Which road do you take when it comes to 401k rollover options?

“Follow the Yellow Brick Road…Because, because, because, because, because….” The Yellow Brick Road of 401ks is the ROLLOVER ROAD. After leaving your job, rollover your 401k immediately to an IRA to avoid taxes and other costly yet common investing no-no’s.

According to Hewitt Associates, a Chicago-based human resources consulting firm, nearly 1/3 of investors leave behind their 401ks. While there are pros and cons to doing so, I am not in the leave it camp. Leaving it would be like asking your former boss to watch your retirement nest egg and nurture it until you are ready to crack it open. Not a good idea. How likely are you to check in regularly on your how your former boss is doing with managing the fees and expenses of your Plan in addition to checking the performance of the mutual fund line up? Not likely.

When Dorothy realized it was time to leave Oz, she did wasn’t about to leave Toto behind—and neither should you. Grab your 401k and roll it over to an IRA to avoid taxes, and IRA withholding of 20% on withdrawals. Don’t procrastinate, its easy to forget and leave a 401k behind, but don’t leave your account to chance. Volatile markets can leave you in a reactionary state when you realize that your hard earned money is being neglected in old and perhaps outdated allocation of mutual funds that an advisor recommend some many years ago. What’s worse is if you need to tap into your account, it will typically take much longer to access any funds in your former company plan than with an IRA in your name.

Reasons to Rollover your 401k:

  1. Ease of access in an IRA. In a pinch you can access your IRA more quickly than funds from your former employer’s 401k.
  2. (MAKE SURE) Unlimited investment options, not a stale line up of only mutual funds.
  3. Active management of your account versus being stuck in an allocation a 401k advisor recommended back in 1996.
  4. Don’t pay taxes or IRS penalties when you rollover your 401k to an IRA.
  5. Eliminate a 20% IRS withholding on withdrawals vs. Rollovers.

Of course its possible your fees could be lower if you left your 401k alone, but given the above other reasons to ROLL, I wouldn’t ever let that be the only reason you leave your assets behind. There are plenty of IRA providers that offer low fee accounts and investment options.

Follow the Rollover Road to a more successful retirement future. To make sure you are truly on the best Rollover Road find an IRA custodian that:

  1. Offers unlimited investment options.
  2. Offers super low fees and low cost investment options.
  3. Employs NAPFA advisors with NO CONFLICTS OF INTEREST to help you manage your fees and investments in good markets and bad with your best interests at heart.

There’s no place like home, there’s no place like home.