Just Because You Can Rollover A 401(k) Doesn’t Mean You Should

The ads I see alot that make me chuckle are the ones about rolling over a 401(k).  Just like alot of other marketing, there’s some truth to the message, but then it’s not always the full picture.

It’s not a binary good/not good scenario, and really depends on the type of 401(k) plan your prior employer had.

For example, if you leave your employer at 55 you can take equally substantial periodic payments from your 401(k) with no tax penalty.

You can’t do that with an IRA.

Also, mutual funds provided within many 401(k)s are available at a different class (I) than the retail version.  There can be different classes of the same mutual fund; it’s good to know which one you have bought or  are participating in.

I class are like buying a mutual fund on discount, because the expenses are lower for this class than the others (A, B, or C).

Essentially, the starting point when considering rolling over a 401(k) is first looking at the quality of the plan and the quality of the funds offered through it.

It may include funds at prices you wouldn’t be able to purchase in an IRA, so it’s definitely a good thing to know.