New York - We believe that the decision should be based, in part, on an overall analysis of your investment portfolio and consideration as to whether or not you want to invest in individual stocks and bonds.
Generally, an IRA account provides more flexibility than a 401(K) account. Although some 401(K) accounts investments in stock, most do not. In an IRA, investments choices are not limited to the offerings in the old or new plan but can be selected from the entire universe of mutual funds, bonds and individual stocks. If you are unhappy with both plan's investment choices, you may want to consider transferring the money into a new IRA account.
You should perform an overall analysis of your investment portfolio and pay particular attention to available liquidity. If you roll over your money into an IRA account you lose the ability to borrow against it so you should ensure that you have appropriate liquidity or the capacity to borrow for unexpected needs.
Should you decide not to want an IRA, you then need to consider which 401(K) plan is better. In general, if the new plan has just as many investment choices or options, you should transfer the money to a new plan. This allows simplification when it comes to paperwork and investment tracking. Be careful when initiating a transfer. You should review your portfolio composition and not change the mix or asset allocation of your investments all at once. This could have a dramatic effect on your entire balance should sudden market volatility occur. Major asset allocation changes should be accomplished slowly using the dollar-cost averaging method. This method requires a regular transfer (i.e., weekly or monthly) from the old asset classes to a new one. This method reduces the risk that you will put your investments in a specific asset class prior to a sudden decline.
Are you looking to make the most of your 401k plan, but don't know where to start? TheAdviser.com specializes in helping individuals navigate the complexities of retirement planning. Whether you're changing jobs and need to rollover your 401k to an IRA or Roth IRA, or you're simply looking for a portfolio review, our team of FEE-ONLY financial advisers has the expertise to help you reach their goals. With a free consultation available by clicking here, there's no risk in reaching out to us to learn more about how we can help you create a secure financial future. Contact us today to schedule your consultation and start planning for the future you deserve. Alternately, you can visit 1800ADVISER.COM to browse biographies of FEE-ONLY advisers in our network and choose one or more that best fits your needs.
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