A Sophisticated  Approach to Financial Services

Allianz Life’s 2024 Annual Retirement Study is out, and it shows a whole lot of Americans lack plans for retirement income. In fact, more than half of Americans do not have a plan in place for retirement.¹ If that isn’t troubling enough, in a report entitled Americans Face Alarming Retirement Savings Shortfall, the National Institute for Retirement Security found , “Most Americans will not have enough money for a financially secure retirement. […] NIRS research found that for Generation X, a generation that is quickly approaching retirement and the first that will retire largely without pensions, the bottom half of earners have only a few thousand dollars saved for retirement. This means the vast majority of Gen Xers are not even close to having enough savings to retire. And when Americans don’t have adequate retirement income, they are more likely to fall into poverty or turn to public assistance programs or families to make ends meet.”² Retirement income is not something that will just fall into place. You cannot wing it. A safe and secure retirement requires plans for retirement income.

56% of Americans Do Not Have a Plan for Retirement

According to Allianz Life’s 2024 Annual Retirement Study, “Less than half of Americans (44%) say they currently have a plan for how they will take income in retirement. Boomers (67%) are more likely than Gen Xers (30%) or millennials (33%) to say they have a retirement income plan.”³ While it is good that older Americans have more plans in place than their younger counterparts, those Gen Xers are quickly approaching retirement age themselves. Without plans for retirement income, they may find themselves in the same spot as many elderly Americans are today – relying on family members to take care of them or having to forego essential needs. Kelly LaVigne, VP of consumer insights at Allianz Life, explains, “If you don’t know how you will draw from your retirement assets for income, then you aren’t ready to retire. […] So much of retirement preparation focuses on accumulating assets – and that’s important – but it is critical to understand how those assets will be able to fund your life after you retire. To do that, you need to make important decisions like when to start claiming Social Security and examine what resources you have to fund your retirement.”⁴ [Related Read: What to Do If You’re Nearing Retirement with Less Savings Than Expected]

48% Worry They Will Have to Live Frugally

According to the study, “Nearly half (48%) worry about living too frugally and not enjoying retirement as much as they should.”⁵ LaVigne adds, “Without a solid strategy, the ongoing process of deciding how much money to withdraw from which account when can be daunting.”⁶ Without solid plans for retirement income, you’ll be forced to make decisions on the go. With so many factors determining costs, this can be especially tricky. For instance, rising costs have led to “about one in four adults 65 and older and three in 10 aged 50-64 cut back on food, utilities, clothing or medication due to healthcare costs.”⁷ Older Americans are finding themselves having to sacrifice basic needs to cover healthcare costs. Given this is the case, it is understandable why almost half of those in this study worried they will have to live frugally during retirement and won’t be able to enjoy it. The way around this fear is to make plans for retirement income before the time comes. 

45% Worry about How to Take Distributions to Cover the Cost of Retirement

Given the rising cost of retirement, the study also found that many Americans are concerned about how to responsibly take distributions. According to Allianz Life’s 2024 Annual Retirement Study:  Americans identified the greatest risks to their retirement income:

• Everyday costs increasing (42%)
• Outliving money (35%)
• Healthcare costs (32%)
• Stock market dropping (31%)
• Spending too much and running out of money (30%).⁸

This is why it is so important to make plans for retirement income. You need to have a plan for how you draw from your assets and where you will find additional income. 

Get a Plan in Place for Retirement

You don’t want to be like most of those who participated in this study.  You want a plan for your retirement. Fortunately, there is still time to make plans for retirement income and get the ball rolling.

• Do Not Raid Your 401(k): Make a promise to yourself to keep your money where it is and allow it to grow until the time comes. Raiding your retirement accounts may cost you in the future. It can impact the quality of your retirement, have negative tax consequences, and cost you money and opportunity.
• Figure Out How to Contribute More Now: With years to go before retirement, make the most of your contributions. Continue to contribute enough to receive the company match. And then contribute some more! Every extra bit helps.
• Consider Your Individual Retirement Needs and Wants: Take time to think about the retirement you need and want – and then consider if it is possible. While you may daydream about living at the beach and golfing daily, this may not be realistic. Instead, start with your true retirement needs. Calculate how much you need to make this happen.
• Set a Timeline: It’s important to think about when you want to retire. For example, it is smart to know when you want to start claiming Social Security – especially considering the longer you work, the more you may draw from Social Security. Likewise, the longer you wait to withdraw from your 401(k), the more time it has to grow. Use this timeline to boost your retirement savings.
• Think about Different Ways to Fund Retirement: Once you have an idea of when and how you want to retire, think about different ways to fund your retirement. Calculate how much you expect to receive from Social Security. Then, figure out how much more you’ll need to retire safely. What can you do to cover this gap? How much do you already have saved? Is it possible to utilize catch-up contributions? Do you have any other assets or investment opportunities? Are you open to working part-time during retirement?
• Seek Professional Help: Creating plans for retirement income isn’t easy. It is beneficial to seek help from a professional who can help you come up with a strategy to utilize retirement funds in a way that lasts the rest of your lifetime.

If you have questions about your 401(k) or if you need help, we’re here for you. Click below to book a complimentary 15-minute 401(k) Strategy Session.

Book a Strategy Session

SOURCES

1. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income
2. https://www.nirsonline.org/2024/02/americans-face-alarming-retirement-savings-shortfall-according-to-national-institute-on-retirement-security-testimony-before-u-s-senate-committee/
3. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income
4. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income
5. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income
6. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income
7. https://news.gallup.com/poll/393494/older-adults-sacrificing-basic-needs-due-healthcare-costs.aspx#:~:text=For%20substantial%20proportions%20of%20older,medication%20due%20to%20healthcare%20costs
8. https://www.allianzlife.com/about/newsroom/2024-Press-Releases/Americans-Lack-Plans-for-Retirement-Income

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There are many Thanksgiving traditions we enjoy, yet often participate in them without knowing their origins.

For instance, why do we eat turkey?

Why do we watch a parade with giant inflatable character balloons? 

And when did Friendsgiving become a thing?

Keep reading for 12 popular Thanksgiving traditions, and you might just be the smartest person at the table this year.

#1 The Original Thanksgiving

Most of us are familiar with the story of the first Thanksgiving.

In November 1621, after the Pilgrims’ first corn harvest proved successful, the Pilgrims invited their Native American allies to a celebratory feast, which is considered the first Thanksgiving.

However, did you know that the first Thanksgiving actually lasted 3 whole days?¹

And while we traditionally recognized the Pilgrims’ meal with the Native Americans, many historians believe this was not the first meal of this type in the Americas.

According to History.com, “In 1565, nearly 60 years before Plymouth, a Spanish fleet came ashore and planted a cross in the sandy beach to christen the new settlement of St. Augustine. To celebrate the arrival and give thanks for God’s providence, the 800 Spanish settlers shared a festive meal with the native Timucuan people.”²

#2 Thursdays Are for Thanksgiving

Thanksgiving is officially celebrated on the fourth Thursday of November – but that came after a fight.

