Tom’s Thoughts on Whether it is Better to Leave a 401k as it is, Or Roll it Into an IRA at Retirement.
Transcript:
Katie Nealis: Okay, so the next question is, should I roll over my 401k at retirement or leave it there?
Tom Vaughan: This actually comes up quite often, you know, as people hit retirement. And, you know, first of all, I’ll tell you that I’m biased, I make money when people move it into an IRA. And generally speaking, if they leave it at the 401k, you know, I don’t, having said that, I have tracked over the years, you know, kind of the differential and rate of return between those 401 K’s that people have and the IRAs that they have. And at least in my experience, the IRAs have been getting a higher rate of return, even after expenses, it’s very, very difficult to tell what kind of expenses you have in a 401k.
You know, we constantly are looking at that. And it’s very difficult, because there’s a lot of people with our hands in with the third party administrators and those types of things. Obviously, we know what expenses we have in our IRAs. But the one thing that I would think about in terms of an IRA versus a 401k, after retirement, is that in an IRA, you have, you can hire somebody professional like me to manage it, which I think is a good idea, again, biased opinion. But you also have the capability of, you know, investing in almost anything, you can buy any stock, any bond, any exchange traded fund, any mutual fund, you know, almost everything in the world is available inside of your IRA, whereas the 401k generally has this restricted list.
So, for example, if you really thought clean energy was great, like it was last year, unbelievable, you couldn’t buy that in your 401k. I’ve never seen a 401k with a clean energy, you know, availability. So, you know, that, that would be a good reason, just for selection of investment and being able to try to make a better rate of return. The other thing is, if you want to kind of try to protect the portfolio using stop losses, or different things like that, again, you can’t do that inside of a 401k you’re just gonna watch that thing fall, maybe you’ll try to scramble and make some changes. But within an IRA, we can do stop losses, for example, and try to protect some of the downside, you know, on those, say exchange traded funds or, or individual stocks that you might be able to buy. So, I’m a big proponent of moving from a 401k to an IRA, but again, you know, just keep in mind who you’re asking