We Americans have an estimated $4 trillion invested in our 401(k) accounts. That’s trillions with a “t”, and that’s a lot of money buddy.
At the same time we have about 10,000 “baby boomers” retiring every day, and making critical decisions about how to best use their retirement money. It’s a question I get a lot: I’ve saved for years to get this lump sum for retirement, now what?
We may want to leave it right where it is, or we may decide we want to do a “rollover” to our very own IRA account. The great thing is, it’s up to us.
Just know this: the big 401(k) plans spend a crazy amount of effort and a ton of money in advertising because they consider those assets at risk if you decide to rollover your 401(k) to an IRA, and their grip is very strong.
No matter what you decide, my goal here is simply to give you the tools and information to make the best decision for you, not them.
Reasons to Leave Your 401(k) Where it is:
Different strokes for different folks, right? Not everyone will want to rollover their 401(k) to an IRA, and here are some reasons why:
Loan issues – if you have an outstanding loan on your 401(k), a transfer out of the plan could trigger a taxable event, and no one likes paying a bunch of unnecessary taxes.
Divorce – if you are getting divorced, you might have to leave the money behind in your 401(k) for legal reasons.
Guaranteed products – some 401(k) plans have guaranteed accounts with exceptional interest rates, often higher than CDs or bank accounts.
You’re good – you’re perfectly happy with your 401(k) plan choices, and concerned about making a change.
Reasons You Might Consider Firing Your 401(k):
Greater choice – the amount of investment choices in the average 401(k) plan is 15 choices. With an IRA you’ll have thousands of choices. If you’re not one of the lucky few these days retiring with a pension income, you may want to consider the flexibility of investing a portion of your savings to provide a guaranteed income to supplement your Social Security.
Personal Service and attention – people often feel they are “just a number” at the big 401(k) plans and prefer more personal service with a local advisor.
No love for your former employer – you may just not want your former employer to “have your money”. Depending on how you feel about your former employer, you may prefer an independent IRA custodian.
You may want to simplify your life – often times, we have several different retirement accounts at different companies. All these accounts can be consolidated in to one IRA account.
You may prefer a more proactive approach – often there is very little management of 401(k) plans since most mutual funds have a “buy and hold” philosophy. That works fine until it doesn’t. In 2008, the 50% market correction (peak to bottom) was disastrous for recent retirees. Do you remember the old “my 401(k) is now a 201(k)” jokes? Most people I talk to don’t want this amount of risk once they are retired, and they want to know a professional is watching their accounts while they enjoy their retirement.
No matter what you decide, the really special thing about your 401(k) is, it’s yours! It doesn’t belong to the company you worked for, and it’s not in a fund controlled and managed by some unseen entity. I think a lot of financial institutions and their representatives forget this.
It’s our money, and we get to decide what to do with it, and that’s a beautiful thing!
P.S. Get a FREE copy of my Amazon best-selling book Simple Retirement (you just pay the shipping – the book’s on me) here: http://simpleretirementbook.com