Are You Making These Mistakes with Your 401k or 403b? Find Out Now!
Three major reasons to move that 401k or 403b now, and protection is number one. What in the world are you waiting for? Have you lost your mind? I can never understand why anyone would leave dollars sitting in a current or old employer’s 401k or 403b plan.
Hello again, Dave Douly here, a 40-year veteran of the financial markets, and giving you straight answers on how to maximize wealth and income in retirement. Now, today I’m going to focus on those over 59 and a half that are still with their current employer, and those that have old 401ks still sitting with their old employers. Now let’s get started and dive right in.
The first reason to get those dollars moved from your 401k is choices. Who doesn’t want more choices? Most employer plans have a limited selection of investment options. By rolling these dollars out to your own IRA, it opens the playing field to unlimited choices, especially to individual equities and away from target funds or, quite frankly, mutual funds. Please don’t ever choose target funds; it’s downright stupid. I could spend a lot of time here on that one, but I’m not going to waste my time or yours. But when I see target funds chosen inside anyone’s 401k, I want to, quite frankly, just throw up. If you cannot move those dollars yet because you are under age 59 and a half and still employed by the same employer, then move to a self-managed account within the 401k. 98% of employers now give you that choice as an option. Then find a great fiduciary to manage it for you or at least help you make some great decisions. So choices are the number one reason.
Next is consolidation and simplification. If you have had several jobs over the years, you may have accumulated many retirement accounts. Now, consolidating these into a single IRA, which is really all you need, helps you track performance, stops you from overlapping positions, and just plain makes it easier to manage the account. I’ll have clients show me their IRAs with multiple positions, as an example where they have Fidelity’s total stock fund and Vanguard’s total stock fund. Now, between them, you own nearly 6,000 companies, and the overlap is at 95%. “Well, Dave,” you might say, “I’m really diversified,” and I would agree. You have bet on every horse in the race, but guess what? You’ll end up with the average. The idea was trying to lay off risk, but as Warren Buffett says, you are part of the ignorant. That’s why they created these types of investments. Mutual funds were created to make investing easy, so consumers wouldn’t have to think. When I see financial advisors doing the same thing, placing large amounts of your portfolio in countless mutual funds and charging you, the consumer, an ongoing management fee, I just scratch my head. It tells me they too are just lazy in doing their homework to buy great companies with great management and tons of cash on hand. You need to run as fast as you can if your portfolio looks like that.
Now, the third and most important reason to get that 401k or 403b move is protection. Now, there’s no way to protect your positions from fast-moving markets in a 401k or 403b; you’re just along for the ride. Yet, 80% of families’ net worth, in real dollars, not hard assets, is tied up in qualified accounts IRAs, and yet less than 5% have those dollars protected. By moving to your own management account, you can cover your positions using options to protect your balances. Now, it sounds difficult, but it’s easy, and that’s how the rich keep getting richer. Imagine having $500,000 in your 401k, and because of markets out of your control, within a matter of days or weeks, your retirement count plummets 30 to 50%. You don’t think it’s possible? Ask those who were retiring in 2001 or 2002 or 2008 or 2009, or even in March of 2020 during the COVID, believe me, it can happen. You ensure your car, your home, your life, why not your retirement accounts? Get those dollars moved, and do it now. Quit procrastinating.
Number one, you’ll get better choices by making a move. Number two, a better grasp for performance, less paperwork, and most importantly, protection. Listen, visit our website to see countless videos all in reference to a better road ahead for all things money, no matter what your age is. Subscribe below to get our video each week. Got questions? Heck, pick up the phone, give us a call, or just email. Till next time.
