I’m 73 and will only have my 401(k) after retiring. How do I make it last?

I do not need this money to survive any time soon.

Do I switch it, change it, and to what? I need good sound advice. 

See: We’re in our 60s and have lost $250,000 in our 401(k) plans — can we still retire?  

Dear reader, 

Investors everywhere are asking themselves a similar question these days — what do I do with my 401(k) so I don’t lose so much money? Market volatility has given many retirement savers a headache in the last year or so, and the stress doesn’t appear to be letting up just yet. 

There’s no one hard-and-fast rule with how to manage your 401(k). First, it’s important to determine how much of this account you’ll be relying on in retirement every year, and if you have other sources of income. Whether you’ll be distributing from it primarily or not is a key factor, since the more you need from the account every year, the faster the account will deplete. Knowing this will also help you make sense of how your account needs to be invested, but I’ll get to that in a moment. 

Analyzing and assessing any other sources of income in retirement, such as Social Security or rental income or part-time work or savings in an IRA, will also help you determine if you need to tap into your 401(k) immediately upon retirement, or if you can hold out. The “when” in this calculation is crucial. For example, right now market volatility is sending most retirement account balances on a rollercoaster ride, and if you’re experiencing a loss of any kind, you want to avoid taking a withdrawal from your account so as not to suffer from sequence of return risk. That’s the risk that you will lose out on potential returns in the future while taking distributions at a lower balance. 

By holding off on withdrawals from your 401(k), you allow your account to rebound when the market inevitably does better again. The longer it has to grow, the better. You mention not needing this money to survive any time soon, so if you’re able to avoid distributions for the near-term after retirement, such as by relying on Social Security or another income source, you could really benefit. If you’ve got excess cash flow now, such as from Social Security checks, you may want to consider putting some more money into a retirement account, or at the least an emergency savings account. 

Now to asset allocation. Again, there are numerous strategies for how to invest a 401(k). Some people will argue you need to be much more conservative if you’re in your 70s than if you’re just starting your career, while others will say you need to invest somewhat aggressively so that your account is continuing to earn money while you’re in retirement. Financial planners may also suggest the bucket method, which is when you break down your savings into a few pools — there would be the ultra conservative bucket, which is for short-term spending, then a moderate bucket, which would be a mix of stocks and bonds, and then an aggressive bucket, which would have a longer-term outlook and focus on income generation. 

Check out MarketWatch’s column ‘Retirement Hacks’ for actionable pieces of advice for your own retirement savings journey 

How you should invest your money is dependent not only on how much money you need or want in retirement, but also your comfort level. 

There’s a difference between “risk capacity” and “risk tolerance.” The former is how much risk you need to take in your portfolios to reach your goals. The latter is how much you can stomach, such as if you are invested aggressively but you can’t sleep at night, you’re constantly logging into your retirement account or you’re watching index tickers move up and down throughout the day. (None of those are good to do frequently.) 

I can’t tell you how exactly you should manage your 401(k) because of all of the other key factors and figures to consider, such as current and expected living expenses before and during retirement, financial needs, debts, other assets like a home or an IRA, etc., but I hope these considerations act as starting points for you. 

And as for taxes: You can diversify your tax options, such as investing in a traditional 401(k) and a Roth one, if that’s an option at your job. The traditional account is invested pre-tax, which means you’ll pay taxes at the time of distribution, whereas Roth contributions are taxed and then distributions would be tax-free. 

Also see: How much do I need to retire? Is $3 million enough?

If you don’t have a Roth 401(k) option available to you, there’s always the Roth IRA, assuming you meet the income requirements ($153,000 for single taxpayers and $228,000 for those who are married filing jointly). Tax diversification is a great way to reduce your liabilities at tax time and maximize how much of your withdrawals you can keep — for example, if you’re close to the breakpoint of two tax brackets but you need to take money out of your retirement savings, you could withdraw from your Roth. Comparatively, if you only had a traditional account, that withdrawal could push you into the next tax bracket and thus, you’d be paying more in taxes. A certified public accountant could help you make sense of these calculations. 

I also suggest you contact a qualified financial planner, someone who would work in your best interest, or at the least reach out to your HR department or a professional at the firm housing your 401(k) so that you can review your options. 

In the meantime — and I say this a lot, and to everyone — review your spending and savings habits and see if you can make tweaks. You can’t control what the market does or what tax rates will be in the future, but you’re in full control of how you manage your money outside of the portfolio. Be proactive in other ways, such as maximizing your savings while you’re still working, writing out a financial plan for retirement that includes all of your goals as well as accounting for all of the expenses that are expected and unexpected, have an emergency savings account outside of your 401(k) that you can lean on in the event of an unfortunate situation and review your healthcare coverage, as that’s a huge cost for all Americans, especially as we age. 

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