Clients and non-clients alike now have access to a free 401(k) fee analyzer tool powered by FeeX to get quick insight into their 401(k), 403(b) or other defined contribution plans. The tool analyzes overarching administration fees, as well as individual fees for the mutual funds within the plan, so that individuals are looking at a detailed view of their specific investment holdings and plan services fees. Users can then clearly see an objective, side-by-side comparison of the fees associated with their 401(k) account(s) versus other potential fees in a IRA. There of course are other important considerations in making a rollover decision.Infographic - How the tool works TD Ameritrade's survey found that nearly three-quarters of 401(k) owners left an account behind at an old job and ended up choosing one of three paths:
- Roll it over to a qualified account (new employer plan or IRA)Nearly one-third of Americans (31 percent) with an old 401(k) account roll it into a new employer's plan while slightly more (34 percent) choose an IRA. When deciding between the two, it's important to consider fees and investment options. The common belief is that all 401(k) funds have institutional pricing that's cheaper than those available to individual investors, which is not always the case. Oftentimes, similar securities with comparable holdings can be found in the public markets at a lower fee. Relative to 401(k)s, IRAs can often offer a wider variety of investments, tools and other resources such as branch locations. And, if more than one 401(k) is involved, consolidating multiple accounts into a single IRA can make it easier to monitor and manage progress toward retirement goals.
- Leave it beThe 22 percent of 401(k) owners who keep the account with their original employer may want to compare the fees and features of their plans versus those of an IRA.
- Cash it outThirteen percent of 401(k) owners cash out their 401(k) accounts when leaving a job. And yet, financial professionals often say this should be a last resort for people not yet of retirement age, as investors can incur tax consequences including penalties, and sabotage years of retirement savings when cashing out before they are eligible for the tax advantages involved with this type of investing. Investors should take time to educate themselves and fully understand the implications if considering this option.
Before rolling over a 401(k) to an IRA, be sure to consider your other choices, including keeping it the former employer's plan, rolling it into a 401(k) at a new employer, or cashing out the account value (keeping in mind that taking a lump sum distribution can have adverse tax consequences). Whatever you decide to do, be sure to consult with your tax advisor.Source: TD Ameritrade Holding Corporation 1) FeeX 2016 proprietary data assembled from 401(k) fee disclosures: An evaluation of 81.4 million 401(k) plan participants determined that 77.5 million, or about 95 percent pay participant fees.