You have to make a lot of decisions when you retire, and among the biggest is what to do with your workplace retirement savings. No matter how much money you have or how you intend to invest it, you have to first choose where your nest egg will live.
You have four basic choices.
Remain in your employer’s plan and just let the money grow until you have to start taking the required minimum distributions (RMDs).
Remain in your employer’s plan while taking installment payments.
Roll over the assets to an IRA at an institution of your choosing.
Take the account balance in cash and pay tax on the distribution to either spend it or roll it into a Roth IRA.
The good news, according to recent research from Vanguard, is that most people faced with this decision over 10 years, from 2011 to 2021, were able to preserve their retirement dollars. Seven out of 10 kept their assets in a tax-deferred environment, and 90% of the money stayed invested, and presumably, grew a bit. Average balances ranged from $239,300 to $418,900.
“More and more investors are on the right road to having a good experience with accumulations. We’re seeing improvements,” says Matt Brancato, chief client officer for Vanguard Institutional.
But, Brancato adds, “the average doesn’t tell you about individual experience.”
And for that, you have to look at some of the less good news, which is that Vanguard found that 30% cashed out their savings at age 60 or later, most with smaller balances. The average amount of these accounts was $39,700. Some had likely simply saved less, and some had been with the company plan for a short time, so had not accumulated a large amount.
The peril of cashing out
Cashing out a small balance might seem inconsequential to you at the time. The account could be one of many that you have, and the tax burden might not seem too much for you to bear. Or you could be intending to pay the income tax due on the distribution and roll the money into a Roth IRA in a conversion. Or the cash might be enticing – and then it’s gone.
“First of all, ‘small’ is a relative term,” says Brancato. “The dollar amount has to be proportionate to the intent. It’s a highly individualized decision.”
One important step if you’re thinking of cashing out is to consider how the amount involved could possibly grow over time and add to your retirement income later on. If your balance is $39,700 now and you think that isn’t much, it could be $78,000 in 10 years, if it grows at 7%.
At Ascensus, another large retirement plan administrator, they display those numbers to people when they initiate a decision that would impact their retirement savings, like reducing their 401(k) contribution. “We serve up a very quick estimate to connect the dots between what seems like a small amount to a much larger amount of money you’d forgo in retirement as a result,” says David Musto, CEO of Ascensus. After seeing that information, “30% of people ultimately choose not to reduce 401(k),” he adds.
That same kind of information may also help people make a decision between staying in their workplace plan after retiring or moving the money to a rollover IRA. While most eventually move money over to their own account within five years, Vanguard’s study shows that the numbers are shifting up for those staying in their workplace plan even after they retire.
Brancato sees the driver of that being flexible plan design, advice and financial-wellness tools that may be part of an employer package. If you want to tap into your money before you have to take RMDs, for instance, your plan would have to allow it, and Vanguard notes that the number of plans offering this nearly doubled in the past five years.
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Sundar Pichai, chief executive officer of Google Inc., speaks during the Google I/O Developers Conference in Mountain View, California, U.S., on Tuesday, May 8, 2018.
David Paul Morris | Bloomberg | Getty Images
Google executives are continuing to deal with the fallout from last month’s fumbled announcement of the company’s artificial intelligence engine called Bard, but their efforts to clean up the mess are causing further confusion among the workforce.
In an all-hands meeting on Thursday, executives answered questions from Dory, the company’s internal forum, with most of the top-rated issues related to the priorities around Bard, according to audio obtained by CNBC. It’s the first companywide meeting since Google employees criticized leadership, most notably CEO Sundar Pichai, for the way it handled the announcement of Bard, Google’s ChatGPT competitor.
Wall Street has punished Google parent Alphabet for the Bard rollout, pushing the stock lower on concern that the company’s core search engine is at risk of getting displaced as consumers eventually turn to AI-powered responses that allow for more conversational and creative answers. Staffers called Google’s initial public presentation “rushed,” “botched” and “un-Googley.”
Jack Krawczyk, the product lead for Bard, made his all-hands debut on Thursday, and answered the following question from Dory, which was viewed by CNBC.
“Bard and ChatGPT are large language models, not knowledge models. They are great at generating human-sounding text, they are not good at ensuring their text is fact-based. Why do we think the big first application should be Search, which at its heart is about finding true information?”
Krawczyk responded by immediately saying, “I just want to be very clear: Bard is not search.”
“It’s an experiment that’s a collaborative AI service that we talked about,” Krawczyk said. “The magic that we’re finding in using the product is really around being this creative companion to helping you be the sparkplug for imagination, explore your curiosity, etc.”
But Krawczyk was quick to follow up by saying, “we can’t stop users from trying to use it like search.”
He said Google is still catering to people who want to use it for search, indicating that the company has built a new feature for internal use called “Search It.”
“We’re going to be trying to get better at generating the queries associated there, as well as relaying to users our confidence,” Krawczyk said. He added that users will see a tab that says “view other drafts,” which would point people away from search-like results.
