Rollover to a Longer and Healthier Life

A Rollover decision may occur several times during a working career before you officially declare to your family and Human Resources that you are retiring.

Salary deferral employer sponsored retirement plans such as 401k and 403b are standard benefits offered since the late '70s. Employees choose among several mutual funds to invest a percentage of gross salary each pay period. Contributions to the account occur before any tax which lowers your taxable base and in effect reduces total taxes paid. The government is helping you to save money for your future.

If you had a generous employer, then a percentage of salary deferral is often matched adding to your retirement nest egg which is a very good deal that should be maximized. As long as you stick around long enough to vest in the employer’s contribution, then the cash is yours to Rollover when you leave for greener pastures.

After setting up the deferral amount when you qualify to participate, little daily thought of the future significance of this account occurs between quarterly statements. Starting 401k deferrals early in your career increases the odds that you will amass a sizable account. Your 401k account, one day, will help contribute to your household income to pay for your American Lifestyle.

Ultimately that day arrives when you want to change your company, career or retire. Your choices are to leave your money with the last plan custodian, transfer your balance to your new plan or Rollover your 401k account balance to an IRA (Individual Retirement Account). Rollover is almost always a better choice. In almost 20 years, maybe three of our clients elected to leave money behind at a former employer. And over a period of years, even those people eventually transferred money to their own self-directed Rollover IRA within 2 years.

Why? Is it because better performing investment options are available? Is it because less expensive management is obtainable?

No, that's not it at all.

The real reason is Control. More specifically, the perception of control. Leaving all that money behind with a company that no longer employs you feels uncomfortable to you. A Rollover feels safer to all of us.

The reality is that the employer has no further connection to your 401k account which is actually held in a 3rd party trust account with some giant industry mutual fund conglomerate. But, "feelings" or emotions rule us all. We decide emotionally and rationalize later.

As emotional beings, we crave comfort in our lives. Mostly everything we do, on some level, is to increase pleasure or reduce emotional or physical pain. Stress causes pain - physical and emotional pain. Doctors tell us that stress is medically linked to depression, heart conditions, obesity, migraine headaches and a host of other ailments too numerous to list.

We all see behaviors that are meant to help alleviate stress but often result in even more discomfort. Examples of this include overindulgence in alcohol, drugs, food, gambling, people, shopping, and even prescription medications.

What does all of this have to do with your 401k rollover account?

Well, if you agree that most people prefer to be comfortable rather than uncomfortable, then your investment choices play a significant role in your future health, happiness and even longevity.

Medical researchers in numerous studies in different countries have concluded that when we have more control, even if only perceived control, over our respective environments, which include our residence location, job, people, property and money, then we feel more comfortable.

Logical!

Few things are more uncomfortable then lack of money or constant worry about money.

If we were gamblers, a good bet would be that given a choice, people would rather give up a few toes than give up a few hundred thousand dollars.

The stock market can wipe out years of diligent savings via 401k salary deferrals in a few days.

Tremendous wealth has been lost for so many that participate in the stock market through mutual funds, stock accounts and retirement plans that are funded with stock based investments.

Daily market volatility causes stress for most account owners that are middle aged and within sight of retirement. Employees under 40 tend to be less bothered since they plan to work another 27 years so they rationalize that the markets will come back.

A problem with stock market based investments, offered through mutual funds like the kind available in most 401k accounts, is that they offer no control.

It is this lack of control that causes turmoil for so many. It wouldn't be so bad if markets went up fairly predictably over time. However, there are periods of time, historically, that the market has been down for several years.

What happens to the account owner retiring during a prolonged depressed market cycle? Do you know anyone like this? I bet you do! Not the life of the party!

Market research shows that a very large percentage of investors use stable value funds and low yielding money market instruments to fund retirement accounts. Unfortunately, after accounting for management fees and inflation, no real growth is achieved.

Studies indicate time and again that a properly allocated stock based investment portfolio outperforms nearly every other investment given enough time.

Exactly how much time is enough time?

Don't get me wrong. We feel that equities belong in a well structured and diverse asset allocation, but not in the disproportionate amounts that we normally see upon review of total holdings.

What is the personal cost to our bodies and relationships with our significant others and family members? We have witnessed marriages fall apart in the late '90s because of sudden massive stock market losses. These are a few extreme cases to be sure, but still, a final straw for an already unstable situation that might have been avoided.

What if long life doesn’t run in your family? Is the daily stress worth the possibility of a few extra percentage points if you’re not healthy enough to enjoy it?

The majority of Rollover 401k accounts wind up in 100% based equity plans because we learn from popular publications, manic media personalities and our favorite stock broker that the market is the place to make the real money.

Well, what happens to your plans when the market doesn't cooperate? Where does the money come from to make up for your losses? You go back to work in your 60s or 70s to make up the difference.

The market is uncertain. The stock markets are a changing reflection of the opinions of millions of people driven by emotion. People reacting to daily aggravation and personal stress trying to make money to sustain their lives in some fashion. If we eliminate sources of uncertainty and aggravation in our lives such as worry about our money, then medical research shows our overall stress levels drop. Seems simple enough, right?

Reducing stress improves overall health. Better health leads to a longer life. So, if we can improve our health, happiness and longevity by choosing an investment vehicle that will give us back control, shouldn’t it be considered?

What kind of investment vehicle can be used to rollover your 401k account that will insure that you gain back control and make you feel comfortable?

We can rollover our 401k, 403b or similar type salary deferral account into our own IRA (Individual Retirement Account) and fund it with investments that don't go down but only up.

Wouldn’t this help eliminate worry? Wouldn’t this type of investment holding make you feel pretty good?

Imagine turning on and tuning in to CNBC as a source of great entertainment and not a cause of your blood pressure rising. Wouldn’t it be great to feel sympathetic but not personally concerned over political upheavals or uncontrollable weather that wipes out a year’s worth of crops which feeds livestock that creates food stock for the country? OMG!

An investment that delivers a predictable guaranteed rate of return will allow you to predictably plan your financial future. Knowing what you can count on is comforting and solid.

Knowing your financial future reduces stress. Less stress, more happiness. Happy people are healthier. Healthy people live longer.

It is that simple.

So, what investment can do all of the above? Traditional Fixed Annuity contracts offered from highly rated insurance companies can deliver all of the above.

An annuity is guaranteed. An annuity is stable. An annuity is predictable and does not suffer from market loses. A fixed annuity offers security because it does not lose money. Interest rates are normally higher than bank issued CDs. You can sleep at night when you know that your hard earned money is gaining value every day.

Want guarantees with more upside potential? No problem! A Fixed Equity Indexed Annuity tracks the S&P 500 or Dow Jones 100 but doesn't directly involve you in the market. Positive gains earn higher rates of return on your principle. Negative market setbacks do not impact your principle. You get all of the stability and guarantees with a Traditional Fixed Annuity but no downside risk.

So, consider the merits of a Traditional Annuity or Fixed Equity Indexed Annuity before your next 401k or 403b Rollover decision.

Annuity Buyer's Guide