I can’t even remember how many Minnesota company 401(k) retirement plan participants I have heard this same story from. I can tell you that it has been several over my 31 years in the financial services industry.
When you change jobs, you naturally call the company that provides your old company 401(k) retirement plan. After you identify yourself, you then explain that you are no longer participating in that company 401(k) retirement plan. What is the first question that you hear from the company 401(k) retirement plan provider?
That is correct. The young and eager customer service representative on the other end of the phone offers to send you out the information on a self-directed IRA. The reason you are given is that “this is the option that most people in your situation take advantage of.”
Financial services firms take full advantage of the “rollover IRA” opportunity. They know full well that the majority of individual company retirement plan participants don’t have the experience of managing old company 401(k) retirement plan accounts that come from a job change or a retirement.
The same financial services firms also know that individual company 401(k) retirement plan participants don’t always remember to ask about the fees and costs associated with moving money from an old company 401(k) retirement plan account.
Be very careful before you sign any documents sent to you by your old company 401(k) retirement plan provider. Don’t be misinformed and end up as another victim of misleading sales practices, bad investment products, or unsuitable investment advice.
The vast majority of information provided by company 401(k) retirement plan providers is misleading, confusing, and self-serving. This information is most times intended to confuse individual investors. The best idea is always to “roll over” your old company 401(k) retirement plan account.
For most investors, an old company 401(k) retirement plan account is one of their largest financial assets. That money deserves full disclosure and fair treatment from any financial services firm or any advisor you come in contact with.
Ric Lager
Lager & Company, Inc.
