner!

 

[street]

One of the podcasts I listen to was talking about scenarios where you're leaving money, sometimes a significant amount, to heirs after you pass, and how having that money in a traditional 401k or IRA can be a financial burden to your heirs because of the 10 year withdrawal window.

Depending on how old you were when you had your child(ren), they may be in their 40's or 50's when you pass, aka their prime earning years. This can be an "issue" for them because the required withdrawals they make are going to be taxed at their highest marginal tax rate, and if they're in a well paying career, they can lose a good chunk of those funds to taxes.

Doing Roth conversions alleviates this tax concern for your heirs because you've already paid the taxes on the money when you converted it, likely at lower tax rates than what they will be forced to pay.

I was already planning on doing Roth conversions when we reach to point of ER, but that was a point I hadn't thought about, as we will likely (hopefully) be in a scenario where we can leave a good amount of money to those who are still here after we pass.

Very true but looking at it from the other side of the fence it is free and more money than what they had. So, a bittersweet problem to have.
In my case leaving a legacy will leave them with a lot of tax because they would most likely not need an inheritance to survive life till death. They should have a lot more than me at my age with the professions they are in.
I do know if I would have gotten an inheritance I sure would not have complained if I had to pay more tax. Tax and death are a requirement at birth. I don't like either requirement, but life has been good.

 

[RetMD21]

With the anticipated reduction in the estate tax exemption in 2026 I'm considering making charitable organizations IRA beneficiaries.

 

[Graybeard]

I retired at 56 and never took any distributions until RMDs started, I am 74 today. My net worth has tripled since I retired. My corporate pension (no COLA) and SS have been more than enough and still are, typically I bank $1200 to $2000 per month of unspent money. When RMDs started my income literally doubled! I reduced my AA from 50/50 to 40/60 and this year to 30/70 to stop the growth in my rollover IRA and reduce RMDs. I moved the last of my 401k into my rollover IRA to eliminate 2 RMDs. I just have too much money and no use for it. Divorced, no kids, would never travel, been frugal all my life, always bought used cars and heat the house with a woodstove cuz I hate buying heating oil. Heating with wood cuts my heating bill easily in half if not more. If I told you what I am doing to BTD you'd laugh and say you aren't blowing any dough! As it has been mentioned, there is uncertainty re future medical but I'm pretty healthy and have little in the way of expenses. It is not easy spending money when you were frugal all your life and worse yet there is nothing I need or want.

 

[livingalmostlarge]

My mom has no RMDs and six figures between her pension and SS. She can't spend it fast enough. Two paid for homes and her traditional ira isn't huge. $500k. And she retired with it being $200k. She has another $500k in Roth and $500k in taxable. I'm taking out her rmd and investing it in her taxable. It's just kept growing minimal with ML since 2007 but since I took over and stuck her in VOO it's grown a lot.

The longer she lives the more my kids will have. It's highly doubtful she'll ever touch the RMDs. This doesn't include the couple of homes she's got that are worth a very nice number. I'd probably sell a home if she ever needed care. Even at $20k/month my mom's got half that in Pension and SS and then one house? Would last 5-10 years each. So she won't have to touch her IRA, Roth IRA, and Taxable ever probably.

 

[Texas Proud]

My 401k is about 7.5% of our portfolio. I highly doubt I’ll ever need that money.

Just curious... was this the max you had in a 401(k)? Or did you roll some over to an IRA and this is what is left?

OR, were you self employed and did not have access to a 401(k)?

 

[disneysteve]

Just curious... was this the max you had in a 401(k)? Or did you roll some over to an IRA and this is what is left?

OR, were you self employed and did not have access to a 401(k)?

I only had access to a 401k at my last job 2016-2024 and I was part time or per diem for a good chunk of that period. The first 24 years of my career I didn't have one. They aren’t as common as people tend to think unless you’re with a large employer.

 

[audreyh1]

I suspect these folks aren’t thinking about possible long term care costs or similar.

 

[Lorenzo]

I have always worked for an employer where I had a 401k, but only my very first employer whom I worked for for all of five years offered a matching contribution. For the rest of my ~30 year career, none offered matching. And no pension, no compnay stock (only that first employer was a megacorp), no nothing except the 401ks. What I saved through my 401ks (some rolled into IRAs) is essentially all I've got (plus SS).

