Anthony Pellegrino | Goldstone Financial Group | Goldstone Financial Group TV: Should You Roll Over Your 401k?

 

In this ongoing series, Goldstone Financial Group principals Michael and Anthony Pellegrino answer personal finance questions from the residents of Chicago. This episode centers on employer-sponsored retirement accounts — and, more specifically, the strategies a retiree can use to grow the money they save further.

 

How limited am I to my company’s 401K options?

MICHAEL PELLEGRINO: Unfortunately, you probably are relatively limited. Most people only have a few options available when they sign on to a company 401(k) plan. If you do enroll, it’s crucial that you contribute — and if your employer offers a match, take them up on it! That’s free money in your account. Aside from that, I’d suggest working with an advisor to see if you’re eligible to make an IRA or Roth contribution.

ANTHONY PELLEGRINO: Another factor to consider is age. Most people assume that they can’t touch their 401(k) while they’re working, but you have more options once you reach 59.5 years of age. If you’re still working and contributing at that point, a fiduciary could help you put together an in-service rollover. You can go in and access some part or all of your 401(k) and then roll over those funds to an IRA. At that point, you have more options for your investment — and you don’t have to stop contributing to your 401(k), either! You’ll have two buckets to grow your investment, instead of one.

 

Should I leave my old 401k with my past employer?

MICHAEL PELLEGRINO: That’s one option, but you may have others. It’s important to look at the specifics of your 401(k) before you make any decisions. Again, though, an employer-sponsored plan is going to limit your options. It might be worth looking into rolling the money over into other investment vehicles — an IRA account, for example.

 

Should I take out money from my pension fund from a previous employer, or should I leave it there to grow over time?

ANTHONY PELLEGRINO: Those of us at Goldstone Financial Group specialize in these “lump-sum pension option rollovers.” People come to us all the time to ask about lump-sum buyouts, wondering whether they should take their pension money out all at once or access it in installments as “income” in retirement. In our view, a pension is just a large annuity. Once you start drawing income, you give up all access to its liquidity. You’re locked into that model, and you have no way to move the money you’ve saved into other investment vehicles. Worse, a pension does not come with death benefits — if a retiree were to pass on after spending decades with a company, their family would get nothing.

MICHAEL PELLEGRINO: As fiduciaries, we can create a comparison of your options and help you determine whether you should keep your 401(k) as is or roll those funds over into another investment vehicle.