What to do with your 401(k) or 403(b) if you leave ... - Roth IRA News

Why is it so important to roll your 401(k) or 403(b) to an IRA when you leave your employer? The primary benefit of the IRA, over the 401(k), 403(b) or SIMPLE, is that you have more investment alternatives in an IRA. In a 401(k), unless you are lucky enough to have a self-directed brokerage window, you are probably limited to the mutual funds offered by your plan administrator. In an IRA, you can buy and sell the entire universe of investment alternatives ? including all stocks, bonds, mutual funds, options, real estate, and even privately held companies. While that is the most important reason to roll your 401(k) over into an IRA when you leave, there are others. If invested properly, your fees will probably be lower in an IRA than a 401(k). Fees are very important for three reasons: 1) reducing fees is risk free return ? it may be the only free lunch in investing; 2) reducing fees leaves more money in your pocket to compound over time; and 3) studies show the one thing most correlated with performance, over time, is not the fund manager, the sector, the asset class or the historical performance, but low fees. As a general rule, fees are inversely correlated to portfolio performance ? the higher the fees, the worse the performance. The lower the fees, the better the performance ? which is, of course, a very practical reason why you should learn to be your own money manager. (NOTE: Snider Advisors offers a free online course, called ?How to Turn Your 401(k) Into a Million ?

Source: http://rothira.solve-up.com/roth-ira/what-to-do-with-your-401k-or-403b-if-you-leave-your-job/

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