A few days ago I answered a readers question about post retirement 401(k) account withdrawals. A second part of his question asked about where to invest the account.
When most folks retire, they are advised to rollover their 401(k) account to a rollover IRA.
The tsunami of advertisements from brokerage and mutual fund companies shout that you should take your money with you when you leave your employer. With more workers with 401k plan accounts heading into retirement, these advertisements target a growing market of individuals who will consider transferring their retirement nest egg to a rollover IRA.
But retiring employees need to know that the 401k plan provided by their employer provides several advantages. This is largely because their employer has a fiduciary obligation to serve the best interests of the plan and its participants, instead of serving the interests of a particular financial firm that is selling its own IRA products. Also, larger employer plans have powerful bargaining leverage over investment managers and service providers, and use their size to negotiate institutional pricing for investment management at low rates. For example, it’s not uncommon for a large plan to offer an S&P 500 index fund with total annual investment expenses of less than 0.05 percent, as compared to the average expenses of a similar retail index mutual fund which can carry fees of over seven times more, and also have possible front-end or back-end charges of over three percent.
via Company 401k Plan May be Your Best Retirement Account – CBS News.
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