While Thanksgiving had been celebrated on the last Thursday of November since President Lincoln was in office, President Franklin D. Roosevelt decided to change things up in 1939, hoping to boost holiday sales by giving shoppers an extra week. 

He moved Thanksgiving to the second to last Thursday of November, which meant it fell on the third Thursday rather than the fourth.

People were not happy with his decision and referred to it as Franksgiving.

Ultimately, Roosevelt’s plan failed after his rivals and Thanksgiving traditionalists compared him to Hitler.

Time explains, “By the end of 1941, Roosevelt had signed a bill officially sticking Thanksgiving on the fourth Thursday of November, whether or not it was the last Thursday of the month.”³

#3 Thanksgiving Meal Traditions

Today’s typical Thanksgiving meal usually includes a turkey, dressing, and cranberry sauce.

But this is not what the first Thanksgiving meal looked like – or even what it looks like in different parts of the country today.

The first Thanksgiving dinner included corn, venison, and wildfowl.

Not turkey.

Today, some places in America have their own versions of Thanksgiving dinners, such as Hawaiian luaus with a main dish of pig or New England states enjoying lobster instead of turkey.

#4 Thanksgiving Turkey

Back to the turkey…

While turkey hasn’t always been on the Thanksgiving menu, it is now synonymous with the holiday.

According to the History Channel, almost 90 percent of Americans eat turkey, whether roasted, baked, or deep-fried on Thanksgiving.⁴

#5 Turkey Pardons

One of the stranger Thanksgiving traditions is the annual public turkey pardoning ceremony.

“Beginning in the mid-20th century and perhaps even earlier, the president of the United States has ‘pardoned’ one or two Thanksgiving turkeys each year, sparing the birds from slaughter and sending them to a farm for retirement.”⁵

In addition to presidential turkey pardons, many state governors pardon turkeys.

#6 Thanksgiving Parades

The very first Macy’s Thanksgiving Day Parade took place in 1924.

Instead of the giant inflatable character balloons we see today, this first parade had live circus animals.

The animals were replaced as the parade began introducing the iconic character balloons in 1927.

Another interesting tidbit about Macy’s Thanksgiving Day balloons: “From 1929 to 1931, Macy’s would release the balloons at the end of the parade. Those who found the balloons could return them to Macy’s for an award. The practice ended when a balloon got caught in a plane’s propeller when a pilot was trying to catch it.”⁶

The Macy’s Thanksgiving Day Parade has taken place every year except the 3 years during WWII.

Today, it has about 50 million television viewers and typically has 3.5 million on-site spectators.⁷

#7 Football Games

It’s not uncommon to fill up on turkey and sit back and watch a big rivalry game on TV.

This tradition goes way back. 

The first Thanksgiving game was between Harvard and Yale on Thanksgiving Day, 1876.

After this game, it became a tradition to have rivals play against one another on the holiday.

Once the NFL was founded in 1920, they began hosting Thanksgiving football games.⁸

#8 Volunteering

Thanksgiving is one of the most popular days of the year for Americans to volunteer.

In fact, many volunteer organizations wind up having as many volunteers as they do the people they are serving.

Sometimes, organizations even have to turn volunteers away.⁹

When you get the urge to volunteer to express your gratitude this Thanksgiving, consider donating or signing up to volunteer after the busy holiday season.

#9 Turkey Trots

One of the most popular Thanksgiving traditions, the turkey trot (aka an outdoor race), got its start in Buffalo, New York, on Thanksgiving Day in 1896.¹⁰

Turkey trots are now the most popular day for races in America and “[draw] nearly a million participants to more than 1,000 different events across the country.”¹¹

#10 Pumpkin Pie

I cannot imagine Thanksgiving without pumpkin pie.

But desserts were not on the original Thanksgiving table.

Based on the journals from Pilgrim colonists, historians believe that the Mayflower’s sugar supply had shrunk significantly in 1621 by the time they had their Thanksgiving feast.

That means there were not any of the desserts we’ve come to associate with Thanksgiving.¹²

#11 Thanksgiving Travel

The Sunday after Thanksgiving is typically the busiest airport day of the year. 

NerdWallet reports, “In 2021, 2022, and 2023, it was the busiest single day of the entire year at U.S. airports, based on TSA passenger data. Last year, more than 2.9 million people crossed through U.S. airport security checkpoints on the Sunday after Thanksgiving. Compare that to Thanksgiving Day, when just 1.5 million people (slightly more than half of Sunday’s figures) were at an airport.”¹³

#12 Friendsgiving

Today, it is becoming quite common for people to celebrate Friendsgiving rather than or in addition to Thanksgiving.

According to the New York Post, “Seven in 10 young Americans prefer ‘Friendsgiving’ over a traditional Thanksgiving. […] A poll of 2,000 Americans – aged 18-38 – found 68 percent say celebrating Friendsgiving is their preferred method of engaging in the autumnal celebration.”¹⁴

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SOURCES

1. https://www.history.com/topics/thanksgiving/history-of-thanksgiving
2. https://www.history.com/news/thanksgiving-history-trivia-facts
3. https://time.com/3603622/fdr-moved-thanksgiving/
4. https://www.history.com/topics/thanksgiving/history-of-thanksgiving
5. https://www.history.com/topics/thanksgiving/history-of-thanksgiving
6. https://www.nbcnewyork.com/entertainment/holidays/see-how-thanksgiving-day-parade-balloons-have-changed-over-the-years-and-other-fun-facts/4882894/
7. https://www.scholastic.com/parents/family-life/parent-child/macys-thanksgiving-day-parade-trivia.html
8. https://www.history.com/news/why-do-americans-watch-football-on-thanksgiving
9. https://dcist.com/story/18/11/21/if-you-havent-already-signed-up-to-volunteer-on-thanksgiving-its-probably-too-late/
10. https://www.outsideonline.com/health/running/best-turkey-trots-america/
11. https://www.runnersworld.com/races-places/a20862856/how-the-turkey-trot-became-the-most-popular-race-in-america/
12. https://www.history.com/topics/thanksgiving/history-of-thanksgiving
13. https://www.nerdwallet.com/article/travel/busiest-travel-days-thanksgiving
14. https://nypost.com/2019/11/18/most-young-people-enjoy-friendsgiving-more-than-thanksgiving/

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As our parents age, it’s natural to start worrying about their financial well-being.

But how do you approach a conversation about money with the very people who raised you?

We get it. It’s awkward.

According to a Bankrate survey, “Americans think money is more taboo to talk about than their political or religious views.”¹

Specifically, “Only 38% of U.S. adults are comfortable discussing their bank account balances with family members or close friends, a smaller percentage than those comfortable discussing their love lives (47%), credit card debt (52%), weight (71%), political views (78%), religious views (81%) or health (81%).”²

With the holidays right around the corner, we encourage you to lean into this taboo financial conversation.

And be thankful that you have an opportunity to talk to your parents about their finances before you are forced to.

Read on to see why it is so important to talk to your parents about their finances sooner rather than later.

The Right Time to Talk to Your Parents about Their Finances

There may never be a moment when you feel ready to talk to your parents about their finances – it’s a challenging subject for anyone. 

But waiting too long can have serious consequences.

