I Lost My Job Or I Changed Jobs – Should I Rollover My 401K?
Yes you should.
Why? Simply put, because as great as the 401K idea is, it can limit your choices significantly. You might not be able to get the best possible investments out there.
Think about it – if you worked for a reasonably large company, then while you were employed, you probably didn’t feel like you had much say in the investments that were offered to you and your fellow employees. Technically, the benefits director is supposed to take into account all employees opinions, but that doesn’t mean that a given opinion makes sense or that any change will happen.
Also, contrary to what many people think, your 401K isn’t free. It costs money to be invested in the choices made available to you through your company plan. Big 401K providers don’t do this out of the goodness of their hearts, after all! In fact, in 2009 Senators Tom Harkin (D-IA) and Herb Kohl (D-WI) introduced and had passed the Defined Contribution Fee Disclosure Act of 2009 to force companies to disclose these fees among other things.
Another thing you don’t have with your company 401K is personalized investment advice tailored to meet your goals. For this reason, one of the other things that the Disclosure Act is requiring (and which many companies have already added because their fund provider knew this was coming) are the so-called “target date” funds, one example being the Fidelity Freedom 2040 fund. Funds of this nature are provided in company 401Ks primarily for the legal cover that they provide.
Here’s how that works: you work for Company XYZ and invest in their 401K. You’re an engineer, or an accountant, or a truck driver, not a financial planner. You don’t research these things all day because you have other things to do. Consequently, you don’t know what to invest in, so you say, “I’m 35 years old, so I’ll probably retire in about the year 2040, so I’ll just invest in that one.” You’re covered in theory because these target date funds have an obligation to be focused initially in a relatively aggressive way, getting more and more conservative the closer it gets to 2040, which is pretty standard in the investment world. Generally speaking, you want to grow while you’re younger and get more protective as you get older and closer to retirement.
The problem is that this approach doesn’t take into account your individual goals and purposes. It’s a generic solution for those that aren’t interested or don’t have the time, and many investment professionals are concerned that the performance that they offer might be subpar to other choices.
So what does all this mean? Should you roll over? Absolutely you should, because you gain individual control over what you’re invested in, in addition to getting professional advice, and it doesn’t cost you a dime in taxes if you do it right.
When you roll over your funds with someone like myself, the whole world of investing opens up to you for those funds. The IRS doesn’t care what you invest in, only that you pay the right amount of taxes, which is another thing we’ll discuss.
Want to know more? Let’s talk, and create a plan that’s right for you and your family.
Related posts:
- If I Do The Roth Conversion, Can I Finance The Tax Payment?
- The Roth Conversion Opportunity (And Why It’s So Cool)!
- Having A Smart Nest Egg!
- What Kind Of Money Should I Put Away Before 2010?
- How To Handle A 401(K) Rollover To IRA
April 18th, 2010 at 12:43 am
I was browsing tonight, unsure of what I was looking for, but knew that I needed help with my finances, and your site just popped up. (Divine intervention, or what!)
April 22nd, 2010 at 10:57 pm
My friend mentioned to me your blog, so I thought I’d come have a read. Very interesting material, will be back for more!
April 23rd, 2010 at 8:27 pm
I like to visit your blog a couple times a week for new entries. I was wondering if you have any other niches you write about? You’re a very interesting writer!
April 24th, 2010 at 2:43 am
I currently use Etrade right now, but at $12.99/trade I think I’m getting ripped off. Seems like the popular opinion on here is that Zecco is the best option, but I have two questions If I currently use Etrade, how do I “transfer” those stocks that I own right now with Etrade over to Zecco?
April 25th, 2010 at 3:20 pm
I wanted to thank you for this interesting I definitely loved every little bit of it. I have you bookmarked your site to look at the latest stuff you post.
May 24th, 2010 at 2:00 am
Couldn’t be written any better. Reading this post reminds me of my old room mate! He always kept talking about this. I will forward this article to him. Pretty sure he will have a good read. Thanks for sharing!
May 24th, 2010 at 4:34 am
Hi webmaster, commenters and everybody else !!! The blog was absolutely fantastic! Lots of great information and inspiration, both of which we all need!b Keep ‘em coming… you all do such a great job at such Concepts… can’t tell you how much I, for one appreciate all you do!
May 26th, 2010 at 4:33 am
While this subject can be very touchy for most people, my opinion is that there has to be a middle or common ground that we all can find. I do appreciate that youve added relevant and intelligent commentary here though. Thank you!
May 26th, 2010 at 8:52 am
I totally go along you! I have often felt that way but nobody really would like to take it as seriously as we do apparently. Excellent blog anyway, I am going to have to stop by more frequently.
May 26th, 2010 at 3:27 pm
Recently, I didn’t give so much thought to writing comments on blog entries and have left comments even less. Checking out your insightful page, will probably encourage me to do so more regularly.
May 26th, 2010 at 10:46 pm
This post was very nicely written, and it also contains a lot of useful facts. I appreciated your professional way of writing this post. Thanks, you have made it very easy for me to understand.
June 11th, 2010 at 12:52 am
Major thanks for the blog article. Cool.
June 21st, 2010 at 4:02 pm
That’s my goal!!!