Is Cigna a good choice as custodian of rollover IRA?

[Guest Zelly Miller]

My 401k at the company I left is with Cigna. I can rollover the 401k into an IRA with them.

I was told the following by one of their respresentatives:

- They pay the $40.00 exiting fee.

- No annual/custodial fee for balances of $5,000 and more.

- They have the mutual funds I want such as Vanguard Index 500, Janus Worldwide (if I transfer all of my 401k balance into the fund before the 401k is rolled over), Fidelity Growth & Income, etc.

- They are a discount brokerage.

- Transaction fees are 0.65% of the principal amount.

The above all seem like pluses to me. The transaction fee doesn't seem exorbitant either. Talking to the Cigna representatives, though, have given me the feeling like they're trying to pull something, or they're not telling me the full story.

Does anyone have experience with Cigna, good or bad?

When exactly is the transaction fee charged? Each time a fund buys more stock?

Any input and advice greatly appreciated. Need in a hurry, my deadline to rollover is next week!

Thanks!

Zelly

[John G]

- They pay the $40.00 exiting fee.

Exit fee from the 401k? The amount is too small to be an issue. Service, investment options, 24/7 availability, readability of statements, investment research tools, research reports would all seem more important to me. If you plan to use their web capabilities, check it out first. If phone calls are your method of access, try calling at different times of the day and clock the response time.

- No annual/custodial fee for balances of $5,000 and more.

You have lots of options with either no annual or waived fee with 5k assets... the competitive environment for brokerages has driven the marketplace in this direction. /COLOR]

- They have the mutual funds I want such as Vanguard Index 500, Janus Worldwide (if I transfer all of my 401k balance into the fund before the 401k is rolled over), Fidelity Growth & Income, etc.

Remember, you only can buy shares in a fund that is actually OPEN. Janus Worldwide is not right now. Access probably varies by brokerage and mutual fund family. Low expense funds just don't want to pay the brokerage freight for processing the transaction, especially if their size is small. A fund has little control over assets if they are in an outside brokerage. Schwab, Etrade, etc. give you access to thousands of funds... under various rules. You don't want to get married to a specific fund as the winners from the past year, quarter or decade often fall below average in the subsequent period.

- They are a discount brokerage.

Discount? This covers a wide range, you need to measure real costs for your typical trades. Costs can range from $5 at Brown to hundreds at Schwab if the number of shares goes over 1,000. It used to be that commissions were correlated with brokerage advice and services, but now the differences lie on the continum of computer/efficiency vs human/personal contact. Do you focus on mutual funds or stocks? If stocks, do you buy more than 1,000 shares or odd lots? An active trader will ussually find more money lost or made on the nuances of executions rather than commissions. Commission costs count less for the long term buy and hold investor.

- Transaction fees are 0.65% of the principal amount.

You need to ask more about this. Percent of what? How often? What funds are exempt? If this is the charge for each mutual fund, then look elsewhere.

A couple of final points: most financial mags have articles comparing brokerages on response time, investment options, fees, etc. If you don't like the brokerage you select now, you can do a direct fund transfer at a later date to another custodian.

I have no direct experience with CIGNA, sorry.

[david rigby]

Do you get the same features, or even some better ones, by not doing anything? That is, if you leave the account within the plan, does the plan offer similar options with respect to investment choices?

Certainly you cannot put more in the plan since you are no longer an employee, but that should not automatically invalidate the current investment vehicle and/or strategy.

[Richard Anderson]

Why do you think that you have a deadline for rollover?

[John G]

To extend Pax's comment, you can always rollover to custodian #1 and then sometime later this year switch to custodian #2. As long as the switch is done directly from custodian to custodian, you have no problem. IMO you never want to receive a check directly from anyone, let the custodian process the paperwork.

It seems like you may be new to the investing world. The folks who comment on this web site can help you further if you provide some basic info such as: your age, marital status, rough income level, rough size of the 401k assets on which you are trying to make a decision, investment experience (type of investments, years, academic training), marginal tax bracket, etc.

[Guest Zelly Miller]

If I want to rollover from the 401k to an IRA, I have 90 days from date of departure from previous employer to let Cigna know that I want to rollover to an IRA. If I don't notify them, they will disburse the 401k monies to me if balance is under $5,000 or I can continue to keep money in 401k if balance is over $5,000.

I want to roll over to an IRA. I forgot that I can rollover the IRA to a different custodian at a later date. So I will rollover initially with Cigna.

Thanks for all the advice.

Zelly