Should you roll over your 401(k)? | Haven Financial Solutions, Inc.

Congratulations! You just got a get-out-of-jail card, you?re shaking that company?s dust off your feet, etc., etc. Unlike most people, you?ve actually managed to save some money in the 401(k) and now you?re wondering what to do with it?leave it parked, or roll it over into an IRA. Double points if you actually understand what it?s invested in currently. So, I?m going to give you 4 reasons to roll it over, and 4 reasons to leave it where it is.

Yes, roll it over if?

1. Your current plan has bad choices, and a lot of them do. You may have been stuck with some stinker funds?high commissions, limited choices, high management fees?while you worked for the company, but no more. Move it to a no-load mutual fund company, and get some decent portfolio advice from a fee-only financial planner (that would be me, in case you?re wondering).
2. You might forget about it, move, or be hard to find in the future. Also, as we all know from the news, heads of companies go to jail, retire, or flee the company and if your 401(k) is with a small company, there?s some probability that you might have a little difficulty tracking it down in 10 or 15 or 30 years.
3. You?ve had multiple employers or have multiple accounts. Managing dribs and drabs into a consistent and reasonable asset allocation is a nightmare. The fewer the accounts, usually, the better the plan.
4. You have a new job with good investment choices in the 401(k). You can roll over the old one into the new, and keep your portfolio to a manageable number of accounts. If your new plan allows, you also might be able to borrow against it in an emergency.

No, don?t touch it if?

1. You intend to spend it. No, no, no, no. Don?t touch it and you might actually have a retirement instead of doddering in to work at 85 on your walker, like all those people who tell me they?re never going to retire. At least you?ll have enough money for an assistant to wheel you in.
2. You?re in a profession or conduct activities which give you a high probability of being sued. 401(k)s offer slightly more creditor protection?although you might want to address that by insurance.
3. You want to roll over a traditional IRA to a Roth. If you?re thinking about rolling a small IRA into a Roth, you might want to do so before you make it a big IRA. Even if you don?t roll over the entire amount, all IRAs will be taken into account by the IRS in figuring how much tax you owe. Also, I sometimes suggest that high income earners who are good savers consider contributing to a non-deductible IRA, then immediately converting it to a Roth. Can?t do it as easily if you have other IRA accounts. The details of this are too long to explain in this blog post, but I?d be happy to discuss them based on your specific situation.
4. You?re not going to pay any attention to the investments or learn anything about portfolio choices. May as well leave it where it is. At least you won?t stick it in CDs or leave the check sitting on your dresser for 61 days.

None of this is intended as specific investment advice because obviously it depends on your personal circumstances. The biggest problems I see with 401(k)s are that they?re too small (at least contribute enough to get the employer match, and preferably contribute the legal maximum), and the employee has made dumb choices. Typical conversation:

??????????? ?Tell me how you selected this (absolutely horrendous) choice of funds.?

??????????? Choose one answer:

??????????? ? ?The name sounded good?

??????????? ? ?My brother-in-law told me it was hot?

??????????? ? ?I saw their ad?

??????????? ? ?(Some idiotic) TV money guru recommended it?

??????????? ? ?I wanted my money to grow and this was called a growth fund?

??????????? ? ?I wanted my money to be safe so I chose the government fund?

??????????? ? ?Threw darts? (probably the best of all of these)

It?s your future, and I bet you worked hard enough to earn it. Take some time to think things through, do some reading, and get good advice.

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