Rolling over your 401k today can help move you towards a more comfortable retirement tomorrow. Leaving your 401k unattended can not only jeopardize your retirement, but also ensures that you miss out on various market opportunities. Besides that, rolling over your 401k gives you more control over your investments.
But today’s savvy investor needs more than just control over their investments. They need a transparent view of their holdings, along with a well-defined strategy for their assets. Regardless of whether the investor is largely self-directed or works with a professional, every investor requires guidance about what to do with their retirement assets.
Many workers believe performing a 401k rollover is a chore and a challenge, but in actuality it is not. Nowadays, the process has become very easy. It is investing and planning ahead that still remains the challenge, however. We describe a very brief example of how a 401k rollover works, and how easy it is to get a low-cost, high impact retirement plan in place that can potentially surpass the features of your old 401k in many ways.
Don’t Dash Your Retirement Dreams. Devise a Plan
Tom Investor, 62, is finally leaving his long-time employer of 25 years. A larger conglomerate offered Tom an executive position at one of their manufacturing locations. Besides a sweet executive compensation package, the position comes with a defined benefit plan that can complement Tom’s existing retirement assets.
Tom is also concerned that, seeing that he might not be working much longer and this may possibly be his last hurrah, he needs to be more careful about his investing strategy. Downturns in the stock market over the past several years has hurt his returns, and he feels that he is assuming too much risk. Furthermore, Tom also wants more control over how his assets are invested, along with more variety in his asset allocation.
Tom is looking for alternative investment exposure in asset classes such as private equity and hedge funds. Having some resources to help him out if he gets stuck is also a major consideration that has weighed on his mind. But everyone that has rolled over their 401k has always mentioned some sort of struggle that has touched on Tom’s worries.
After opening an IRA rollover account, Tom contacted his plan administrator and the plan administrator began liquidating the assets in Tom’s 401k. Most 401k plan administrators will liquidate the 401k assets and cut a check directly to the new IRA custodian for the benefit of the individual. This avoids a taxable event and ensures continuous tax deferral. The plan administrator generally should not cut the check directly to the individual in most circumstances, as this will incur a taxable event if the transition is not executed properly.
Putting the Plan in Action
Even before the assets have been rolled over, it is important to prepare a well-defined investment strategy for these assets. Implementing this plan will help Tom achieve his retirement goals and maintain his standard of living. Tom will finally have the retirement plan that he is looking for.
For example, Tom’s 401k rollover could benefit from an investment vehicle that gives him access to a diversified portfolio of securities, and a variety of strategies. This can help him mitigate the risk to his portfolio and help Tom’s assets capture value in various investment environments. In this instance, a Separately Managed Account (SMA) (or a series of them) may help fulfill his goals.
Tom’s earlier concerns about his retirement plan and the plan for his assets are well-founded. An SMA not only acts as a liquid investment vehicle for his retirement assets, but also helps him develop an asset allocation that is most appropriate for his objectives and risk tolerance. SMAs can also provide exposure to alternative investment methods, which was something Tom also wanted for these assets.
But part of the value of an SMA is in the potentially low-cost, transparent process that allows Tom to invest his assets with less worry. A large part of that comes from the investment methodology utilized by the investment manager, who may seek to mitigate as much investment risk as possible. Tom not only understands how his funds are invested, but he can also see his account activity anytime, anywhere. Whether he is home spending time with his new grandson, or on a business trip or even on a weekend getaway with his wife at their lake cabin, Tom can make sure his retirement plan is working for him.
A 401k Rollover is Easy
Despite all the hoopla, a 401k is easy to perform. But the secret is that implementing a plan for your retirement assets is easy too. 4Thought Financial Group’s easily understandable investment methodology not only helps you put your plan into place, but may help you keep more of your money. Don’t jeopardize your retirement over unfounded fears, start today.
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