What to Do With Your Google 401(k) When You Retire
When you retire from Google, one of the most important decisions you'll make is what to do with your 401(k). In fact, this choice can impact your retirement income and tax situation for decades to come.
The Four Options for Your Google 401(k)
When you retire from Google, you have four primary options for what to do with your 401(k) funds.
Option 1: Leave It at Vanguard
First off, you could leave your 401(k) with Google's plan administrator, Vanguard. As long as your balance exceeds $7,000, Google's plan allows you to keep your funds where they are even after retirement. This option makes sense if you're satisfied with Vanguard's investment options and fees and want to skip the hassle of moving your savings.
This is also a good option if you’re retiring early. If you retire at age 55 or later, you can access your 401(k) penalty-free without having to wait until you turn 59½. This benefit is lost if you roll the funds into an IRA.
However, even if you leave the money in place, you won't be able to make new contributions after leaving Google. You will also need to manage this account separately from any other retirement accounts you hold, which could complicate your finances.
Option 2: Roll It into an IRA
Rolling your Google 401(k) into an IRA is one of the most popular options for retirees. This gives you complete control over your investments, often with more investment options than you’ll find in your Google 401(k).
With an IRA, you can choose from thousands of individual stocks, bonds, ETFs, mutual funds, and other investments. Many retirees appreciate this flexibility, especially if they work with a fiduciary financial advisor who can manage a diversified portfolio tailored to their specific needs.
If you have multiple old 401(k) accounts from previous employers, you can use an IRA to consolidate them. Managing one IRA is simpler than tracking multiple savings accounts across different plan administrators.
On the other hand, you’ll lose access to the rule of 55 for penalty-free early withdrawals. And if you're considering doing backdoor Roth IRA contributions in the future, having a large traditional IRA balance can complicate that strategy due to the pro-rata rule.
Option 3: Roll It to a New Employer's Plan
If you're retiring from Google but taking on new employment with another company that offers a 401(k), you might be able to roll your Google 401(k) into the new employer's plan. This option keeps your retirement savings in one place and maintains the tax-deferred status of your funds.
Rolling to a new employer's plan makes sense if the new plan has low fees, good investment options, and you plan to continue working. It also preserves the ability to delay required minimum distributions (RMDs) if you're still working and don't own 5% or more of the company.
However, not all employer plans accept rollovers, so you'll need to check with your new employer's HR department. Additionally, you'll be limited to whatever investment options the new plan offers.
Option 4: Cash It Out
Taking a lump-sum distribution and cashing out your 401(k) is almost always the least favorable option. When you withdraw your entire balance, you'll owe ordinary income taxes on all traditional (pre-tax) funds, and if you're under age 55, you'll also pay a 10% early withdrawal penalty. (If you retire at age 55 or later, the rule of 55 allows you to avoid that penalty, but the taxes remain.)
For a Google employee with a substantial 401(k) balance built through years of contributions and employer matching, cashing out could mean losing a substantial portion of your savings to taxes. It could even push you into a higher tax bracket, letting you keep even less of your nest egg. You also lose decades of tax-deferred or tax-free growth you might otherwise gain through your investments.
This option should only be considered in extreme financial emergencies where no other alternatives exist.
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Factors to Consider When Making Your Decision
Investment Options and Flexibility
Google's 401(k) at Vanguard offers more investment flexibility than many employees realize. In addition to a solid selection of low-cost index funds and target date funds, Google's plan includes access to a self-directed brokerage window. This feature allows you to invest in thousands of individual stocks, ETFs, and mutual funds beyond the core fund menu.
With the PCRA option, you can access a much broader range of investments while keeping your money in the 401(k). This means the investment flexibility advantage of rolling to an IRA may be less significant for Google employees than for employees at companies with more restrictive 401(k) plans.
That said, an IRA still provides complete investment freedom without any plan-imposed restrictions, and you won't need to navigate the PCRA application process or manage a separate brokerage window within your retirement account.
