View the full transcription of this episode here.
Most retirement savers know their 401(k) is their biggest account. What many don’t realize is just how many rules, fees, and strategies surround these plans, and how costly missteps can be.
On this episode of GDS Unplugged, adviser Tim Allin, CFP®, CEPA®, shared insights on everything from early withdrawal provisions to the much-talked-about “Mega Backdoor Roth.” Below are the highlights.
It’s common for participants to assume their workplace plan is “free.” In reality, most plans come with layers of:
Fees aren’t necessarily negative, but if you’re paying them, you should be receiving value in return, whether that’s financial planning, tax coordination, or investment guidance. Without that, fees can eat into long-term returns without providing real benefits.
Starting at age 73 (age 75 for those born in 1960 or later), the IRS requires savers to begin taking Required Minimum Distributions (RMDs) from tax-deferred accounts.
Key facts:
This is one reason consolidating accounts before RMD age can reduce both stress and paperwork.
Leaving the workforce before 59½ doesn’t mean funds are locked away forever. Two IRS provisions offer potential options:
Both options require careful planning, and in some cases, consultation with a CPA or financial professional.
Target-date funds (TDFs) are designed to automatically adjust from stocks to bonds as a “target” retirement year approaches. While simple, they come with drawbacks:
TDFs can work well as a default choice, but they are not one-size-fits-all.
Some employer-sponsored plans allow an advanced strategy known as the Mega Backdoor Roth. Here’s how it works:
When available, this strategy may provide an opportunity to expand the amount of retirement money that grows tax-free. However, rules vary by employer, so checking plan documents or calling the provider is essential.
For business owners, selling a company is often a once-in-a-lifetime event. Yet some research shows that 70–80% of businesses that go to market never sell, and among those that do, most owners report regret within a year, according to the Exit Planning Institute.
The difference often comes down to planning. Successful exits typically involve a core team: attorney, CPA, wealth manager, and in some cases family or business partners. Just like surgery requires coordination among specialists, business sales benefit from a “quarterback” ensuring communication, accountability, and follow-through.
The common thread across all these strategies, from RMDs and early withdrawals to Roth conversions and exit planning, is the need for preparation. Most mistakes occur not because people lack the intelligence to choose well, but because they never had the right information or a clear plan.
With proper planning, clients may reduce the likelihood of penalties, better manage fees and align strategies with their long-term goals.
This episode is filled with practical insights that can help you uncover the often-overlooked costs, rules, and opportunities within your 401(k).
From hidden fees and Required Minimum Distributions to early withdrawal strategies, target-date fund pitfalls, and advanced approaches like the Mega Backdoor Roth, adviser Tim Allin and Glen Smith cover it all.
Tune in to explore ways to better understand retirement strategies, avoid common pitfalls, and align your plan with your long-term goals. Don’t miss this opportunity to learn more about taking steps to better understand and prepare for your financial future.
GDS Wealth Management (“GDS”) is an SEC-registered investment adviser; registration does not imply a certain level of skill or training. This content is for informational and educational purposes only and is not investment, legal, accounting, or tax advice, nor a recommendation to buy or sell any security or strategy. All investing involves risk, including possible loss of principal. Past performance is not indicative of future results. Glen Smith and Tim Allin are registered with GDS Wealth Management; the views they express are their own and do not necessarily reflect those of GDS or its clients. Retirement and tax are complex, can change over time, and vary by plan. Be sure to review current limits and rules carefully and consult with a qualified adviser and CPA/attorney before making decisions. Mentions of third-party providers are for illustration only and not endorsements; GDS does not guarantee their services. Any forward-looking statements are subject to change and are not guarantees. For more information about services, fees, and disclosures, visit www.gdswealth.com.