Should You Rollover Your Old 401(k)?

Hi, I’m Kelly Mercer, Vice President and Wealth Advisor at GreenUp Wealth Management. You might be surprised to find out that the median number of years workers stay with the same employer is just four. So if you are like most people, you’ve changed jobs and have a 401(k) or a 403(b) with a former employer. What should you do with that old 401(k)?

You have three options. You can keep it with the former employer, move it to the 401(k) with your current employer, or you can move it to a Rollover IRA. So let’s simplify this decision by comparing 401(k) plans and Rollover IRAs to, say, golf clubs. When starting out in golf, you typically begin with a basic set of off the rack clubs.

Without a lot of experience, most wisely opt for a set of inexpensive clubs that will do well enough for most people. Similarly, with 401(k) plans, you’ve probably noticed they have limited investment options, and that’s because employers have a fiduciary duty to act in their employees’ best interest. Since employees’ investment experience can range from complete beginner to sophisticated investor, employers simplify those investment choices.

This makes the plan less complex and reduces the employer’s administrative costs. Going along with our analogy, as you become a more experienced golfer, upgrading to a custom fitted set of clubs could greatly enhance your game. A Club Fitter can tweak your current clubs and even suggest different ones to optimize the swing you have and the game you play.

Likewise, rolling over your old 401(k) to a Rollover IRA gives you access to a much wider range of investment options, giving you more control over a retirement portfolio. And much like a great Club Fitter, a great advisor can optimize the investments in your Rollover IRA for the specific retirement goals.

As a golfer goes through stages of life, the body may not be what it once was, which might lead to swing adjustments. Former goals like more distance off the tee are probably replaced by things like reliability and ease. In a similar fashion, advisors will adjust your retirement portfolio, tailoring your investments for your specific stage in life, your risk tolerance, and your financial plan.

So let’s revisit your three options. If you have at least $7,000 vested in your old 401(k) plan, you can leave it with your former employer. The benefit to you is that you are already familiar with that plan. You can move the assets in your old 401(k) to your current 401(k) plan. You may want to do this to consolidate your 401(k) assets all in one place. And your third option is to transfer your old 401(k) to a Rollover IRA to give you a wide array of investment options, more control, and a customized retirement portfolio that matches your needs.

Talk to your GreenUp Wealth Advisor about what option is best for you.

I’m Kelly Mercer. Thanks for watching.