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My dad just retired at age 70 and wants to know if he should leave his 401k with his company or move it. Where would be the best place to move it?

Jan 28, 2013 by Donald from Manhattan, NY in  |  Flag
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6 votes

Donald, David and Daniel are correct, although I'm more certain that your father should roll his 401(k) into an IRA than they seem to be. Your father needs objective financial advice, not piece-meal recommendations. Help him find an advisor he trusts.

Comment   |  Flag   |  Jan 28, 2013 from San Jose, CA

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6 votes

Donald, this is a great question and the answer depends on a variety of factors. First, if your dad's account is held in a 401(k) plan with high fund expenses and participant direct charges for account administration, it is probably best for him to consider moving to an IRA. But if the 401(k) plan offers low fees and quality service, the answer is not likely to as easy. Many advisers will charge either a management fee on 0.50% to 1.00% on your account balance and such fees can really detract from your dad's account balance. Others may charge commissions which are built into much more expensive actively managed mutual funds. So the adviser will have to add a lot of value to make the fee worth it. Plus many 401(k) plans offer customized asset allocation tools, some with little or no additional fees. So staying put might be a better long-term asset preservation solution. But if your dad needs estate and asset management drawdown strategies, only personalized advice can really do justice to helping him achieve his goals.

Consider asking some trusted friends and neighbors for some referrals to a professional who can help. Take time interview these advisers just you would if they were applying to you for a job. Inquire about their credentials and their ability to help your father meet his goals and objectives. Be sure you understand the fees they charge and the sources and methods of their compensation. Advisers who are paid on commission, while helpful, are not required to provide your father with advice based on what is the best possible outcome for him. They are only required to offer suitable investment products. Therefore, the products they offer may or may not be the best solution with the most reasonable level of fees. However if your father’s assets are not very large, working with a competent commissioned representative may be the best (or only) solution.

Comment   |  Flag   |  Jan 28, 2013 from Houston, TX

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4 votes

Donald - You've asked an important question. Unfortunately, there is no one size fits all simple answer. For most retirees, the answer depends on the quality of your dad's 401k plan vs. the quality of IRA investments which he would have access to. Generally, IRA's offer a broader range of investment choices and strategies. Your dad should consult with an objective, fee-only financial advisor who can advise him on investments as well as assist with retirement income planning (assuming he'll need to draw on his investments in retirement).

Comment   |  Flag   |  Jan 28, 2013 from Morristown, NJ

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Donald, your are making a start in helping your father with his future retirement income from his 401K. I think you need to look for an advisor that will take your fathers best interest to heart and ask your father alot of questions, about what his future needs are and how to cover these needs. I think rolling it into an IRA would be best because it would give him control and access to any funds.

To find this kind of advisor talk to others that are retiring from his company as well as friends and family to get a referral to their trusted adviros. From there interview these advisors to find one that would best meet your fathers personality.

Comment   |  Flag   |  Jan 28, 2013 from Hutchinson, KS

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Donald, Your wise to get some feedback on a very important and critical question. There is no simple answer. My suggestion is to contact a fee based planner to have an open discussion on your dad's current situation and his desires for a comfortable retirement. Based on the results of that discussion you will then review the options that are available to him and make a comfortable decision. Good Luck!! Dan

Comment   |  Flag   |  Jan 28, 2013 from Asbury Park, NJ

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Since your father is 70 the advantage of being able to withdraw from a 401k at age 55 is not applicable and the typical limited 401k choices, especially in fixed-income, lean toward a move. However, if the 401k has a 'stable value' option that may be an attractive choice right now that is not available in IRAs. I would find a fee-only advisor who can help look at your father's complete financial picture and determine if best to set up an IRA for a direct rollover and set up a portfolio with the fixed income portion mindful of rate risk. The account remains in your father's name/control. I can accommodate web-based meetings if you want to find out more.

Comment   |  Flag   |  Jan 28, 2013 from Western Springs, IL

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If you rollover your 401(k) to a ‘rollover’ IRA, you will likely have more freedom in selecting investment choices that may be better suited to your personal investment style. You could also have more control over fees. As for the best place to move it, it depends on your investment goals, tolerance for risk, time horizons, need for liquidity, the extent of other assets, and a host of variables. Consult a local qualified investment advisor. Find one that you feel comfortable with. Ask questions.

Comment   |  Flag   |  Jan 29, 2013 from Delray Beach, FL

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