What You Need To Know About a Pension Plan Rollover…

We are big proponents of finding a good financial adviser to help you manage your money and pension plan. In fact, we offer this piece of advice in almost every blog post.

This is because financial advisers are experts in their field. These individuals know the market’s behaviors and can advise you in a way that may be best suited to your future financial needs.

For retirees, a financial adviser is a key component to a successful financial plan. Particularly when it comes to rolling over your pension account. But how do you know the advice you’re getting is good advice?

Perhaps one of the toughest decisions for retirement savers is what they will do with their pension and savings plans when they are ready to exit the workforce. If you make the wrong decision, you could end up losing your nest egg. This is why you need to know what financial advice you can trust.

Bad Rollover Advice

If your financial adviser is suggesting that you roll your 401(k) plan into an IRA, you should be aware of a few things. While this is not always bad advice, there are a few things you should be aware of so you can ensure that you aren’t getting taken advantage of and so that you know the right questions to ask.

  • IRA accounts come with higher fees.

    A lot of IRA account holders will be paying higher fees than their 401(k) accounts. A lot of IRA accounts do not meet cost share minimums. These accounts can typically only access retail mutual fund share classes.  In addition to these higher fees, IRA account holders will likely have more fees. In the form of transaction fees for sales and purchases, which do not exist with 401(k) accounts. Furthermore, the advisers that come with your 401(k) are most likely free, which means if you are seeking investment advice elsewhere, you are almost guaranteed to pay higher fees simply because you are paying for advice.

  • Limited options.

    With an IRA account you may not be getting the best advice because your advice options might be more limited and less objective than the advisers that come with your employer-sponsored 401(k) account. Before considering the switch, ask a few different advisers for tips. This way, you’ll have a better understanding of which advisers are there to help you, and which are there for the paycheck.

  • No creditor protection.

    Your IRA account may lack protection against creditors like other pension options. For most pension plans, creditors are not able to seek restitution from retirement plans. If you fall on hard times and have an IRA account, your nest egg may be at stake.

Protect Yourself and Your Future

Your first step with any financial decision is to educate yourself and to do your research. It is easier to be fail if you lack a basic understanding of how your retirement account works.

Educating yourself means gathering a basic understand of 401(k) accounts and IRA accounts as well as how the market works. Additionally, you should know where your money is going, including what fees you are paying.

If an adviser is trying to persuade you into switching an account with a high withdrawal rate and promises of high market returns, you should also be wary.

When seeking financial advice it is okay to ask to see your adviser’s credentials. This gives you time to consider your options before making a decision. In terms of credentials, your adviser shouldn’t have firm-hopped too frequently, which could be a sign of some shadiness. The Certified Financial Planner Board of Standards (or CFP) is also a great marker against which to judge an agent’s integrity.

You deserve a good financial adviser. After all, you’re trusting your financial future to this individual, so it is important to trust him or her.