Fees and Expenses
If you’re thinking of rolling your funds into an IRA, pay attention to management fees, trading costs, and fund expense ratios. Google's 401(k) plan through Vanguard typically has very competitive fees due to institutional pricing. Many of the funds available in the plan have expense ratios lower than what individual investors could access on their own. Some IRA providers also charge annual account fees or transaction fees that could add up over time.
The Rule of 55
If you're retiring from Google at age 55 or later and might need to access your 401(k) before age 59½, preserving the rule of 55 is crucial. This provision allows penalty-free withdrawals from your current employer's 401(k) if you leave your job during or after the year you turn 55.
Once you roll your Google 401(k) to an IRA, you permanently lose this benefit. The rule of 55 only applies to employer-sponsored plans, not IRAs. If early access to your retirement funds is important to your strategy, leave your 401(k) at Vanguard.
Required Minimum Distributions (RMDs)
RMDs from traditional (pre-tax) 401(k)s and IRAs depend on your birth year. If you were born in 1951 through 1959, you must begin taking RMDs at age 73. If you were born in 1960 or later, you won't need to start RMDs until age 75.
The RMD rules are largely the same whether your money is in a 401(k) or an IRA, with one important exception: If you're still working and don't own 5% or more of your employer, you can delay RMDs from your current employer's 401(k) beyond the normal RMD age. This exception doesn't apply to IRAs, however. You must take RMDs from traditional IRAs starting at your designated RMD age, regardless of whether you’re employed.
For Google retirees who won't be working elsewhere, this distinction doesn't matter much. But if you're considering working part-time or consulting and want to delay RMDs, keeping funds in a 401(k) (whether Google's or a new employer's) provides that option.
Managing multiple 401(k) accounts also complicates RMDs because you must calculate and take RMDs separately from each 401(k). With IRAs, you can calculate the total RMD across all your traditional IRAs and take the entire amount from just one account, which is often more convenient.
Roth Accounts and Tax Diversification
If you have Roth 401(k) funds in your Google account, you can roll them to a Roth IRA without any tax consequences. Rolling your Roth 401(k) to a Roth IRA can still be beneficial for consolidation and investment flexibility, even though both Roth 401(k)s and Roth IRAs are now exempt from RMDs during your lifetime.
Under the SECURE 2.0 Act, RMDs from Roth accounts in employer plans were eliminated starting in 2024, bringing Roth 401(k) RMD rules in line with Roth IRAs. This means there's no longer an RMD advantage to rolling Roth 401(k) funds to a Roth IRA, though many retirees still prefer the simplicity and flexibility of consolidating their Roth savings in a Roth IRA.
Creditor Protection
Both 401(k)s and IRAs have creditor protection, but the level of protection differs. 401(k) plans have unlimited federal protection under the Employee Retirement Income Security Act (ERISA), meaning your retirement funds are shielded from creditors in bankruptcy and lawsuits.
IRAs also have federal bankruptcy protection, but it's capped at approximately $1.5 million (this amount adjusts for inflation). Beyond federal protection, IRA creditor protection varies by state law. For most retirees, this distinction doesn't matter, but if you have concerns about lawsuits or creditor claims, keeping funds in a 401(k) does provide stronger protection.
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Special Considerations for Google Employees
The Mega Backdoor Roth Strategy
If you've been using Google's mega backdoor Roth strategy by making after-tax contributions and converting them to Roth, pay attention to how you handle these funds at retirement. Your Roth 401(k) balance (including mega backdoor Roth conversions) can be rolled directly to a Roth IRA without tax consequences.
Rolling your Roth 401(k) funds to a Roth IRA is often recommended for consolidation and investment flexibility. Make sure to complete a direct rollover to avoid any withholding or tax complications.
Consolidating Multiple Accounts
Many Google employees have old 401(k) accounts from previous employers in addition to their Google 401(k). Retirement is a good time to consolidate these accounts. You can roll multiple old 401(k)s into a single IRA, making it easier to manage your asset allocation, rebalance your portfolio, and track your overall retirement savings.
