First Person: I Suspect My 401(k) Returns Won't Be Too Sexy or Too Shabby

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When I began working for a new company last year, I could have rolled my old 401(k) plan into a similar plan at my new company. According to a recent MarketWatch article, it's the best retirement move almost nobody makes. Most job switchers do what I did. They roll over their old retirement account into a Rollover IRA. Even though some experts say it's better to roll plans into a new job's 401(k), I am happy with my choice. Experts estimate people roll over $9 into IRA plans for every $1 they rollover into a new 401(k). Maybe there's a reason most of us don't want to give up control of our old 401(k) plans once we have the chance to mange our own money.

Opening the world of opportunity

By rolling over to my new company's 401(k) plan, I would have had a limited range of investments. In fact, my new 401(k) plan has even fewer mutual funds and target-date funds compared to my old 401(k). Now that my money is in a Rollover IRA with a discount brokerage firm, I only have to pay a nominal fee to buy virtually any stock or exchange traded fund. I don't buy the claim that 401(k) plans offer lower costs. My fees for my Rollover IRA are less than 1 percent compared to the fees associated with my 401(k), which are at least 4 to 5 percent.

Starting fresh with a new 401(k)

Even though I didn't rollover my old 401(k) into a similar plan with my new company, I did start fresh by opening a new 401(k). I can dollar-cost average into the mutual funds within my new 401(k) over time. I won't be tempted to take out a 401(k) loan since it will take years before I enough money in my new 401(k) account to borrow anything. If I had rolled over my old 401(k), I would be able to take out a substantial loan. I rather not have a loan as an option so my money is safer in a Rollover IRA where I won't touch it. I was reluctant to invest any money into a new 401(k) because they can be such a rip off, but I like the idea of having my retirement money in different accounts.

Keeping the backdoor open

Another reason I wanted to rollover my money into an IRA Rollover account is because of the backdoor Roth option. In other words, I still have the opportunity to rollover my IRA Rollover money into a Roth IRA. I would have to pay the taxes on the money that I rollover so I can't afford to rollover all of the money into a Roth. But over time, I could funnel the money into a Roth. If I put the money into a 401(k), I'd be closing the door on that option. I love the Roth the most because I can take out the money without paying taxes when I'm old and retired.

Even though my company doesn't match the money I put into my new 401(k) plan, I like having one retirement account that is on auto-pilot. It will be interesting to see whether I live to regret putting any money into a 401(k) plan at all. It may turn out to give me average returns that aren't too sexy but aren't too shabby. Honestly, I don't really expect more.

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More from this contributor:

Planning for a Simple Retirement

Rolling Over my Old Pension into a Roth

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