401k Rollover advice misses the point.
A 401k rollover occurs when you leave your current employer and "roll" your 401k into an IRA with a brokerage firm. A Wall Street Journal personal finance article tells us there's an expected $2 trillion in rollovers out there in the next few years. Brokers are salivating. 401k rollovers are big business for brokerage firms.
Sites like Fidelity, Schwab, T.Rowe Price, et al have software that asks you questions to help you figure out if you should keep your 401k with your soon-to-be former employer (one option) or roll it into an IRA (preferably one at Fidelity, Schwab, T.Rowe Price, et al - you get the picture). Fidelity's software apparently was constructed so that no matter how you answered the questions, it always concluded you should roll over into an IRA. Your can't check it out anymore because the software's been taken down for "maintenance."
One option the article doesn't mention is that you can roll your 401k to your new employer's plan. There could be a reason to do that. If your new employer has a provision that you can borrow money from your 401k, and you have the need to do so, you might consider that option. You can't borrow from your IRA.
In any case, the Wall Street Journal tries to steer a middle course. So they say arguments can be made for the various options. They also imply that brokerage firms are acting for their own self-interest and imply they can't be trusted.
All of this may be true, but it misses the real issue. Think about it. If the investment options are limited or awful at your former or current employer's 401k, you shouldn't keep it there or roll it over to your new employer. For example, I've rarely seen any 401k's that offer an option to invest in gold, precious metals or mining shares. Besides the fact that investing some of your assets in any of these would have been one of your best choices since 2001, consider that it's a whole class of investments that's missing from most 401k's. Ditto for choices in commodities and alternate currencies to the US dollar.
401k's basically give you the choice of stock, bonds and cash - and some don't even have a reasonable alternative for putting a percentage of assets into cash.
The article does point out that fees are cheaper in some 401k's vs. retail brokerage accounts. What difference would that make if the investment choices stink?
When evaluating a potential 401k rollover, you need to look at planning issues, investment issues and, of course, fees. But don't forget the investment choices.
Sites like Fidelity, Schwab, T.Rowe Price, et al have software that asks you questions to help you figure out if you should keep your 401k with your soon-to-be former employer (one option) or roll it into an IRA (preferably one at Fidelity, Schwab, T.Rowe Price, et al - you get the picture). Fidelity's software apparently was constructed so that no matter how you answered the questions, it always concluded you should roll over into an IRA. Your can't check it out anymore because the software's been taken down for "maintenance."
One option the article doesn't mention is that you can roll your 401k to your new employer's plan. There could be a reason to do that. If your new employer has a provision that you can borrow money from your 401k, and you have the need to do so, you might consider that option. You can't borrow from your IRA.
In any case, the Wall Street Journal tries to steer a middle course. So they say arguments can be made for the various options. They also imply that brokerage firms are acting for their own self-interest and imply they can't be trusted.
All of this may be true, but it misses the real issue. Think about it. If the investment options are limited or awful at your former or current employer's 401k, you shouldn't keep it there or roll it over to your new employer. For example, I've rarely seen any 401k's that offer an option to invest in gold, precious metals or mining shares. Besides the fact that investing some of your assets in any of these would have been one of your best choices since 2001, consider that it's a whole class of investments that's missing from most 401k's. Ditto for choices in commodities and alternate currencies to the US dollar.
401k's basically give you the choice of stock, bonds and cash - and some don't even have a reasonable alternative for putting a percentage of assets into cash.
The article does point out that fees are cheaper in some 401k's vs. retail brokerage accounts. What difference would that make if the investment choices stink?
When evaluating a potential 401k rollover, you need to look at planning issues, investment issues and, of course, fees. But don't forget the investment choices.
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