“Say no to hidden fees!”
“It’s YOUR money, why are you losing it to fees?”
Do these messages sound familiar?
Hidden Fees Fear Based Selling
They are common rhetoric in ad campaigns being used by many of the large retail brokerage firms, in a pitch to rollover your old 401k to an IRA with their institution. It is a powerful message, since most 401k investors have been largely unaware that they are even paying fees. We recently posted about new 401k disclosure requirements and the fees to be aware of.
While it is important to be aware of the fees associated with any investment, it is even more important to look before you leap when considering rolling over your 401k or other company sponsored retirement plans. As financial planners, this is something we routinely advise our clients on and we do recommend rolling over old plans on a regular basis.
However, we also see some very good 401k plans that offer great funds at lower expense ratios than are available to retail investors. In these cases we recommend clients leave those plans in place to take advantage of the low expenses and solid investment choices.
It is important to remember that retirement plans have plan representatives that negotiate the funds offered in your plan and their costs. If you worked for a large employer, in many cases they are able to offer share classes of funds at lower expense ratios than those available to retail investors.
Fees are a large factor to consider when rolling over your 401k, but don’t forget other equally important considerations such as investment quality and tax issues. Market volatility through the rollover process will also play a role. Rollovers can take weeks to process, potentially leaving your money out of the market during that time. It is important to evaluate what effect that might have on your overall portfolio and investment strategy. Please contact us if you would like to take a closer look at if a rollover is right for you.
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