Man quits job and mysteriously leaves behind 13 ketchup packets and four sporks.
There are a lot of ways to give notice -- and some are more colorful than others. But when it comes time to pack up your desk and move to your new company's corner office, don't forget those trillions of dollars in your lower left-hand desk drawer.
According to the Department of Labor, Americans move to a new employer once every four years, leaving a trail of old 401(k) and 403(b) plans. (No reliable statistics about leftover packets of ketchup and sweet-and-sour sauce were available at press time.)
"Mountains of money are moving in the next decade," reports a Financial Research Corporation study on the rollover market. Mountains, indeed: Consumers will take out more than $3.7 trillion from qualified retirement plans by 2006, according to "Money on the Move: Strategies for Capturing Retirement Rollovers." More than half of that amount -- $2 trillion -- will be funneled into individual retirement accounts.
With the average 401(k) balance at $50,000, companies such as Fidelity Investments, Charles Schwab (NYSE:SCH), Vanguard, and Merrill Lynch (NYSE:MER) stand to gain a healthy influx of retirement assets. By capturing just 0.75% of the projected rollover dollars, a company could add about $13 billion of new assets to its business over five years.
If you've watched any TV in the past, oh, year or five, you may have noticed that the retirement-market behemoths are gunning for your money. One phone call (or click), a single document, and, finito!
Don't run slow-motion into their arms for the marketing footage just yet. First, make sure the bulk of your contribution is going toward your retirement nest egg, not to the brokerage company. You can get into the nitty-gritty of what each discount brokerage firm offers, including customer service and one-time freebies. Or you can take a shortcut and home in on two particular things: fees and trading commissions.
By law, for maintaining your IRA, your broker can charge an annual fee -- aptly called an "IRA maintenance fee" -- but many don't. Then there are fees for account inactivity and for transferring your money out of the account. Trading commissions can also erode your returns. (In this side-by-side comparison of sponsor-brokers, you can see that Ameritrade (Nasdaq: AMTD) and J.P. Morgan's (NYSE:JPT) Brown/Co charge no IRA maintenance fee, though they do have $1,000 and $5,000 minimums, respectively, to open an account. ShareBuilder charges a maintenance fee on some accounts, but it has no minimum dollar requirement.)
Isn't it time to liberate that money sitting in your old work retirement accounts? Here's more help if you need it:
- Rollover or direct transfer? Both are easy to execute, but the direct-transfer method helps you easily avoid any costly tax snafus.
- What should you do with all that dough once you have 100% control? We've got a few ideas on how to build a winning portfolio, or you can sidle up to some recent Rule Your Retirement retirees and let them tell you what you really have to plan for in the after-work life.
- Oops! Did you forget to save for retirement? It's not too late to make significant headway. And if you need some moral and professional support, make sure you find it in an unbiased source. Get a free month's worth of phone calls to the Ayco Answerline team via TMF Money Advisor.
Dayana Yochim owns none of the companies mentioned in this article but is sure that they all have really nice personalities.