According to a study by Home Instead Senior Care, “Given the severe consequences of waiting too long to have this critical conversation, if your parents are approaching 70 and you are approaching 40, you should have ‘the talk’ about critical aging issues.”³

In other words, if you are part of the sandwich generation, it’s time to have this conversation.

“The sandwich generation consists of adults with a parent 65 years or older who are raising a minor or providing for an adult child.”⁴

Those in the sandwich generation are having to take care of their own children, their aging parents, and themselves.

“On average, 48% of adults are providing some sort of financial support to their grown children, while 27% are their primary support. Additionally, 25% financially support their parents as well. Some of the adults living in this sandwiched generation face financial problems regularly, having to support three generations at one time.”⁵

For those caring for children while nearing retirement, there’s a real possibility of also needing to care for your parents. 

That’s why it’s crucial to discuss your parents’ finances sooner rather than later – so you can also prepare.

While it’s recommended to have this conversation if you’re around 40 and your parents are around 70, it’s also wise to initiate it if a parent is diagnosed with a life-threatening illness or begins to show signs of cognitive decline.

Clarifying Expectations Is Critical

In a Fidelity Investments survey, 60% have seen family members or friends lose their ability to manage their daily finances as they age, and 40% said they have had to help manage their parents’ finances.

Yet only 9% of those surveyed think they could end up in a similar situation.⁶

As much as we don’t want to think about it, our parents are getting older, and something could happen that puts us (their children) in the driver’s seat.

We don’t know what the future holds.

If your parents are critically ill, would they be able to afford healthcare or long-term care? Or are they expecting to move in with you? 

If your parents pass away, do you know what will happen to their property? Do you know who will be put in charge of executing their estate? 

Consider these findings from a Fidelity Investments study.

• 92% of parents expect their children will assume the role of executor; however, 27% of children identified as executor didn’t know this was expected of them.
• 69% of parents expect one of their children will help manage their investments in retirement; however, 36% of kids identified in this role didn’t know this was expected of them.
• 72% of parents expect one of their children will assume long-term caregiver responsibilities in retirement if needed; however, 40% of children identified as the caregiver didn’t know this was expected of them.⁷

Unfortunately, many adult children find themselves blindsided by their parents’ financial situations or end-of-life requests because it has never been spoken about.

Don’t let this happen to you.

While your parents are still able, have the difficult conversation with them.

What You Need to Know about Your Parents’ Financial Situation

Tell your parents you’d like to discuss their future plans so that you will be better able to assist them when the time comes and honor their wishes.

Then, direct the conversation to specific topics related to their financial situation.

• Retirement Plans: If your parents have not yet retired, ask them about their retirement plans. When do they expect to retire? Where do they plan to live during retirement?
• Retirement Income: What is their plan for income during retirement? Do they have adequate 401(k) savings? How much do they anticipate receiving from Social Security? Do they have any investments that will provide income or any additional income streams?
• Needs: What will they need from you? For example, do they have long-term care insurance, or are they planning to move in with you when the time comes? Do they have enough savings or income to cover costs? Do they have debt they will need help with?
• Inheritance: While you don’t want to appear greedy, it is wise to ask your parents about any potential inheritance. You don’t want to mistakenly believe you will be receiving an inheritance to find out that not only is this not true, but you will need to sell the family home to cover your parents’ debts. Asking about this possibility is uncomfortable but necessary.

Estate Plans and End-of-Life Life Wishes: Ask your parents if they have a will in place and if there are any end-of-life documents you should be aware of. For instance, some parents have already purchased a grave plot and have set money aside for funeral costs in advance so that their children will not have to. Then again, many parents have not, and it is up to their children to make these arrangements. While you have the opportunity, have the hard conversation. It will be much easier to navigate ahead of time instead of during the time of loss.

Additional Tips for the Difficult Conversation

It is challenging to talk to your parents about their finances, but it is important.

If the conversation leaves you feeling frustrated, don’t give up. Your parents may not have all the answers to your questions yet.

Give them some time, and encourage your parents to meet with a financial advisor.

Note –  If you are already aware that your parents will need financial assistance from you, it is also wise for you to speak to a financial advisor – especially if you are a part of the sandwich generation.

Keep the conversation going. It doesn’t have to be a one-time discussion over dinner.

The overall goal is to let your parents know you are trying to make sure everyone is on the same page so you can help one another.

Stacie Irving explains, “No one is excited to have these conversations, but everyone feels relief once the door has been opened and a financial plan has been made.”⁸

Better Prepare for a Life of Abundance in Retirement.
Check us out on YouTube.

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Sources

1. https://www.bankrate.com/credit-cards/news/financial-taboos-survey/?tpt=a
2. https://www.bankrate.com/credit-cards/news/financial-taboos-survey/?tpt=a
3. https://www.prnewswire.com/news-releases/study-finds-most-families-wait-too-long-to-begin-aging-conversations-270894401.html
4. https://www.forbes.com/sites/jackkelly/2023/02/24/the-sandwich-generation-is-financially-taking-care-of-their-parents-kids-and-themselves/?sh=541f05bf2af4
5. https://www.forbes.com/sites/jackkelly/2023/02/24/the-sandwich-generation-is-financially-taking-care-of-their-parents-kids-and-themselves/?sh=541f05bf2af4
6. https://getcarefull.com/articles/why-you-should-talk-to-your-adult-children-about-your-finances
7. https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fidelity/Family-Finance-Infographic.pdf
8. https://www.care.com/c/financial-conversations-to-have-with-aging-parents/

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The IRS announced changes to retirement contribution limits to help workers boost their retirement savings with cost-of-living adjustments. 

Whether you’re saving through a 401(k), IRA, or another retirement plan, these updates can help you plan to maximize your contributions and ensure your retirement fund grows over time.

401(k) Retirement Plan Contribution Limits for 2025

401(k)s: The contribution limit has increased to $23,500 in 2025, up from $23,000 in 2024. For workers aged 50 and above, there is no increase in catch-up contribution limits. It remains $7,500 ($31,000 total).

The SECURE 2.0 higher catch-up contribution limit applies for those aged 60-63 starting in 2025. This means participants in that age range may contribute an additional $11,250 instead of $7,500.

Solo 401(k)s: Self-employed individuals with a solo 401(k) can also contribute up to the new 401(k) limit of $23,500, along with catch-up contributions if eligible.

IRA Contribution Limits for 2025

IRAs: The contribution limits for a traditional or Roth IRA remain the same for 2025.

You can contribute a maximum of $7,000 (same as 2024).

Catch-up contributions for taxpayers 50 and older are also subject to cost-of-living adjustments, but these limits remain unchanged for 2025 at $1,000 ($8,000 total).

**You can contribute the maximum for 2024 until Tuesday, April 15, 2025. If you have an IRA, plan now to maximize the contribution limit for 2024 before April next year.

SEP IRAs: Contribution limits for SEPs, or Simplified Employee Pensions, in 2025 is up to $350,000 of compensation and is limited to a maximum annual contribution of $70,000, up from $69,000 in 2024.

