Posts Tagged ‘401k rollover’
Self Directed 401k — Is It Right For You?
Let’s say you feel pretty confident in your ability to understand the stock market. Maybe you have an account separate from your 401k where you dabble a bit and you’ve done well. Then a self directed 401k might be right for you.
As the name implies, a self directed 401k plan allows you, the employee, to manage your money within the fund. This is either the best option ever or the worst idea in the world. And it all depends on your ability to assess the market. Not every 401k plan allows for self direction in this way. In the last decade it has grown in popularity, but the current volatile nature of the market makes this less attractive to the average investor. On the other hand, if you can take a little risk and you can do your homework, it could be a great way to get some wonderful deals on solid stocks.
So, is it the right move for you? There are a couple of important questions to answer and answer honestly. First, do you have a 401k? Self directed accounts have to start somewhere and if you don’t even have a basic 401k account, you’ll be starting this account with zero money. Next, do you want high risk with the chance of high reward? If you cannot honestly answer yes then don’t do it. Self directed accounts have a higher chance of losing money, but they also have a higher chance of making money and the deciding factor is you. Too much pressure? Who cares if your buddy is doing it and telling you he’s making a killing. That’s his money and his business. Next, have you explored the fee structure within your plan? Self directed plans, whether they are self directed Roth 401ks or the general variety, all have higher fees in comparison to a standard 401k account.
Opening a self directed 401k could be a smart move for you if you have time — time to research the market and time to weather some ups and downs within the market. A self directed account is perhaps not the best move for a 55 year old who wants to retire in 10 years. But, on the other hand, if you are 25 and you can have the discipline to do the homework, yeah, hop in and try it out. The rewards could outweigh the risks.
One last word of caution: do you have patience? People can easily burn up a portion of their nest egg on transaction fee by chasing after a score. If you have patience and discipline to research stocks, pick a few to try and wait a year or two or three and see how they pan out, then this sort of account could be just right for you. If, on the other hand, you find yourself reading the stock tips every day and agonizing over the price of gold, it’s probably better for you to leave your 401k account alone and make a separate account to play around with.
Protect Your Money With A 401k Rollover
If you are saving money for retirement, then why would you let even a penny of it goes to waste? Sadly, this is what happens to many people who do not bother to learn enough about how to rollover their 401k to their new employer.
If you are changing jobs, then you need to rollover your funds or else you will lose them. Doing a 401k rollover is not that difficult of a process when you consider the implications of not doing a rollover. What you need to do is ask your current employer what your options are in this area. Sometimes you are only going to be able to rollover the portion of money that you placed into the fund yourself. The employer does not want to give away the money that they have contributed to your fund (if they did put some money in there).
Another thing you are going to need to look into is if the 401k from your current employer will roll over exactly into their 401k offerings. Two companies may not have the exact same 401k offerings, but there are usually something similar that can match up well. If you have investing a portion of your money from your 401k into your company’s stock, then you may need to sell off that stock to get the full benefits of that money. Obviously you will not be able to roll over an individual stock like that into your new company. Therefore, you should probably not buy as much of your company’s individual stock in your 401k in case you ever have to roll it over. It just makes everything a little bit more difficult for you.
You should always roll over your 401k any time you change jobs, because this is your retirement money and you have worked hard for it.