At the advice of their investment advisors, many AT&T employees aren’t necessarily rolling over their old 401(k) accounts into individual retirement accounts. Hard to believe given that rollovers, until now, seem to be part of the financial “status quo” in retirement planning. According to financial experts, however, while rolling over to an IRA may be better than cashing it out, moving money from a retirement plan into an IRA can really work against you as IRAs may incur greater fees than an employer sponsored plan. That’s why it’s critically important to pay attention to where you are investing your money.
In a recent Yahoo finance article, investor protection expert Micah Hauptman, financial services counsel at the Consumer Federation of America claims that while many experts have encouraged rollovers, they’re “a huge profit source for all financial services firms.”
If you’re a new AT&T employee or new employee in any organization, for that matter, you should check to see if your new employer’s plan accepts transfers in lieu of an IRA rollover. This is a direct transfer of funds from your prior company retirement plan to your new employer-sponsored plan. This is considered a direct rollover because the funds aren’t going to you, they are going from your previous plan to your new employer plan. That means you’ll avoid the withholding tax.
And when it comes to rollovers, you should always be wary of enthusiastic investment advisors selling high-commission options for your money. The White House Council of Economic Advisors identified these “built-in” conflicts occur in approximately 20% of all IRA-held assets. So how do you know when a rollover is right for you? If you’re paying a lot more than 0.54% on your investment options, you should consider putting your money elsewhere. If you find your new employer’s plan does not accept transfers or your employer doesn’t have a 401(k) plan, a low-cost IRA option may be your best choice. If you’re not sure which option, 401(k) or IRA, is your best one, ask for a side-by-side comparison detailing the cost of each option. Of course, you should always ask your investment advisor for a detailed analysis. The financial professionals at mooneylyons.com can help you with this analysis if you need knowledgeable advice on your rollover options.
Weston, Liz. Think Twice Before Rolling Over a 401 (k). Money. Nerd Wallet. 7, July 2016.
Slott, Ed. 401 (k) rollover vs. transfer 24, May. 2000.
This material is for general information only and is not intended to provide specific advice or recommendations for any individuals.