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After five years of experience leading a TPA call center in North Carolina, Andrew decided to move west to explore parts unknown and follow his passion of helping others. Walking through the doors of Ubiquity Retirement + Savings, formerly The Online 401(k) for the first time, he knew he’d found something special. Continuing to delight clients and partners alike and 10 years later, Andrew has been able to develop new teams, co-found a non-profit of strategic alliances, co-produce a hard-hitting documentary about the looming retirement crisis, and still had time to spread the savings gospel far and wide. Using social media and actual media alike (Wall Street Journal, Fox Business, PlanSponsor, and more), you’ll find no one who likes talking retirement more than this guy!

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January 13, 2012 at 10:20 pm
Retirement News

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When asked by friends or colleagues for advice about their 401(k)s, I’m finding that the topic of rollovers is a common one. There are always questions about rollovers because so many just don’t know what to do.

Let’s take a look at a recent inquiry I received via Facebook:

So, I have a question. I have a 401K that I rolled over into an IRA at my credit union from a previous employer. In the chance that I am employed by a business that offers a retirement plan, how will I know which one to put my money into? I plan on maxing out my contributions – ’cause I gots some catchin’ up to do.

This is a great question. And it’s timely since this person is looking for a job, which definitely speaks to the state of today’s employment rates and economy. Above all, it’s a question I’ve had a few times.

Bottomline: Should I roll over my money to my new company’s retirement plan or leave it where it is?

I know I need to tread lightly in my response. Yes, I’ve been doing this a long time. Yes, I get excited about it. No, I don’t want to turn them off or bore them with my ramblings.

Rather than telling someone what to do, I’d rather err on the side of letting folks know what to evaluate to make their own decision. Every plan is different in design and offerings. And yes, this will take some work on your behalf, but I’ll tell you exactly what to do.

Step 1: The Funds. Your biggest cost in moving your money will be the funds. Look at the funds your old company has, research how much they cost in management fees (i.e., that pesky percentage coming out that’s NOT on your statement, so you need to be sure to ask about it). Then, look at the new plan. If the new one has higher fees, it had better be performing better, too!

Step 2: New Plan’s Rules. When you become newly employed, find out the details of eligibility and vesting. Why put money into a 401(k) plan before you’re eligible? That eligibility period is for you and the employer to make sure you’re at the right place, doing the right thing.

Step 3: Your Money. Are you looking to roll over pre-tax or post-tax money? Your new plan may have the option to put Roth (post-tax) dollars away, so you should check with your employer. A traditional 401(k) will not accept post-tax money, so unless your new employer offers a Roth option, you may be better off with a Roth IRA.

This conversation can go in many directions after that, but these are just some basics to be aware of. There may even be other options for you that I’ve not listed. In the end, do your homework, know your options, and just think about what’s best for you.

If you have any questions, don’t hesitate to reach out to me here or on Twitter, @coolest401kguy.