SIMPLE IRAs: The individual contribution limit for SIMPLE IRAs will rise to $16,500 in 2025, up from $16,000 in 2024. For employees aged 50 and above, the catch-up contribution remains an extra $3,500, allowing those over 50 to contribute up to a total of $20,000.

For employees aged 60 to 63, an even higher catch-up limit applies. In 2025, this additional catch-up contribution is set at $5,250.

Under SECURE Act 2.0, certain SIMPLE accounts have an increased contribution limit. For 2025, the elevated contribution cap for these accounts is $17,600, with a catch-up option of $3,850 for employees aged 50 and above.

Deductible IRA Phase-outs for 2024

• For singles and heads of household who are covered by a workplace retirement plan, such as a 401(k), and contribute to a traditional IRA, the phase-out range increased to between $79,000 and $89,000, up from between $77,000 and $87,000 in 2024. This means individuals earning over $89,000 won’t qualify for any deduction, while those with incomes between $79,000 and $89,000 may receive a partial deduction.
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $126,000 and $146,000 – up from between $123,000 and $143,000.
• If you contribute to an IRA but are not covered by a workplace retirement plan and are married to someone who is, the phase-out range is increased to between between $236,000 and $246,000, up from between $230,000 and $240,000 last year.
• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and is between $0 and $10,000.

Remember you can still contribute to an IRA even if you earn too much – it’s just nondeductible.

Roth IRA Phase-outs for 2025

The income phase-out range for the Roth also increases in 2025. 

• The income phase-out range for singles and heads of household making contributions to a Roth IRA is increased to between $150,000 and $165,000, up from between $146,000 and $161,000 in 2024.
• For married couples filing jointly, the income phase-out range is increased to between $236,000 and $246,000, up from between $230,000 and $240,000 in 2024.
• The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

Saver’s Credit Limits for 2025

For low and moderate income workers, the new Saver’s Credit (also known as the Retirement Savings Contributions Credit) limit is increasing.

• For married couples filing jointly: The new Saver’s Credit limit is $79,000, up from $76,500 last year.
• For heads of household: The limit is now $59,290, up from $57,375.
• For singles and married couples filing separately: The limit is $39,500, up from $38,250.

Distributions for Domestic Violence Victims

Ordinarily, an early withdrawal from a retirement plan incurs a 10% additional tax (early withdrawal penalty) unless an exception applies. 

Under the SECURE Act 2.0, victims of domestic abuse now qualify for an exception. This exception permits withdrawals of up to $10,000 (adjusted annually for inflation) or 50% of the vested accrued benefit in the plan, whichever amount is lower. 

For 2025, the limit has increased from $10,000 to $10,300.

Qualified Charitable Distributions (QCD)

With a qualified charitable distribution, you can transfer funds directly from your IRA to a qualifying charity. 

This contribution can count toward your required minimum distributions (RMDs) for the year and is excluded from taxable income – no itemization required.

For 2025, the maximum amount you can exclude from your gross income through QCDs has risen to $108,000, an increase from the 2024 limit of $105,000.

Additionally, under SECURE 2.0, there’s a one-time option to make a QCD to a split-interest entity. Originally capped at $50,000, this amount, adjusted for inflation, is now $54,000 in 2025, up from $53,000 in 2024.

Qualified Longevity Annuity Contracts (QLACs)

A QLAC enables you to turn funds from a qualified retirement account, such as a 401(k) or IRA, into an annuity. In 2025, the maximum allowable premium for a QLAC has increased to $210,000, up from the previous $200,000 limit in 2024.

Have questions about your 401(k) performance? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

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Many Americans are potentially missing out on retirement savings by falling victims to the 401(k) to IRA rollover cash trap.

According to Andy Reed, head of investor behavior research at Vanguard, “IRA cash is a billion-dollar blind spot.”¹

A recent report from Vanguard found that almost two-thirds of rollover investors unintentionally hold cash without investing it.²

Keep reading to see if you may be one of the 401(k) to IRA rollover cash trap victims. 

Explaining the 401(k) to IRA Rollover Cash Trap

401(k) rollovers shouldn’t be complicated, but they are.

We’ve written about costly 401(k) rollover mistakes and how to avoid them.

However, another kind of rollover issue affects many Americans without them even knowing it.

This is the 401(k) to IRA rollover cash trap.

When investors roll over their 401(k) to an IRA, either because they are changing jobs or retiring, they may unintentionally allow the rollover assets to park as cash for months and sometimes years.

This is called “holding cash” or “parking cash.”

The problem is that investors aren’t holding cash on purpose – they simply do not know that rollovers are held in cash as a default.

Andy Reed, head of investor behavior research at Vanguard, explains, “Many IRA holders want to invest their retirement savings in the stock market and think that they’re invested following a rollover. In reality, they’re sitting in money market funds.”³

Vanguard found, “Close to 50% of those investors mistakenly believed that IRA contributions were automatically invested and 46% did not realize their contributions were allocated to money market funds by default.”⁴

This is especially true for those enrolled in target-date funds who mistakenly assumed that once they rolled over their 401(k) to an IRA, it would work the same way.

The critical difference is that the investor must decide to move the cash and invest.

But most don’t understand this to be true.

Vanguard found that 68% don’t realize how their assets are invested and are not intentionally holding cash.⁵

For example, “About 48% of people (incorrectly) believed their rollover was automatically invested.”⁶

You must take steps to ensure your cash doesn’t stay parked and, instead, is giving opportunities to move and grow.

Why Holding Cash May Not Be the Right Choice for Investors

There is a right time for holding cash – but retirement isn’t it.

Generally, holding cash is a good idea when you are saving money for something in the immediate future, such as a down payment on a home. Or to have in your emergency fund.

But, if you have a substantial amount of cash you want to use in retirement, it should be invested.

The interest accrued on cash savings will be much more limited than if it were invested.

Global Asset Management produced a hidden cash cost analysis over a 20-year period.

According to their data, to reach a $500,000 savings goal:

• If you invest in a balanced portfolio, you would need to contribute $305,000 over 20 years ($15,250 per year).
• If you keep your money in cash, you would need to save $431,000 over 20 years ($21,550 per year).
• The hidden cost of cash is $126,000 ($6,300 per year). This is because your cash investments don’t offer nearly as much growth potential as the balanced portfolio. So if you want to save $500,000 over the same time period, you would have to make larger contributions.⁷

The return on cash is simply too small when you are looking at long-term finances.

It’s An Easy Mistake to Make

The 401(k) to IRA rollover cash trap is an easy mistake to make.

According to Vanguard, “It tends to be an error of omission rather than commission: They are twice as likely to hold cash unintentionally as they are to do so deliberately.”⁸

Investors simply forget and do not move the money from its parking spot to the right investment allocation.

Even those who have dutifully saved for retirement may not even be aware that they have rollover assets holding in cash. 

On the other hand, some investors are simply overwhelmed by the number of IRA investment options.

Vanguard explains, “While 401(k) plans typically offer a limited menu of funds handpicked by plan sponsors, IRAs offer thousands of choices among funds, individual stocks, bonds, certificates of deposit, and other asset classes. That plethora of choices can be unwelcome: One in four rollover cash investors reported feeling overwhelmed by the number of options.”⁹

This results in choice overload and decision paralysis.

