david@lexwealth.com
859-225-2596

The Best Reason to Do A 401(k) Rollover

No Brainer Day-7When you change jobs or retire you have to make a decision about your 401k savings.  There are several reasons to do 401k rollover.  Let’s go through them one by one.

First, the number of investment options available in your IRA. You generally have more investment choices with an IRA than with an employer’s 401(k) plan. You typically may freely move your money around to the various investments offered by your IRA trustee, and you may divide up your balance among as many of those investments as you want. By contrast, employer-sponsored plans typically give you a limited menu of investments (usually mutual funds) from which to choose.

Second, you can freely allocate your IRA dollars among different IRA trustees/custodians. There’s no limit on how many direct, trustee-to-trustee IRA transfers you can do in a year. This gives you flexibility to change trustees often if you are dissatisfied with investment performance or customer service.

Third, an IRA may give you more flexibility with distributions. Your distribution options in a 401(k) plan depend on the terms of that particular plan, and your options may be limited. However, with an IRA, the timing and amount of distributions is generally at your discretion (until you reach age 701⁄2 and must start taking required minimum distributions in the case of a traditional IRA).

The best reason to rollover your 401k to an IRA is advice.  You can have all the investment options available and accounts at every provider in the world, but if you are not getting solid advice your investments may suffer.

A great example of how advice or coaching makes a difference is with my University of Kentucky Wildcats men’s basketball team.  Coach John Calipari has quite a few High School McDonald’s All Americans as freshmen on the team.  Each player brings his own incredible talent and unique skills to the team.  Coach Calipari takes raw freshmen and often turns them into professional basketball players one year later.  So should an investor rely on a financial advisors advice to help them reach their goals and take their investment game to the next level.

Here are the reasons advice is the most important reason to do a 401k rollover:

  • A financial advisor can help you identify lower cost investment options, thereby increasing your returns through the savings
  • Advice from a financial advisor can help you allocate your investments according to your risk tolerance and goals, utilizing the various asset classes available
  • Good advice can help you with transparency.  Knowing all the details , consequences and risks of your investments.

Advice from a financial advisor can help you keep a long-term perspective, and not react to every market correction.  Good advice can keep you from being your own worst enemy and making bad decisions based on emotion and not fact.

There are many great reasons to rollover your 401k to an IRA.  The limitless investment options, using multiple custodians and distribution flexibility.  By far the best reason is getting ongoing advice.  When you go it alone you give up the advantage of asking an expert his opinion.  A good financial advisor will know you as well as you know yourself.

He will know when you need some guidance or just a good kick in the pants!

If you need a good kick in the pants or just some assistance with your 401(k) rollover, please write me at david@lexwealth.com, or call me (859) 225-2596.