I’ve recently become a contributor to Investopedia in the “Advisor Insights” portion of the website. My first contribution, a response to an investor’s question, can be found here and the contents can be found below.

Investor’s Question:

I was recently told by more than one financial advisor that I should rollover my employee retirement plan (now that I’ve left that company) into an Individual IRA. When I called that company to do just that, I was told by their advisor not to rollover. He explained that I began investing in 2007/08 when the market was low. If I were to rollover to an Individual IRA today, I would be buying in when market prices are high, thus buying fewer stocks/bonds (whatever pieces comprise the plan). He also said, since your plan has averaged a 5.1% gain this year, why would I want to lose that? Makes sense. Can someone speak to this logic for NOT rolling over?

My Response:

Yes, you should roll over your employer retirement plan into an IRA. There are a few exceptions depending on circumstances, which I am not going to go into at this time.

The plan representative you spoke to likely told you to not roll your assets into an IRA because it is in the best interest of their firm. Typically employer retirement plans such as 401k plans are administered by financial institutions that charge a percentage fee based on the asset size of the overall plan. Therefore it is in the best interest of the representative and his/her firm for assets to remain in the plan. Therefore, keeping your assets with them would be the representative’s best interests and not necessarily yours.

The representative’s point about the market being low in 2007/08 has no relevance in determining if your retirement assets are better held within a former employer’s retirement plan or held in and IRA and should not be considered.

If you roll your funds to an IRA, you are not losing the 5.1% gains that your assets have already experienced.

When you invest your money in an IRA, the account is in your possession. IRA’s are not held to the same rules and restrictions that 401k’s are. This means that you have fewer restrictions on the access to, and management of your assets. An IRA typically allows for a much broader selection of investment choices, and freedom to choose what financial institution to custody the assets with. With an IRA you have the option to choose a financial institution that has very low maintenance fees.

– Wyatt Swartz

3/1/2017