How to Avoid the 401(k) to IRA Rollover Cash Trap

Staying in cash can result in missed opportunities to earn investment returns, potentially leading to retirement shortfalls.

To avoid this mistake, investors should closely examine their portfolios after a rollover to ensure they are allocated appropriately for their long-term plans.

It is critical to stay engaged with your retirement accounts. 

Be an active investor.

Regularly review and adjust IRA allocations based on your retirement goals and risk tolerance to ensure long-term success.

Seek Help Before You Make a Rollover Mistake

Understanding all rollovers before you make a move is important, and seeking professional help is just as important. 

Speak with a financial advisor to learn about the differences between 401(k) plans and IRAs, particularly regarding automatic investments. 

Ask for guidance when it comes to making decisions about what to do with the cash from a 401(k) to an IRA rollover. 

Each investor’s situation is unique, and speaking with someone may help you avoid costly 401(k) rollover mistakes and make the best decision possible for your financial future.

Have questions about rolling over your 401(k)? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

Sources: 

1. https://www.cnbc.com/2024/09/16/401k-ira-retirement-rollovers-cash-investments.html
2. https://www.cnbc.com/2024/09/16/401k-ira-retirement-rollovers-cash-investments.html
3. https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/out-sight-out-market-ira-cash-drag.html
4. https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/out-sight-out-market-ira-cash-drag.html
5. https://www.cnbc.com/2024/09/16/401k-ira-retirement-rollovers-cash-investments.html
6. https://www.cnbc.com/2024/09/16/401k-ira-retirement-rollovers-cash-investments.html
7. https://www.rbcgam.com/en/ca/learn-plan/investment-basics/the-hidden-cost-of-too-much-cash/detail
8. https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/out-sight-out-market-ira-cash-drag.html
9. https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/out-sight-out-market-ira-cash-drag.html

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If you are nearing retirement and have less savings than expected, you are not alone.

Many Americans feel the same way.

The 2023 Protected Retirement Income and Planning (PRIP) study from the Alliance for Lifetime Income found: 

• 51% of consumers between 45 and 75 feel they do not have enough retirement savings to last their lifetime.
• 32% are not confident they will have enough money in retirement to cover basic monthly expenses.
• 44% are retired currently or retired previously and have gone back to work.¹

The sad truth is many retirees have less savings than expected.

According to a survey by Clever, “The median retiree has $142,500 in savings – 4x less than the recommended minimum for starting retirement ($572,000). […] 25% of retirees have nothing saved for retirement.”²

Retirement costs continue to rise.

Don’t lose hope if you are nearing retirement with less savings than expected.

Here are some steps to take that may help you get back on track.

Assess Your Current Financial Situation

The first step is to take an honest look at your current financial situation.

Review your savings, assets, and income streams.

Factor in Social Security and pension plan (if you are one of the lucky few who still has one).

Note – Some Americans think Social Security will provide enough for them to retire securely. This is a mistake. Social Security isn’t designed to cover the bulk of your retirement income.

According to the Social Security Administration, “For someone with average earnings who retires in 2024 at age 65, Social Security benefits replace about 39 percent of past earnings.”³

Now, consider your retirement needs and goals.

What is the gap between what you have versus what you need or want?

Be realistic.

[Related Read: 401(k) Balance by Age: How Do You Measure Up?]

Adjust Your Retirement Expectations

Now that you have a clear understanding of where you stand financially, you may have to adjust your retirement expectations.

To save more money and get more Social Security benefits, do you need to push back your retirement date?  

As much as you may want to retire today, it may be financially wise to put it off for a few more years.

You may consider working part-time in your retirement years to ensure you have enough to cover your retirement needs.

Maximize Contributions and Catch-Up Options

If you have less savings than expected as you approach retirement, make every effort to boost your contributions. 

Make sure you are contributing enough to receive the employee match. And then contribute even more!

Additionally, as you are reaching retirement, you want to take advantage of catch-up contributions. 

Employees with 401(k)s, 403(b)s, most 457 plans, and federal Thrift Savings Plans can contribute up to $23,000 in 2024.

For those ages 50 and older, the 401(k) catch-up contribution remains at $7,500 for 2024 – for a total of $30,500.

Reduce Living Expenses

To live with more in the future, live with less today.

Cut unnecessary expenses. Take all the money you save and put it toward your retirement savings.

Some people will make up for the loss by cutting expenses, but others will need to make more significant changes, such as downsizing a home or trading in a newer vehicle for an older one.

You may even want to consider relocating.

The cost of living during retirement varies significantly from state to state.

A study from Go Banking Rates calculated the annual living costs for retirees in each state in the United States. 

The state where your $1 million 401(k) savings will last the longest is Mississippi (22 years, 8 months, 12 days).⁴ 

You may need to consider moving to one of the states where your retirement savings will last longer.

See how long your savings will last in the rest of the states here.

Explore Additional Income Streams

If you have less savings than expected as you approach retirement, explore additional income streams that may help further increase your retirement savings.

Look into part-time jobs, freelance work, or monetizing your hobbies to boost retirement savings before and during retirement.

Another option is to look for real estate investment opportunities or rental income to supplement your income during your retirement years.

Reevaluate Your Investment Strategy

If you are behind on savings, it’s crucial to reevaluate your investment strategy.

For example, you may need to make some aggressive moves to boost your savings, but at the same time, you don’t want to risk too much.

The goal is to preserve your wealth while still generating returns.

This isn’t easy to do without financial knowledge.

For this reason, it is recommended that you consult a financial advisor for guidance.

[Related Read: Is Professional 401(k) Account Management Really Worth It?]

Plan for Healthcare Costs

Medical expenses are one of the costliest expenses during the retirement years.

Fidelity Investments 22nd annual Retiree Health Care Cost Estimate in 2023 found, “A 65-year-old retiring this year can expect to spend an average of $157,500 in health care and medical expenses throughout retirement [or $315,000 for a couple].”⁵

Additionally, according to Merrill, “Someone turning 65 today has a nearly 70% chance of requiring some type of long-term care during their lifetime. […] A private room in a nursing home can cost upward of $100,000 per year.”⁶

Now is the time to consider health insurance options like Medicare and supplemental plans to start building an emergency fund for unforeseen medical expenses.

Get Help

A professional advisor can provide personalized advice tailored to your financial situation, helping to optimize your 401(k) performance so you can catch up and boost your savings.

401(k) Maneuver provides independent, professional account management to help employees, just like you, grow and protect their 401(k) accounts.

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that are hurting your retirement account performance. 

With 401(k) Maneuver, you can go about your life doing what you love with confidence, knowing we are managing your 401(k) for you.

Have questions about rolling over your 401(k)? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

SOURCES

1. https://www.foxbusiness.com/markets/inside-americas-retirement-income-crisis
2. https://listwithclever.com/research/retirement-statistics-2024/#crisis
3. https://www.cbpp.org/research/social-security/top-ten-facts-about-social-security
4. https://www.gobankingrates.com/retirement/planning/how-long-million-last-retirement-state/
5. https://newsroom.fidelity.com/pressreleases/fidelity–releases-2023-retiree-health-care-cost-estimate–for-the-first-time-in-nearly-a-decade–re/s/b826bf3a-29dc-477c-ad65-3ede88606d1c
6. https://www.ml.com/articles/healthcare-in-retirement.html

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On October 10, the new Social Security COLA increase was announced, and many retirees were disappointed.

