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.

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