38 KIPLINGER’S PERSONAL FINANCE^ 05/2017MONEYforming funds and high
costs. And even low-cost
plans may charge former
employees higher adminis-
trative fees if they choose
to keep their 401(k).
Some plans offered by
small and midsize compa-
nies are loaded with insur-
ance products that charge
“egregious” fees, says Mitch
Tuchman, managing direc-
tor of Rebalance IRA,
which provides advice and
low-cost investment portfo-
lios for IRA investors. Re-
balance invests clients’
money in exchange-traded
funds to keep costs down.
(For advice on how to cre-
ate a low-cost portfolio of
index and actively managed
funds, see “Index Every-
thing? Not So Fast,” March.)
Companies are required
by law to disclose the fees
they take out of your ac-
count to pay for administra-
tive costs. Review your
quarterly statements for
details. Companies are also
required to provide an an-
nual rundown of the plan’s
investment costs, expressed
as a percentage of assets,
or an expense ratio. You can
use this information to see
how your retirement plan’s
mutual fund expenses
compare with the expense
ratios of similar funds.
Average expense ratiosWHEN YOU LEAVE A JOB, YOU
pack up your family photos,
the spare pair of dress
shoes stashed under your
desk, your “I Love My
Corgi” coffee mug and all
your other personal items.
But what d o you do with
your 401(k) plan?
Most people roll the
money over to an IRA be-
cause they gain access to
more investment options
and have more control over
the account. Some broker-
age firms sweeten the deal
with cash incentives. TD
Ameritrade, for example,
offers bonuses ranging from
$100 to $2,500 when you
roll over your 401(k) to one
of its IRAs, depending on
the amount. Plus, moving
your money to an IRA could
help you streamline your
investments (see “Money
Made Simple,” on page 24).
Amy Thomas, a 43-year-old
clinical trial coordinator in
Lakewood, Colo., has rolled
over 401(k) plans from
three former employers into
one place, which “makes
everything a lot easier,”
she says. Now she doesn’t
worry that she’ll lose track
of an account that might
have been left behind.
But a rollover isn’t always
the right move; sometimes
it’s best to simply leave the
money where it is. Withmillions of dollars to invest,
large 401(k) plans have ac-
cess to institutional-class
funds that charge lower
fees than their retail coun-
terparts. That means you
could end up paying less to
invest in the 401(k). There
are other perils to a roll-
over: If you’re not careful,
you could end up with a
portfolio of high-cost in-
vestments with subpar re-
turns, an issue that’s in the
spotlight as a result of the
debate surrounding the
proposed fiduciary rule
(see the box on page 40).
What about cashing out
the account when you leave
your job and taking a lump
sum? Unless your financial
situation is dire, that’s
never a good idea. You’ll
owe taxes on the entire
amount, plus a 10% early-
withdrawal penalty if
you’re younger than 55.REASONS TO ROLL OVER
Rolling over the money
from your 401(k) to an IRA
is still the best move in
many cases.Your plan has high-cost invest-
ments. Many large 401(k)
plans offer low-cost options
that have been carefully
vetted by the plan’s admin-
istrators, but other 401(k)s
are hobbled by underper-Roll Your Money Into an IRA?
We tell you when it makes sense to move your 401(k) account to an IRA—and when it’s
smart to stay put. BY SANDRA BLOCKSTRATEGIESfor retirement plans have
declined, partly because
plans feature more index
mutual funds. The average
fee is 0.68% for stock funds
and 0.54% for bond funds,
according to a 2015 survey
by the Investment Com-