Each year, there is a cost-of-living adjustment (COLA), which is determined by a measurement of the Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers.

The 2025 Social Security COLA increase is merely 2.5%.¹

This minimal increase means “retired workers’ Social Security checks will grow by around $48 a month, going from an average of $1,920 to $1,968.”²

Given the inflation Americans have dealt with over the last few years, retirees were hoping for more than a 2.5% increase, which is technically the lowest COLA increase since 2021. 

Read on to learn more about why Social Security is not designed to cover retirement and how to potentially boost your retirement savings.

The Reality: Why the COLA Increase Isn’t Enough

Many retirees were hopeful for a more considerable COLA increase, considering inflation.

Unfortunately, while COLA aims to offset inflation, it lags due to delays in calculation.

For example, the annual COLA increase is determined by the Consumer Price Index, but many argue that this isn’t a fair index.

According to Drew Powers, the founder of Illinois-based Powers Financial Group, “The problem has always been that the CPI-U [Consumer Price Index for All Urban Consumers] and CPI-W have never been the ideal measure of senior citizen spending. When the COLA figure doesn’t match reality, our senior citizens suffer.”³

Moreover, the CPI numbers don’t adequately represent today’s expenses for elderly Americans. 

Michael Ryan, a finance expert, suggests, “The inadequacy of the current COLA system isn’t just about numbers. As someone who’s worked with retirees for decades, I believe we need serious reform,” Ryan said. “The CPI-E (Elder Price Index) would better reflect seniors’ actual expenses, though it would require careful implementation to maintain program sustainability.”⁴

Approximately $50 extra is not going to provide much help to those who are struggling to cover basic necessities – let alone cover the high costs of medical care.

Moreover, the 2.5% increase is significantly less than the more generous 8.7% COLA from 2023 and the modest 3.2% in 2024.

The Risk: Social Security Alone Isn’t Enough for Retirement

Ultimately, Social Security was not designed to cover retirement. 

Social Security was designed to supplement, not replace, retirement income.

According to the Social Security Administration: Understand the Benefits, “But Social Security was never meant to be the only source of income for people when they retire. Social Security replaces a percentage of a worker’s pre-retirement income based on your lifetime earnings. The amount of your average earnings that Social Security retirement benefits replaces depends on your earnings and when you choose to start benefits. […] Most financial advisers say you will need about 70 to 80% of pre-retirement income to live comfortably in retirement, including your Social Security benefits, investments, and personal savings.”⁵

Even so, 40% of older Americans rely solely on Social Security for retirement income.⁶

However, even those with 401(k) savings are worried about the minimal increase in Social Security COLA. 

The Senior Citizens League (TSCL) found that “70 percent [of Americans] said they worry that persistently high inflation prices will cause them to raise their spending and risk depleting their retirement savings and other assets.”⁷

Additionally, TSCL reports, “Our research shows that 67 percent of seniors depend on Social Security for more than half their income and that 62 percent worry their retirement income won’t even cover essentials like groceries and medical bills.”⁸

Rather than become reliant on unpredictable future Social Security cost-of-living adjustments, take action to boost your retirement savings today.

Actionable Tips: How to Potentially Boost Retirement Savings Now

• Max out retirement contributions. Do all you can to contribute all you are allowed to contribute. If you are 50 or older, you can take advantage of catch-up contributions, which allow you to contribute more than the 2024 limit of $23,000. For those ages 50 and older, the 401(k) catch-up contribution is $7,500, for a total of $30,500.

• Get the employer match. Many employers match a percentage of employee contributions to their 401(k) up to a certain portion of the total salary. However, some match employee contributions up to a certain dollar amount. Make sure you are contributing enough to get this free money.

[See More: 4 Ways to Potentially Maximize Your 401(k) Company Match]

• • Rebalance your account. Unmanaged allocations may experience larger losses because of down markets. In contrast, they may miss out on growth opportunities during good markets. For this reason, experts recommend rebalancing your 401(k) account regularly. This is one of the easiest ways to boost 401(k) savings.
    
    [Related Read: What Every Investor Needs to Know about Rebalancing a 401(k)]
  • Don’t borrow or take early withdrawals. Even if you are tempted, avoid pulling funds from your 401(k). Whether you withdraw or take a 401(k) loan, your future will be penalized. Both have consequences for your financial future – mainly preventing your retirement savings from growing tax-deferred.

• Cut Unnecessary Expenses. Cut unnecessary expenses today, take all the money you’ve saved, and put it toward your retirement savings. Choose the less expensive option when given a choice. Make wise financial choices today to protect your retirement future.

• Create Additional Income Streams. Look for opportunities for additional income streams, such as freelance work, part-time jobs, or real estate investments. Every little bit helps.
  
  [Related Read: Close the Gap on Financial Goals with a Side Hustle]

• Consider Delaying Social Security Benefits. It may be financially wiser for you to put retirement on hold. The age at which you stop working affects how much you earn from Social Security. Additionally, the longer you work, the longer your 401(k) has to grow.

Get Help. If you are worried you may be depending on Social Security a little too much, seek help from an expert. They can help you determine what you need to do to improve your annual 401(k) account performance so that you don’t have to rely on Social Security. 

Have questions about your 401(k)? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

SOURCES

1. https://faq.ssa.gov/en-us/Topic/article/KA-01951
2. https://www.newsweek.com/social-security-cola-2025-increase-sparks-backlash-1967146
3. https://www.newsweek.com/social-security-cola-2025-increase-sparks-backlash-1967146
4. https://www.newsweek.com/social-security-cola-2025-increase-sparks-backlash-1967146
5. https://www.ssa.gov/pubs/EN-05-10024.pdf
6. https://www.nirsonline.org/2020/01/new-report-40-of-older-americans-rely-solely-on-social-security-for-retirement-income/
7. https://seniorsleague.org/2025-cola/
8. https://seniorsleague.org/2025-cola/

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In today’s dynamic job market, it’s not uncommon for people to change jobs several times throughout their careers. 

With each job transition comes a new set of considerations, especially when it comes to your 401(k).

So, what do you do with your 401(k) when you change jobs?

If you have been taking advantage of your employer’s retirement plan, there are a few things you need to consider about your 401(k) before you change jobs. 

#1 You May Not Be Able to Take All of Your 401(k) Savings with You

Before quitting your job and starting a new one, understand that you may not be able to take all of your 401(k) savings with you. 

It all comes down to your plan’s vesting schedule. 

If you leave your job before you are fully vested, you may lose out on the employee match you worked so hard for. 

Vesting means ownership, and while you own what you contribute, the amount of employer matching contributions you can take with you depends on the vesting schedule. 

Some employees are immediately vested, while others must stay with the company for a certain period before owning the employer match contributions.