However, if you want to preserve the rule of 55 for your Google 401(k), you might consider rolling old 401(k) accounts into your Google 401(k) before you retire, then leaving the consolidated balance at Vanguard. This strategy gives you the rule of 55 benefit for all your consolidated funds.
GSU Tax Implications
Your Google Stock Units (GSUs) vest and are taxed as ordinary income regardless of what you do with your 401(k). GSUs and a 401(k) are separate benefits with different rules. However, both contribute to your taxable income in retirement, so you’ll want to coordinate your 401(k) withdrawal strategy with your GSU sales to manage your tax bracket effectively.
Making Your Decision
What should you do with your Google 401(k) when you retire? Unfortunately, there’s no one-size-fits-all answer. The right choice for you will depend on a variety of factors, including:
Your age
When you need access your funds
Your investment preferences
Your overall retirement income strategy
For many Google retirees, rolling into an IRA makes sense for the flexibility and consolidated account management it provides. However, if you're retiring between 55 and 59 and might need penalty-free access to your funds, keeping your 401(k) at Vanguard to preserve the rule of 55 could be more valuable.
Take time to evaluate your options, run the numbers, and consider consulting with a fiduciary financial advisor who understands the nuances of Google's benefits and can provide personalized guidance based on your specific circumstances.
Get Reliable Guidance for Your Retirement Strategy
Deciding what to do with your Google 401(k) is just one piece of your overall retirement strategy. At TrueWealth Financial Partners, we specialize in helping you make a smooth transition from working to retirement. As fee-only fiduciary financial advisors based in Bellevue, WA, we provide objective advice tailored to your unique situation.
We can help you evaluate your 401(k) rollover options, coordinate your withdrawal strategy with Social Security and GSU sales, manage your tax situation, and develop a comprehensive plan that ensures your retirement savings last throughout your lifetime.
Schedule a free consultation today to discuss your Google 401(k) and create a retirement strategy that gives you confidence and peace of mind.
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FAQs
How long do I have to decide what to do with my Google 401(k) after I retire?
There's no deadline. You can leave your 401(k) at Vanguard indefinitely as long as your balance exceeds $7,000. Take the time you need to make an informed decision.
Can I roll over just part of my Google 401(k)?
Yes, you can do a partial rollover. You might roll some funds to an IRA while leaving the rest at Vanguard. This strategy can be useful if you want both the investment flexibility of an IRA and the rule of 55 protection for funds you might need to access early.
What happens to my Google 401(k) if I die?
Your designated beneficiaries will inherit your 401(k) according to the beneficiary designations on file with Vanguard. Make sure your beneficiary designations are up to date, as they supersede your will.
Can I roll my Google 401(k) to my spouse's 401(k)?
No, you can only roll your 401(k) to an account in your own name. This will either be your own IRA or a new employer's 401(k) plan if they accept rollovers.
What if I have both traditional and Roth funds in my Google 401(k)?
You can roll them over separately: traditional funds to a traditional IRA and Roth funds to a Roth IRA. You can also leave them both in your Google 401(k) at Vanguard if you prefer.
Do I have to pay taxes when I roll over my 401(k) to an IRA?
No, as long as you do a direct rollover and traditional 401(k) funds go to a traditional IRA (and Roth funds go to a Roth IRA), there are no taxes or penalties.
What's the difference between a direct and indirect rollover?
A direct rollover is when Vanguard sends your funds directly to your new IRA provider. An indirect rollover is when they send you a check, and you must deposit it into your IRA within 60 days. Direct rollovers are recommended because indirect rollovers trigger a withholding tax and strict time limits.
Can I contribute to my Google 401(k) after I retire?
No, you cannot make new contributions to your Google 401(k) after you leave the company. However, your existing balance can remain invested and continue growing.