This doesn’t necessarily mean that all old 401(k) plans should be rolled into IRAs or into a current 401(k) plan, he said. But he thinks clients and prospects should be made aware that they have options. He recently added eMoney to his toolbox and encourages clients to use its vault feature to store their retirement plan statements. People should also sit down to corral all their assets and create a financial plan, he said.
Konda reminds young professionals that they’ll likely change jobs and maybe even careers multiple times over their lifetime. If they open an IRA, they can use it to deposit and maintain control over old plan assets. When deciding whether to transfer old 401(k) balances into the plan offered by their current employer, they should consider how long they think they’ll be in their current job, how big their balances are and what their goals are for this money, he said.
Konda has had a couple of younger clients tell him they didn’t like the investment options in their current 401(k) plan. If that plan offers in-kind transfers, employees can move those assets into an IRA, he said.
However, it may be advantageous to stay in the 401(k) plan because the contribution limits are much higher and because employees covered by an employer-sponsored retirement plan may not be permitted to deduct IRA contributions, he said. It depends upon their income level.
Frozen 401(k) assets aren’t all that common, but they’re always in the back of Konda’s mind. Before entering the financial planning industry, he worked for a private land developer in Southern California that later went bankrupt during the recession.
Konda advises clients to have another investment account in addition to a 401(k). This could include a Roth IRA and, if the client can afford it, a liquid investment account through a mutual fund company.
“I’m really a big fan of having a liquid investment account,” he said, so the money is there if the account holder or a beneficiary needs it.