This is a short YouTube video (transcript) by Donna Genie advising viewers to roll over old or “straggler” 401(k) accounts into personally controlled IRAs. The speaker explains that employer 401(k) plans carry administrative and compliance costs (borne by participants) that can reduce returns, and illustrates with a scenario comparing identical mutual-fund investments held in a corporate plan versus an IRA.
Do you have any old 401ks lying around in former employers accounts? If you do, you want to move them out to your own account, use the rollover techniques to roll those into an account that you control. Let's talk a little bit about why that's important. When a company sets up a 401k plan, they have to do a lot of internal testing on that. They have annual requirements to report to the Department of Labor. They have a lot of administrative costs that go into working that 401 plan. And guess who pays for those administrative costs? Ah, the participants do. So let me give you a scenario. Let's say that in your 401k, with your former company that you worked with, you invested in mutual fund abc. And I had mine in my own IRA under my name. And I also invested in that same mutual fund and we had the same amount of money to start at the end of the year. We each get our statements and we sit down to dinner and we compare them. The one who is under the corporate plan will have made less money and have a lower balance than the person who has their own IRA under their own administration.
