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Workers spend decades of their careers saving up money for retirement, whether in their employer 401(k) plans or through other savings vehicles. Yet despite spending a lot of time and effort making sure they invest their retirement assets well, many people don't have much insight on what to do with their 401(k)s after they retire. Handling your 401(k) correctly in retirement is just as important as managing its growth during your career, and to help guide you through the choices you have, below you'll find a list of the things you can do with your 401(k) account after you retire.

1. You can leave your 401(k) at your last employer and take distributions on demand.
One choice that most workers have is to leave their 401(k) accounts at their final employer. You can then choose from a variety of distribution options, one of which is simply to take money out at will on request. In essence, this makes your 401(k) closely resemble IRAs over which you have complete control, except that rather than going to your financial institution to make withdrawals, you'll likely have to go through your former employer's HR department.

If you choose this route, bear in mind that 401(k) accounts are subject to minimum distribution requirements once you turn 70 1/2 years old. As long as you meet those requirements, though, you can generally be flexible about when and how much money you take, giving you latitude to spend when you need money.

2. You might be able to get monthly payments from your 401(k).
Some employers have set up their 401(k) plans to offer employees the ability to get guaranteed monthly payments for life when they retire, in essence creating their own pension-like arrangement. By including provisions that allow your 401(k) money to go directly toward funding an annuity from a private insurance company, you can get continued tax-favored treatment while ensuring a steady stream of predictable monthly payments either for as long as you live or for as long as you or your spouse is still alive. Annuities are essentially a bet on your life expectancy; live longer than expected and you'll end up ahead, while if you don't survive your life expectancy, you'll lose out.

Some plans offer other options, such as fixed installments on a monthly basis. It's important to understand that these are not guaranteed payments and are really just convenient ways to access your own money. You can set up payments for whatever amount you like, and you'll keep getting payments until you run out of money. Some employers will get fancier, calculating payments based on your account balance and life expectancy and adjusting the amount periodically to reflect your investment performance. Whichever way you go, many people find it useful to have monthly income they can rely on from their 401(k).

3. Taking a lump-sum distribution.
The other distribution option you have is to take all your assets out of your account in one fell swoop. This option actually includes two different choices depending on what you then do with the money.

The less attractive choice is to simply take the money out of the plan and put it into a regular account. By doing so, you'll trigger income tax on the entire amount all at once, which in some cases can lead to far higher tax liability than you would have had to pay otherwise. Money that's paid to you will have amounts withheld toward federal and state income taxes, but there's no assurance that what's withheld will be enough to cover your actual tax bill.

The better option is to take the lump sum and roll it over into an IRA. By doing so, you further defer paying taxes on the amount until you withdraw it from the IRA, and you can invest that money in a wider variety of investment choices than you had within the 401(k) account. As long as you're mindful of fees and choose smart investments, the rollover option is one of the most popular and often makes the most sense for those who are willing to do their investing homework.

Knowing how to handle a 401(k) plan after you retire is a key part of making sure your financial strategy in retirement works the way you want. Otherwise, a lifetime of effort could end up failing to achieve the goals you set for your retired years.

Dan Caplinger has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.