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Rolling Over Your 401k Assets to an IRA

| July 13, 2016
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There was an interesting article in the WSJ recently about 401k providers and if they favor their own funds - "Do 401(k) Providers Favor Their Own Funds?" The study suggests that the answer is Yes and that underperforming funds are kept on the menu too long.

Here was a recent experience for me in reviewing a 401k plan for a client:

  • There were 32 investment choices in the plan – 18 of these funds were Target Date style funds. This is a reasonable amount of options to choose from. Once I dug a little deeper though, I found that there were limitations to the plan that could be improved. Within the 32 investment choices, 24 were products of the 401k provider. While the 401k provider is a good organization, and I expected to see more of their products, I would have liked to have seen more investment choices from other organizations in the plan.
  • There were only 2 foreign mutual funds and the 2 funds are of a very similar strategy, which is investing in Foreign Large Growth. In reviewing these funds, there seemed to be a lot of similarities between the two which means that you are really closer to having only 1 foreign investment choice. This does not provide enough choices and the level of diversification I would like to see in a plan.
  • There were 3 Bond choices in the plan. Within the bond choices, 2 of the 3 funds are producing an annual return of 1.2% to 1.3%, which is closer to an enhanced money market fund. So, the reality is there is only 1 pure bond fund choice in the plan.  In my opinion, the bond choices are too limited.

This is pretty much the norm of what I see in many 401k plans. In my opinion, too many 401k plans do not meet the needs of the investor. 

If you are over age 59 ½ - you may be able to transfer your 401k to an IRA via an In-Service Withdrawal.

There are no tax ramifications in transferring the funds out of your 401k plan to an IRA. Talk to your plan administrator to see is this option is available with your plan. It’s allowed by law, but it doesn’t mean it’s an option available in all 401k plans.

  • Rolling over your assets to an IRA allows you the ability to build a portfolio that’s best suited for you.
  • You can continue to contribute to your 401k plan even after you transfer the funds out of your 401k plan. 

If you’d like help reviewing your investment strategies and saving for retirement, please contact Casey Boland via email [email protected] or 513-598-5120.

Date Posted: 07/13/2016 Advice provided in this article is meant for educational purposes only and financial education is important to us. Before making decisions regarding your personal financial situation, please consult an advisor or conduct your own due diligence. If you would like to discuss your Retirement Income Plan with an HCM Wealth Advisor, please give us a call – 513-598-5120. Located in Cincinnati, Ohio, we serve clients in 28 states, and we’d love to help.

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