[Related Read: Why the Vesting Schedule Is More Important Now Than Ever Before]

#2 Don’t Cash It Out

This is a costly option we advise against because you will face penalties and pay taxes for cashing out before age 59½. 

If your 401(k) balance is low, your company may send you a check when you leave your current job.  

This is referred to as an indirect 401(k) rollover – and if you do NOT follow the guidelines, you may end up losing a chunk of your savings. 

Here’s how this works… 

20% taxes are withheld from every indirect rollover – whether you plan to roll over the funds or use the money to pay off debt or make a purchase.

The IRS mandates that your 401(k) custodian withhold this amount – so you get a check mailed to you, minus the 20% taxes. 

After you receive the check, you are required to put those funds – along with the missing 20% – in a new retirement account within 60 days.

You will be able to recover the withheld taxes when you file your tax return, but to complete the rollover, you need to produce that extra cash.

If you fail to do so by the 60-day deadline, your distribution will be taxed as ordinary income and subject to a 10% early withdrawal penalty if you are under the age of 59½.

This means, if you miss the 60-day deadline or decide to cash the check, you may be forced to pay a 10% penalty in addition to the 20% tax.

Let’s say you do an indirect rollover of your $10,000 total 401(k) balance before age 59½ – and you miss the 60-day deadline to roll over your funds. You will have 20% withheld in taxes along with a 10% penalty for early withdrawal. 

This means that you might only keep $7,000 of your original $10,000 401(k) balance – depending on your tax bracket.

You will face steep penalties if you cash out your 401(k) instead of rolling over the money.

[Related Read: Avoid These 4 Irreversible and Costly 401(k) Rollover Mistakes]

#3 You May Have to Pay Penalties

We already mentioned indirect rollovers, but there is another type – direct.

A 401(k) direct rollover is when the transaction occurs directly between the custodian of your old 401(k) plan and the custodian of your new 401(k) or IRA. 

You never actually receive the funds yourself or have control of them, so a trustee-to-trustee transfer is not treated as a taxable distribution. 

You can roll over your old 401(k) directly into your new 401(k), IRA, Roth IRA, or annuity.

There are no penalties or taxes that must be paid with a direct 401(k) rollover. 

In contrast, an indirect rollover puts you in charge. Your former company will send you a distribution check, which you are required to deposit into your new 401(k) plan or IRA.

Again, you are required to put those funds in a new retirement account within 60 days.

And, unlike the direct rollover, 20% taxes are withheld from every indirect rollover.

If you fail to put the funds in a new retirement account by the 60-day deadline, your distribution check will be taxed as ordinary income and subject to a 10% early withdrawal penalty if you are under the age of 59½.

[Related Read: The #1 401(k) Rollover Mistake – Avoid This at All Costs]

#4 You May Not Want to Roll It Over

If you roll over too soon, it may not be in your best interest.

Especially if you are 55 or older. 

If you wait to roll over your money and leave it in your 401(k), you may be able to avoid penalties with the “over 55 rule.”

The “over 55 rule” states that if you are 55 years old or older during the calendar year when you leave your job, you are allowed to take penalty-free withdrawals from the 401(k) plan.

While you will still have to pay taxes on the withdrawals, you won’t have to pay penalties.

#5 Get Professional Help

It’s always a smart idea to seek wise counsel regarding changing jobs.

The same is true when it comes to changing retirement accounts.

Before you make any big decisions that will affect your financial future, speak with a financial advisor.

You don’t want to miss out on employer matching contributions because you misunderstand the vesting schedule or make a costly rollover mistake that hurts your retirement fund.

Consult with the experts to make the best decision for your financial future.

Have questions about rolling over your 401(k)? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

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According to Vanguard’s 2024 How America Saves Report, the average 401(k) balance for participants in 2023 was $134,128, with a median balance of $35,286. Vanguard participants’ average account balances increased by 19% since year-end 2022.¹

How does your 401(k) balance compare to others in your age group?  

In this post, we break down the latest data from Vanguard so you have a better idea of how much to save for retirement.

Average vs. Median 401(k) Balances

Before we go through the 401(k) balance by age, it’s important to distinguish between the two sets of figures that will be presented for each age group: average and median.

The average balance is the sum of all the balances divided by the numbers in the set. This means all the different 401(k) balances in that age group are added together and divided by the number of accounts included.

The average 401(k) balance by age group includes adding those who have saved the most and those who have saved the least and dividing this sum.

For example, there are currently more 401(k) millionaires than ever before, but at the same time, “more than half of American workers feel behind on their retirement savings.”²

In contrast, the median 401(k) balance by age represents the middle value, with half of the people in the age group having less and half having more.

When you look at the median 401(k) balance by age, half of the people in that age group have less than this amount saved in their 401(k), and half of those have more.

Here is the 401(k) balance by age group as reported in Vanguard’s 2024 How America Saves Report.³

25 and Younger

This age group is composed of those just starting out in their careers.

• Average 401(k) balance: $7,351
• Median 401(k) balance: $2,816

Ideally, you will start saving for retirement as soon as you enter the career world and are offered an employer-sponsored retirement plan.

26 – 34 Years Old

Those in this age group have had more time to save for retirement. 

Notice that the average is twice the median balance.

This is a clear indication of those who have earned more and saved more in their 401(k) plan.

• Average 401(k) balance: $37,557
• Median 401(k) balance: $14,933

Rather than comparing yourself to these numbers, focus on yourself and your personal retirement goals.

Experts recommend that by age 30, you should have saved the equivalent of one year’s salary. 

What is your salary? Let’s say it is $45,000. Your 401(k) balance by age 30 should be $45,000.

35 – 44 Years Old

During these years, you likely have more financial obligations, such as taking care of your children.

It is tempting to put retirement savings on the back burner to pay for other things during this life season, but you don’t want to give in.

You’ll regret saving less as you approach retirement age and discover you don’t have enough to retire.

• Average 401(k) balance: $91,281
• Median 401(k) balance: $35,537

Experts recommend that by age 40, you should have three times your salary saved up.

Using our previous salary of $45,000, this means you should have $135,000 saved.

45 – 54 Years Old

During this life season, you may be earning more than ever before.

If this is the case, try boosting your 401(k) contributions. Once you hit 50 years of age, you can also take advantage of catch-up contributions of up to $7,500.

This is the time when you should really start focusing on boosting your contributions.

Here is the recent 401(k) balance for this age group.

• Average 401(k) balance: $168,646
• Median 401(k) balance: $60,763

Keep in mind that experts recommend you should have six times your current salary by age 50. 

If you make $45,000 a year, this means your 401(k) balance should be $270,000.

55 – 64 Years Old

The group close to retirement or in retirement should have a 401(k) account that is ready to do the work for them.

Experts recommend that by age 60, you should have eight times your salary. 

For those making $45,000 a year, this means $360,000 in savings.

Let’s look at the current numbers.

• Average 401(k) balance: $244,750
• Median 401(k) balance: $87,571

With $244,750 being the average 401(k) balance, it means that many 401(k) savers have saved significantly more than $244,750.

