According to the Employee Benefits Research Institute, 1 out of every 3 workers changes jobs without taking their retirement plan assets with them. For many this is because they may feel intimidated about or do not understand the transfer process.
For some this oversight might be because they fancy themselves as too busy to mess with this process. For a select few, they deem their former employer's plan as better than the known alternatives, including the new employer's retirement plan.
As we shall learn here though that there are at least five reasons why you are better off rolling those plan assets into an Individual Retirement Account (IRA) when you change jobs.
1) Increased Investment Options
Rolling your retirement plan assets directly to a qualified IRA allows for more investment choices. There are currently over 15,000 mutual funds and 1,000 exchange traded funds (ETFs) today to choose from through most advisors or fund supermarkets. This is far more than is available through most retirement plans.
In addition to mutual funds and ETFs, you also have the option of investing in any stock, bond or tradable security. Obviously, more options equates to a larger number of options to make money and increase your account value.
2) Better Advice
Now times are changing, but in general there is much better paid advice to go with your larger number of investment options in an IRA than in a retirement plan. In today's volatile and changing world this could mean the difference between achieving your long-term goals and objectives and falling short.
A good example is the advisor like us that uses sophisticated models and indicators to identify major market turns and get in the right position to profit. This kind of advice is not generally available in the retirement plan space.
3) Greater Flexibility and Freedom
By rolling over your retirement plan to an IRA you also obtain greater flexibility. This flexibility allows you (or your advisor) to trade your account any day and at any time, not just during certain select periodic, reallocation windows.
This freedom becomes especially important in volatile markets where this flexibility can mean the difference between large losses or the safety of the sidelines.
4) Lower Fees and Expenses
The average 401k administrative fee, according to mint.com, is 50 basis points (i.e.,.50%). These fees represent wasted funds for which you get no benefit. The average IRA custodian, either direct or via an advisor, charges no annual administrative fee.
Additionally, a majority of the publicly available investment options carry lower expense ratios versus comparable funds in a retirement plan. This is because these funds or investments within the retirement plan are special purpose and may not have the asset size of comparable publicly available investment options.
5) Flexible Distribution Provisions
Finally, when it comes time to distribute plan assets IRAs again have the edge. While the Internal Revenue Service generally requires IRA holders to wait until age 59to make penalty free withdrawals, there are a variety of provisions under the code that allow for penalty free withdrawals under special circumstances. These conditions are often broader and simpler to utilize than comparable employer hardship rules.
So the bottom line here is there is a number of very compelling reasons to rollover that former employer retirement plan to an IRA. This is not a difficult process and it will pay dividends for years to come.
For some this oversight might be because they fancy themselves as too busy to mess with this process. For a select few, they deem their former employer's plan as better than the known alternatives, including the new employer's retirement plan.
As we shall learn here though that there are at least five reasons why you are better off rolling those plan assets into an Individual Retirement Account (IRA) when you change jobs.
1) Increased Investment Options
Rolling your retirement plan assets directly to a qualified IRA allows for more investment choices. There are currently over 15,000 mutual funds and 1,000 exchange traded funds (ETFs) today to choose from through most advisors or fund supermarkets. This is far more than is available through most retirement plans.
In addition to mutual funds and ETFs, you also have the option of investing in any stock, bond or tradable security. Obviously, more options equates to a larger number of options to make money and increase your account value.
2) Better Advice
Now times are changing, but in general there is much better paid advice to go with your larger number of investment options in an IRA than in a retirement plan. In today's volatile and changing world this could mean the difference between achieving your long-term goals and objectives and falling short.
A good example is the advisor like us that uses sophisticated models and indicators to identify major market turns and get in the right position to profit. This kind of advice is not generally available in the retirement plan space.
3) Greater Flexibility and Freedom
By rolling over your retirement plan to an IRA you also obtain greater flexibility. This flexibility allows you (or your advisor) to trade your account any day and at any time, not just during certain select periodic, reallocation windows.
This freedom becomes especially important in volatile markets where this flexibility can mean the difference between large losses or the safety of the sidelines.
4) Lower Fees and Expenses
The average 401k administrative fee, according to mint.com, is 50 basis points (i.e.,.50%). These fees represent wasted funds for which you get no benefit. The average IRA custodian, either direct or via an advisor, charges no annual administrative fee.
Additionally, a majority of the publicly available investment options carry lower expense ratios versus comparable funds in a retirement plan. This is because these funds or investments within the retirement plan are special purpose and may not have the asset size of comparable publicly available investment options.
5) Flexible Distribution Provisions
Finally, when it comes time to distribute plan assets IRAs again have the edge. While the Internal Revenue Service generally requires IRA holders to wait until age 59to make penalty free withdrawals, there are a variety of provisions under the code that allow for penalty free withdrawals under special circumstances. These conditions are often broader and simpler to utilize than comparable employer hardship rules.
So the bottom line here is there is a number of very compelling reasons to rollover that former employer retirement plan to an IRA. This is not a difficult process and it will pay dividends for years to come.
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