What Is The Best Roll Over Plan

[Guest KMD]

I have to roll my 401k over, because my previous employer is changing their 401k provider. I need to move my $4,000.00 and I am not sure where the best place to invest it is. I was thinking of putting it in a Roth IRA. Or is an IRA better. I lost $3,000.00 over the last 2 1/2 years and I'm not sure I want to put it in mutual funds at this time. My other problem is I have to have the form completed and returned by the 20th of Dec.

Please advise me as what the best place is to move my money.

Thank You

Karen

[John G]

You question is akin to asking "what is the best religion". No one can give a "best" answer.

It sounds from you question that you are uncomfortable about making investment decisions and do not understand the basics. First, in any given year your assets can move up or down. There are no short term guarentees, but over many decades investments tend to provide reasonable returns. Returns vary by asset class (bonds, blue chip stocks, growth stocks, CDs)... inversly related to the short term risk (low risk CDs have the lowest return, stocks typically the highest). Sadly, investing usually means you get bruised in some years (like the past two) but do better than average in other years. Good years outnumber bad years typically 5:1 or 7:1. Note, mutual funds come in many many forms and can extend beyond stock funds to bond funds, so some folks with bond mutual funds for the last two years have had great returns. It is not the "mechanism" but the components of the portfolio that make the difference. You are clearly not alone in the past two years in seeing some losses.

When an employer is changing the 401k provider, the first option to consider is rolling it to the new provider. You did not say what investment options you were offered. When an employer switches providers you generally do not get offered and chance to walk out the door with your assets a select a provider on your own. You normally "roll over" a 401k when you leave the employer. Perhaps I am not understanding your situation correctly or you are not using the exact terminology.

Given the modest size of your 401k assets, a single broad based no load mutual fund might be your best choice. Index mutual funds tend to have extremely low annual expenses and will give market performance.

You may want to read some of the March Consumer Reports which cover retirement planning and provide a short list of mutual funds.

Post again if I am not reading your circumstances correctly.