How Much You Need to Retire

While comparing your 401(k) balance to others is informative, it’s essential to consider your unique needs and the rising cost of living and healthcare expenses.

Fidelity Investments estimates that a 65-year-old retiring in 2023 can expect to spend an average of $157,500 on healthcare and medical expenses throughout retirement, or $315,000 for a couple.⁴

Sadly, many retirees have not saved enough money to last through their retirement years, forcing them to go back to work or rely on aid from others. 

Take a look at the real cost of retirement to see how much you actually need to save.

Speak to a Professional about Catching Up

If you look at these 401(k) balances and are worried about how you measure up, consider seeking the help of a professional. 

They can provide personalized advice tailored to your financial situation, helping to optimize your 401(k) performance so you can catch up and boost your savings.

401(k) Maneuver provides independent, professional account management to help employees, just like you, grow and protect their 401(k) accounts.

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that are hurting your retirement account performance. 

With 401(k) Maneuver, you can go about your life doing what you love with confidence, knowing we are managing your 401(k) for you.

Be sure to ask for 401(k) Maneuver at work to get personalized help with your 401(k) account

SOURCES

1. https://institutional.vanguard.com/content/dam/inst/iig-transformation/insights/pdf/2024/has/how_america_saves_report_2024.pdf
2. https://www.bankrate.com/retirement/retirement-savings-survey/
3. https://institutional.vanguard.com/content/dam/inst/iig-transformation/insights/pdf/2024/has/how_america_saves_report_2024.pdf
4. https://newsroom.fidelity.com/pressreleases/fidelity–releases-2023-retiree-health-care-cost-estimate–for-the-first-time-in-nearly-a-decade–re/s/b826bf3a-29dc-477c-ad65-3ede88606d1c

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401(k) account management is an option for anyone with a 401(k) – no matter how close or far you are from retirement.

Even if you have some basic investment knowledge, you might want to consider seeking expert advice.

Think of it this way – financial advisors manage 401(k) accounts for a living. It’s their job. 

It’s not something they do when they have time, which is often what individuals who self-manage their 401(k) accounts tend to do.

However, not all professional 401(k) account management companies are created equal. 

In this post, we hope to clarify the types and show how having someone manage your 401(k) may help you have more money during retirement.

Professional 401(k) Account Management Should Be Personalized

With the rise of AI and the IoT, we are seeing more robo financial advisors popping up.

Robo advisor managed accounts mean an investment service selects a group of funds and packages them in an investment portfolio for you. 

There is little personalization. Many only rebalance annually, and personal risk tolerance is rarely considered.

In contrast, a personalized, professional managed account means your 401(k) is personally managed by a person or team – not a robot.

Personalization occurs using the investment options that are offered, and a personalized strategy – tailored to your unique situation and risk tolerance – is designed using the full menu of investment options in your 401(k) plan. 

When you have professionals personally managing your 401(k), like we do at 401(k) Maneuver, the focus is on the outcome, not a one-size-fits-all algorithm based on your retirement date.

That’s why looking for 401(k) account management done by real people is so important.

At 401(k) Maneuver, we are a fiduciary, which means we are obligated to act in your best interest to improve your account performance. You aren’t merely a number in a computer program.

The Benefits of Professional 401(k) Account Management

Some people ask, “Why invest in professional 401(k) account management when you can do it yourself?”

There are many reasons why. 

Professional 401(k) account management may help you stay on course to meet your retirement goals and lead to a brighter retirement future. 

Here’s how…

#1 Keep More Money

Professional 401(k) management help has been shown to lead to less dispersion (due to fewer risks).

Vanguard’s How America Saves 2024 Report states, “Participants with managed allocations—notably target-date funds and managed account advisory services—had less dispersion in outcomes. […] For managed account participants, the 5th-to-95th percentile differences were 5.4 percentage points. […] By comparison, among all other participants, realized returns for those making their own choices ranged from 2.1% per year for the 5th percentile to 14.7% for the 95th percentile, a difference of 12.6 percentage points.”¹

In addition, those with managed accounts tend to save more money in the first place.

Edelman Financial Engines released a 20-year report analyzing the trends in managed accounts.

One finding was that “managed accounts tend to lead to more positive savings behaviors. Today, managed account members are contributing an average of 9.1% of their income to their account, compared to 7.8% for non-members and 7.4% for individuals primarily invested in a single target-date fund.”²

#2 Personalized Approach

Professional 401(k) account management helps provide a customized and personalized savings strategy for retirement.

Saving for retirement is not one-size-fits-all. 

This is why the Edelman Financial Engines 2024 Igniting Growth Through Innovation report found, “The percentage of managed account members taking advantage of adding personal data and preferences has grown significantly in the past decade, from 33% in 2014 to 74% in 2023.”³

You are unique. Your risk tolerance and retirement goals are personal.

401(k) account management by real people understands this is the case, which is why so many people are moving away from DIY investing and robo investing to managed accounts.

#3 Reduce Fees

Fees hidden within your 401(k) may take away from your investment returns and leave you with less money in retirement than you planned. 

Yet, 92% of 401(k) investors have no idea what they are paying in fees.⁴

Personalized professional 401(k) account management helps you identify the fees inside your 401(k) and know if you’re paying too much.

#4 Save Time and Ease Stress

A set-it-and-forget-it approach to retirement savings most likely won’t get you to your goals. 

Managing a 401(k) takes time and action, but not everyone knows how or has the time to do so.

If you don’t have the time to learn how to manage a 401(k) account effectively, professional account management can help. 

Passing the time-consuming task of managing your 401(k) to the professionals will allow you to focus on other things in your life, knowing your account is taken care of. 

You won’t have to worry about rough markets, data, or trends because you’ll have someone there to guide you.

With professional advice, you are more likely to make better financial decisions. And, thus, potentially earn more to boost retirement savings.

Professional 401(k) account management may alleviate stress.

According to Edelman Financial Engines 2024 Igniting Growth Through Innovation report, “94% of managed account members are more confident that they’ll reach their retirement goals because they’re enrolled in the program.”⁵

At the same time, over half of Americans believe we are facing a retirement crisis.

Wouldn’t you rather be one of the Americans who feel confident they’ll reach their retirement goals than those who fear running out of money?

#5 Protect Your Retirement

401(k) Maneuver provides professional account management to help you grow and protect your 401(k) account. 

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that may harm your account performance. 

Our done-for-you virtual service lets you keep your 401(k) right where it is while we review and rebalance your account based on your risk tolerance and current market conditions.

Have questions or concerns about your 401(k) performance? Book a complimentary 15-minute 401(k) strategy session with one of our advisors.

Book a Call

Sources

1. https://institutional.vanguard.com/content/dam/inst/iig-transformation/insights/pdf/2024/has/how_america_saves_report_2024.pdf
2. https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/49240/2024_20_years_managed_accounts_report_final.f65d5278bee2.pdf
3. https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/49240/2024_20_years_managed_accounts_report_final.f65d5278bee2.pdf
4. Over 90% of Americans make the 401(k) Mistake, Maurie Backman, Motley Fool
5. https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/49240/2024_20_years_managed_accounts_report_final.f65d5278bee2.pdf

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