I post blogs in order to meet new Minnesota investors. Many retired investors send me e-mails with great questions about real life investment management problems.
Joe e-mailed me a couple of weeks ago. He is recently retired, and has an existing relationship with an investment advisor. Joe wants to receive investment advice from his current investment advisor on the money in his former company 401(k) retirement plan account.
Joe was surprised to hear from his investment advisor that he would have to open an IRA rollover account at the investment advisor’s firm. His current investment advisor cannot provide investment advice to him if his 401(k) retirement plan account remains in the company 401(k) retirement plan.
Joe contacted me in order to confirm that this was correct information. Joe’s question is a common source of confusion for both current and retired company 401(k) retirement plan investors.
How can a company 401(k) retirement plan investor receive investment advice on his or her company 401(k) retirement plan account?
Most company 401(k) retirement plans allow retired employees to remain in the company 401(k) retirement plan. After reviewing Joe’s company 401(k) retirement plan menu and costs, I recommended the same strategy to Joe.
The reason Joe’s current investment advisor told him to move his company 401(k) retirement plan account into an IRA is that is the only way the investment advisor can get paid to provide investment advice to Joe on the money in his former company 401(k) retirement plan account.
Most investment advisors can’t get paid to provide investment advice on existing company 401(k) retirement plan accounts. Registered Investment Advisors can get paid to provide investment advice to individual company 401(k) retirement plan participants.
I cautioned Joe to make sure that his investment advisor is disclosing all of the fees, expenses, and costs of the IRA rollover option.
Joe may be better off leaving his company 401(k) retirement plan account alone. He does have the option finding an independent investment advisor who can help him.
Ric Lager
Lager & Company, Inc.
