How to Assess the Quality of Your 401(k) Plan

Make it your New Year’s resolution to take control of your retirement by reviewing your retirement plans. You may think maintaining a qualified retirement plan offered by a former employer, such as a 401(k), 403(b), or government 457 plan, is enough. But is it?

If you have a retirement account with just one employer, you may have satisfactory investment options and pay low fees, so it might make sense to leave your retirement assets in your former employer’s retirement plan.

But if you have multiple retirement accounts with different former employers, you might want to consider combining your assets into a traditional Individual Retirement Account (IRA). Here’s why.

First, retirement plans such as 401(k)s may offer limited investment options. That could put your retirement savings at risk, particularly if your savings are concentrated in just a few funds. In contrast, self-directed rollover IRAs offer a variety of investment options.

It could also be difficult to manage investments spread among multiple plans. If you have more than one retirement account, consolidating your retirement assets into a single rollover IRA can make it easier to manage, with considerably less paperwork. Plus, having one plan can help simplify estate planning, including beneficiary designations.

Lastly, the mutual funds available through your current plan may have high expense ratios. Reducing just half a percentage point in fund expenses, for example, can ultimately save you thousands of dollars over just a few years.

The best news: when you make a direct rollover, no money is actually distributed to you; it moves straight into the IRA, so you’re not taxed (until you withdraw the money later), and 100% of your retirement assets can continue to grow tax-deferred.

We can help you decide if a rollover is right for you. Please call or email us for assistance.