“But as you want to get into more of the search-oriented journeys, we already have a product for that — it’s called search,” he said.
The attempt to separate Bard from search appeared to signify a pivot in the initial strategy, based on what employees told CNBC and on internal memes that circulated in recent weeks. In the lead up to the Bard announcement, Google executives repeatedly said the technology it was developing internally would integrate with search.
Several Google employees, who asked not to be named because they weren’t authorized to speak on the matter, told CNBC that the inconsistent answers from executives has led to greater confusion.
Elizabeth Reid, vice president of engineering for search, echoed Krawczyk’s comments on Thursday, focusing on the company’s extensive use of large language models (LLMs).
“As Jack said, Bard is really separate from search,” Reid said. “We do have a pretty long history of bringing LLMs into search,” she said, citing models named Bert and Mum.
But while the company experiments with LLMs, it wants to “keep the heart of what search is,” Reid said.
In Google’s announcement last month, it mentioned search several times.
“We’re working to bring these latest AI advancements into our products, starting with Search,” the company said in a blog post.
That same week, at an event in Paris, Google search boss Prabhakar Raghavan unveiled some fresh examples of using Bard within search. And following the announcement, company leaders urged all employees to help by spending a few hours testing Bard and rewriting wrong answers, citing a “great responsibility to get it right.”
CNBC also previously reported the company was testing various Bard-integrated home search page designs.
Another top-rated question Thursday asked Pichai for different use cases for Bard, since Google employees were asked to help on search and “to rewrite queries with factual information.”
“It’s important to acknowledge that it’s experimental,” Pichai said in his response. “It’s super important to acknowledge the limitations of these products as well.” Those limits are something he’s addressed in the past.
Pichai said that with Bard, “you are exposing the ability for users to converse with LLMs,” which will improve over time. “And obviously we are product engineering on top of it,” he said.
“Products like this get better the more the people who use them,” Pichai said. “It’s a virtuous cycle.”
Employees are well aware of how the introduction was received.
“The first public demo was demoralizing, sent our stock into a nosedive, and invited massive media coverage,” read an employee comment from Dory that was read aloud. Then came the question, “What really happened?” and the request to “please share your candid thoughts on what went wrong at the Bard launch.”
Pichai referred the answer Krawczyk, who danced around the subject without giving a direct answer.
“Questions like this can be fair and we want to reiterate the fact that Bard has not launched,” Krawczyk said. “We acknowledged to the world that this is something that we’re experimenting with — we’re testing it. But there’s a lot of excitement in the industry right now.”
Krawczyk also referenced an event held at Microsoft’s headquarters that week, in which the company showed off how OpenAI’s technology can power Bing search results and other products.
“You see the stories of ChatGPT coincides with an event that we’re having that was actually focused on search,” Krawczyk said. “There can be challenges around the external perception but, as you heard today, we continue to focus on Bard’s testing.”
Krawczyk added that Google is excited to get the technology in “users’ hands to capture their creativity.”
Pichai chimed in to say, “It’s an intense time.”
“The purpose of the blog post was once we decided we were going to external trusted testers, things could leak and it was important we positioned it,” Pichai said. “We haven’t launched the product yet. And obviously when we launch, we’ll make clear it’s an experimental product.”
Pichai said that the company hopes to provide more details after Google IO, the annual developer conference. Google has yet to announce dates for the event.
Another top-rated employee comment from Dory said, “Launching AI seems like a knee-jerk reaction without a strategy.”
Pichai began his response by noting that Google spends more money on AI research and development than any other company.
“I disagree with the premise of this question” he said, letting out a laugh. “We are deeply working on AI for a long time. You are right in the sense that, we have to stay focused on users and make sure we are building things which are impactful.” He said, “user input is going to be an important part of the process so it’s important to get it right.”
Jeff Dean, head of artificial intelligence at Google LLC, speaks during a Google AI event in San Francisco, California, U.S., on Tuesday, Jan. 28, 2020.
David Paul Morris | Bloomberg | Getty Images
Jeff Dean, Google’s AI chief, was called upon by Pichai at the all-hands meeting to answer a question regarding the company’s loss of top talent. Specifically, the question asked why Google lost so many key people who were listed on a paper about much of the AI technology behind Bard.
“I think it’s important to realize this is a super-competitive field,” Dean said. “People with these kinds of skills are in high demand.”
Dean said Google has “two of the best AI research teams in the world” and “people working side by side on pushing forward the state of art in AI.”
Despite the competition in the market, “we have the ability to get things out in papers here but also work on products that touch on millions of users every day,” Dean said.
Pichai added that, “Just over the last couple of weeks, we are talking to some people who want to join Google who are literally some of the best ML researchers and engineers on the planet.”
A Google spokesperson didn’t immediately respond to a request for comment.
WATCH: Google could have a second-mover advantage with its chatbot tech
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