Reasons to Roll Over Your 401k to an IRA

If your money is still sitting in your previous employer’s 401k account, it’s time to move it into an account where you can control the fees and investment choices instead of letting your old employer make those decisions.

Why Roll Over?

Rolling over your previous employer’s 401k account into a single IRA is the only way to make sure that your portfolio account will follow proven investing strategies such as asset allocation, diversification, control over investment fees, and have the ability to invest in the best performing investments for your personal situation.   And with an IRA rollover, you preserve all of the existing tax advantages of your 401k.  Here are some of the advantages to rolling over:

1. More and Better Investment Options

In an IRA, you can select your own investments. You won’t be limited to the funds and managers selected by your employer. Consider that the average 401k employer plan contains just 13 investment choices making it difficult, if not impossible, to achieve a diversified portfolio whereas an IRA can give you access to thousands of investments, including stocks, bonds, and mutual funds.

2. Lower Fees

Some 401k plans are loaded with hidden fees, including administrative, insurance and management costs.  These fees represent money that is being wasted and worse, this money isn’t being used to fund your investments. Most IRA rollover accounts do not have any administrative or insurances fees associated with them and this represents an immediate savings to your portfolio.

3. Easier Account Management

With your retirement money earned from prior jobs in a single place, you’ll be able to see whether you are on track for retirement, without having to check multiple accounts.  You can obtain daily account valuations and you will be able to track the performance of your account.

4. Greater Control and Flexibility

Combining your 401k account(s) into an IRA will allow you to have control over your retirement plan.  You can choose to manage the account on your own or hire an advisor for help.  As long as you do not purchase an annuity based product or hire a broker that charges back end fees, you will have flexibility to move your account at anytime if you become unhappy with the portfolio.

Rolling over your 401k to an IRA Rollover account can have a positive impact on your retirement plan.  However, make sure you seek advice from a trusted resource before making a decision.

Need Help Rolling Your 401k Plan into an IRA?

Carolina Wealth Management can help guide you through this important process.   We specialize in helping our clients transfer their 401(k) accounts into an IRA rollover to maximize their savings opportunity.  We educate each client on proper diversification strategies, reducing fees, minimizing risks, and avoiding tax implications.  We design prudent investment strategies and tailor portfolios to our clients needs.  For more information, contact David Damm at 252-439-1344.

  • Created on .

The Psychology of Investing

One of my favorite quotes concerning investor behavior comes from the original guru of value investing, Mr. Benjamin Graham.  His quote; “The investor’s chief problem and even worst enemy is likely to be himself.”  In my opinion this quote points to one the biggest reasons why individual investors fail to outperform the markets (other reasons are high fees, poor funds and lack of diversification).  In fact, a study done by Dalbar, Inc. found that from the period of 1987 to 2007 the average investor underperformed the market index (i.e. S&P 500) by an average 7.3% per year!  This is an amazing difference of returns!  How can individuals produce such low returns compared to the market index?

Investor Behavior Causes Poor Market Returns

Several studies about investor behavior show that when the stock market goes up, people pour money into equity mutual funds, and when the market goes down, they pull money out. During bear markets, they pull even more money out. Therefore, they continuously chase trends (buy high and sell low) focusing on what is happening right now, not what will happen in the future.

Let’s face it, our emotions are our biggest enemy when it comes to successful investing.  This destructive behavior is what I like to call, “the greed vs. fear battle”.    When fear takes hold, it impinges our ability to make informed decisions.  That is, we tend to want to reevaluate our risk tolerance when the market is going down for “fear” of losing money. This behavior causes us to sell or change our investments at or near the market bottom.  Conversely, when the markets are going higher, we want to start investing again so we do not miss the big rally.  This “greedy” behavior generally backfires, as we will enter the market at or near the highs. Both irrational behaviors cause individual performance returns to be substantially less than index stock market returns.

Four Ways to Increase Your Market Returns

When it comes to your investments, if you feel your emotions are getting the best of you, come back to the following rules:

  1. Do nothing  -   A conscious decision to do nothing is still a form of action.
  2. Your money is like soap  -   To quote Gene Fama Jr., a famed economist, “Your money is like soap. The more you handle it, the less you’ll have.”
  3. Never sell equities in a down market  -  If your funds are allocated correctly you should never have a need to sell equities during a down market cycle. This holds true even if you are taking income. Just as you wouldn’t run out and put a for sale sign on your home when the housing market turns south, don’t be rash to sell equities when the stock market goes through a bear cycle.  Wait it out.
  4. Science works  -  It’s been academically proven that a disciplined approach to investing delivers higher market returns. Yeah, it’s boring; but it works.

Start following these truths now and become one of the few investors earning above average market returns!

(CWM does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by David Damm and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all readers thereof should be guided accordingly.)

  • Created on .


  • Phone:
    (252) 439-1344
  • E-Mail:
    This email address is being protected from spambots. You need JavaScript enabled to view it.

SEC Registered Investment Advisor.
Copyright © 2018 Carolina Wealth Management, Inc. | Admin Login | Powered by AdvisorFlex