

Receiving Conflicting Advice

"I was recently told by more than one financial advisor that I should rollover my employee retirement plan (now that I've left that company) into an Individual IRA. When I called that company to do just that, I was told by their advisor not to rollover. He explained that I began investing in 2007/08 when the market was low. If I were to rollover to an Individual IRA today, I would be buying in when market prices are high, thus buying fewer stocks/bonds (whatever pieces comprise the plan). He also said, since your plan has averaged a 5.1% gain this year, why would I want to lose that? Makes sense. Can someone speak to this logic for NOT rolling over?"

I can see your dilemma. You are receiving conflicting advice from multiple "financial advisors." The most important thing you need to understand is how these different financial advisors are compensated. The ones that are telling you to move it to an IRA, do they receive compensation only if you move the funds? If they do, then of course they are going to recommend to move it. The one that is telling you to keep it in the 401(k), is he/she compensated by the total assets in the 401(k) and thus wants you to keep your money in the 401(k)? In either case, these advisors may have a clear conflict of interest. If they do, then you need to seek independent financial advice without this conflict of interest or educate yourself on what you should do. By the way, the selling now and buying now comments as well as the gain comments that were mentioned have little to no validity. Ignore these comments entirely.

In general, cases can be made to keep money in the 401(k) and to move the money to an IRA. Unless you have a very specific reason for moving the funds such as the 401(k) fees are high or the investment selection is terrible for your particular investment strategy, then you may want to keep your funds in the 401(k). Once the funds are moved out, you lose potential options in the future. I recently explained to a client, why they can't do something that I am recommending to his wife because a long time ago he rolled over funds from his 401(k). Again, I'm not saying it is bad to roll funds out of a 401(k) because in many situations it is a good idea, but it can limit options in the future. What is most important is to understand not just what you are doing but why you are doing it. Only work with an advisor that will teach you and advise you. I hope this helps.