 

[Dtail]

Our 401k is 29% of the invested assets. I will most likely keep it until RMD's and then spend it.

 

[iloveyoga]

I rolled my 401(k) to an IRA. I "need" it for our extra and fun stuff! Pensions and SS take care of the bills and regular items and we live a fairly low key lifestyle. Larger travel expenses do come from the IRA eventually.

 

[TheWizard]

I retired at 56 and never took any distributions until RMDs started, I am 74 today. My net worth has tripled since I retired. My corporate pension (no COLA) and SS have been more than enough and still are, typically I bank $1200 to $2000 per month of unspent money. When RMDs started my income literally doubled! I reduced my AA from 50/50 to 40/60 and this year to 30/70 to stop the growth in my rollover IRA and reduce RMDs. I moved the last of my 401k into my rollover IRA to eliminate 2 RMDs. I just have too much money and no use for it. Divorced, no kids, would never travel, been frugal all my life, always bought used cars and heat the house with a woodstove cuz I hate buying heating oil. Heating with wood cuts my heating bill easily in half if not more. If I told you what I am doing to BTD you'd laugh and say you aren't blowing any dough! As it has been mentioned, there is uncertainty re future medical but I'm pretty healthy and have little in the way of expenses. It is not easy spending money when you were frugal all your life and worse yet there is nothing I need or want.

Too much money and no use for it ...... interesting.

I'm 74 and heat my house and my girlfriend's house with wood also, when I'm home, which could be 50% of the time.

But I travel, and have offspring and other young relatives to leave $$$ to, and I've been doing QCDs to deserving charities as well. So I'm happy to maintain a high stock allocation in all three of my account types: tax-deferred, Roth, and taxable...

 

[stephenson]

I like this answer from Exchme - crisp and clear! My version in same order ...

1. Invest for the future - check!
2. Don't spend when you can't afford it - check!
3. Enjoy life, including your job and associates - check!

But, to the point ... assuming one lives long enough and is healthy enough, at around 72-73, RMDs begin - and one can then "spend with abandon." Except, we have been trained so well by 1. and 2., above, that it is difficult.

Us? Glad the list is still "incomplete"
- We're traveling a lot more, but can't quite bring ourselves to buy into business class due to the value simply not being there.
- Will shorten the interval between cars - although did just sell the 911 I had wanted - because it really provided such limited joy related to its fragility and couldn't carry much - replaced with e a Golf R with a manual transmission - more joy.
- Sold the big boat for a smaller one to fit in the garage, but it was a pain to put it in the garage, so may sell the smaller boat and buy a bigger one.
- Thinking about a different house in an area with better weather ... may or may not ...

Exchme said ...
"I can think of a few reasons:

Folks that followed the 4% rule or something similar have been pleasantly surprised by the market in the last several years. The S&P is up 7.4X after adjusting for inflation since the March 2009 lows. Most retirees you meet will have retired during that bull market, so the balances have gained a momentum all their own.

Many folks live the same relatively frugal lifestyle they always did, so the cushion they added to their expenses wasn't all needed and adds to the snowball of savings.

Some enjoy their career and wouldn't have retired early even if they could have foreseen the happy financial situation."

 

[Al18]

I definitely need my 401K (now rolled over to an IRA). Without a pension, I started withdrawing from it when I ER and have drawn some money every year.

 

[scrabbler1]

I had to roll my old 401k into an IRA when I retired 16 years ago at age 45. That rollover IRA, along with SS and my frozen company pension, are what I have often described as my "reinforcements" to the taxable portion of my overall portfolio, the part which has been sustaining me comfortably for the last 16 years.

My goal was to get from age 45 to age ~60 intact (I am 61 now), then tapping into the IRA if needed. But the taxable part of my portfolio has grown from $650k to $1.1M since late 2008, the depth of the financial crisis. So, unless I plan to buy something really BIG (which could conceivably happen), I don't expect to need the rollover IRA any time soon. The income generated by the taxable part of my portfolio more than covers my expenses, so even if there was also no SS I'd still be fine. And don't forget the frozen pension.