1 in 3 Workers Can’t Answer This Simple Question About Their Retirement Funds

Saving enough money to retire isn't enough. You must also know how to make the most of that money so you don't outlive it.

1 in 3 Workers Can’t Answer This Simple Question About Their Retirement Funds Photo by Dean Drobot / Shutterstock.com

Let’s imagine for a minute that you are on the brink of retiring with a big, fat 401(k) balance.

Now, what are you going to do with all that money after you retire?

Not sure? You’re not alone: 31 percent of workers with a defined contribution plan like a 401(k) don’t know what they will do with the assets when they retire, according to the findings of the 2018 Retirement Confidence Survey recently released by the Employee Benefit Research Institute (EBRI).

The question that stumped about 1 in 3 workers was: “Which of the following are you most likely to do with the money in your retirement savings plan when you retire? Please select all that apply.”

The options were:

  • Roll it into an individual retirement account (IRA) — a response cited by 30 percent of workers
  • Keep the money in your workplace retirement savings plan — 24 percent
  • Cash it out and put it into another investment or savings account — 23 percent
  • Purchase a product that guarantees monthly income for life — 21 percent
  • Cash it out and spend it — 5 percent
  • Don’t know — 31 percent

Being unsure of what to do with retirement savings is arguably an enviable conundrum. It beats not having any savings. And EBRI found that 26 percent of workers have less than $1,000 in savings — a situation far more common among workers without a retirement plan like a 401(k).

Still, if you don’t know what to do with your 401(k) balance, you probably don’t know how to make the most of it, either. And that doesn’t bode well for your retirement.

Part of the reason 1 in 3 workers don’t know what to do with their plan assets could stem from the fact that many have yet to calculate how much retirement money they need to begin with.

EBRI found that only 38 percent of workers or their spouse have ever tried to calculate how much savings they would need to live comfortably in retirement.

The survey also found that among workers, only:

  • 38 percent have reviewed the amount of Social Security retirement income they will receive at their planned retirement age.
  • 33 have estimated how much monthly income they will need in retirement.
  • 29 have estimated what their monthly expenses will be in retirement.

For the nonprofit organization’s survey, 2,042 people in the U.S. age 25 or older were polled. Roughly half of them were workers and roughly half retirees.

What you need to do

There is little excuse for someone approaching retirement not to have reviewed their Social Security income options. Just log into your SSA.gov account. Doing so should tell you how much Social Security retirement income you would receive each month at given retirement ages.

If you don’t have an SSA.gov account, you can open one for free — even if you haven’t yet retired. In fact, for cybersecurity reasons, you shouldn’t wait to claim your SSA.gov account.

Once you know the size of the check Social Security will send you each month — and the age at which you want to start claiming that money — you will be better equipped to calculate how much other retirement savings you will need and how to make the most of it.

So, have you determined what to do with your retirement account assets? Share with us below or on Facebook.

Karla Bowsher
Karla Bowsher
I’m a freelance journalist and former newspaper reporter who has covered both personal and public finance. I've worked for a top 50 major metro daily and a community newspaper as well as ... More


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