It is not uncommon to have multiple 401(k) accounts after switching jobs several times over a career. According to a Fidelity survey, almost a third of people who transitioned jobs were not sure what to do with their old 401(k) or 403(b).1 Changing jobs is a busy time so thinking about what to do with your old 401(k) is often not a priority. If you are among the many busy people who have multiple retirement accounts at different firms, this post is for you.
For many banks and insurance companies, wealth management means selling products loaded with fees, especially mutual funds. According to ICI, 82% of investors own fund shares through financial professionals such as a broker, investment advisor, or financial planner. Just because you pay your advisor 1% each year, do not think that your mutual funds do not cost you anything.
In a recent AARP survey, a shocking 71% responded that they didn’t pay any fees for their 401(k) mutual fund investments. I didn’t realize that Wall Street had suddenly earned a reputation for working pro bono. Well this simply isn’t the case, and investors need to better educate themselves on the cost of owning mutual funds which can be very reasonable (index funds) to exorbitant (load funds.)
If you are a 401(k) participant, it is very likely that you are invested in a target date fund. Vanguard expects that by 2016, 80% of new participants will invest solely in target date funds up from 64% in 2011.
If you aren’t familiar, target date funds combine several mutual funds into one easy to digest fund and are managed to become more conservative as participants move closer to retirement age.
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