Does Your 401(k) Resemble a 201(k)? Why Now May be the Time to Rollover

After riding out these past couple of years, most of us now have learned first-hand about market volatility. Also, it's probably fair to say that most of us don't like it. But did you know that you may actually benefit from the recent stock market fluctuations? (This section applies to individuals that will be or have been terminated only.)

If you are changing jobs, being laid off, or retiring - now may be the best time to do a direct rollover. Because of your termination, you have an important decision to make. What are you going to do with your existing 401(k) plan? According to the IRS, you have several options. Please refer to Exploring Your Distribution Options. However, depending on your individual situation, one option may prove to be more advantageous than another.

Even though many individuals are in a state of comatose due to the wiping they have received from the stock market, you shouldn't allow emotion to cloud your decision making. There has always been and there will always be stock market ups and downs. It's simply the nature of the beast. However, there are several advantages to rolling over your 401(k) plan now.

1. How are the investment choices within your 401(k) plan performing? How do they compare against their related indexes? Against their peers? Are you unhappy with their performance but limited as to where you can invest your retirement savings? Then now is the best time to consider a direct rollover.
   
   By rolling over your 401(k) plan into an IRA, you give yourself unlimited choices and advantages as to where and how you invest your retirement savings. Within an IRA, you can invest in:
   
   

   Certificates of Deposit (CDs) U.S. Treasuries, Zero Coupon Bonds, Government Agency Bonds (GNMAs & FNMAs), Collartized Mortgage Obligations (CMOs) Corporate Bonds, Municipal Bonds, Preferred Stock Individual Stocks Annuities And other investments as well You may also consider strategies to help preserve your portfolio such as stop loss and/or stop limit orders

   
   Why wait for the market to turn around and continue to loose money in investments that may never recover? Roll over your 401(k) plan now to take advantage of the discounted price in more suitable investments. Does it really matter how or where you recover back your losses?

   Please also refer to Would You Like to Have Control of Your Retirement Savings? and Quiz: Should You Consider a Direct 401k Rollover IRA?
   

   
   
2. What does your asset allocation picture look like? Because the performance of different asset classes will vary, so will the performance of your retirement savings. Typically, the right mix of asset classes should help in market declines. Does your existing 401(k) plan offer you this strategy or balance? Does your existing 401(k) plan offer you a variety of choices within each asset class? For example:
   
   

   Large Cap Growth / Value Mid Cap Growth / Value Small Cap Growth / Value International Equities International Bonds Emerging Markets Short-term / Intermediate Government Bonds High Yield / Corporate Bonds

   
   
3. Do you own any company stock in your existing 401(k) plan? Do you wish to hold on to it? How will you protect it from market declines and/or negative news? Within an IRA, you can:
   
   

   Place stop loss and/or stop limit orders to help preserve profits and/or limit losses.

   
   
4. Have you heard of a Roth-IRA? Is a Roth-IRA right for you? Have you wanted to convert to a Roth-IRA but didn't want to pay the taxes? With many 401(k) plans down in value, now may be the right time to consider that conversion. Although you can not convert your 401(k) plan directly to a Roth-IRA, a financial planner can advise whether this is the best option for you and assist you with the process. Please consult your tax advisor pertaining to your particular situation.
    
5. Are you receiving the attention, service or information you deserve to properly manage your retirement savings? Although we are in the midst of the "information age", disseminating this information takes time. Something many investors do not have the luxury of.

   Although all 401(k) plans have a contact person or contact number to call when you have questions, do you still find yourself lost or alone? How easily is the information accessible? Is it easy to comprehend? How often are you contacted about pertinent market, global, or economic news?

   Working one-on-one with a financial planner of your choice may prove to be advantageous. Please refer to The Need for a Financial Planner - The Difference Between planning and Investing.
   

6. What is it costing you to maintain your existing 401(k) plan? Are you aware of the many costs and fees related to 401(k) plans? You may be paying up to 2.5% of assets under management to maintain your retirement savings. Please refer to Is Your 401(k) plan Costing You More Than it is Worth?