While employers may be okay with letting their employees move on, they’re not trying to let their 401k accounts walk away so easily. According to a recent report from Wall Street Journal, it seems that many employers are fighting to keep the assets that go with their former employees’ 401k instead of allowing the employees to roll their money into an IRA until they find their next job.
Employers Need the Money
In the past, employers were eager to allow an employee to walk away with their 401k account simply because there were too many hassles that came with managing it. However, the recession changed the tunes of some employers who are now eyeballing $400 billion of assets found in 401k accounts that are eligible for rollover are trying to figure out how to keep the money right where it is.
Workers Being Enticed (or Forced) Into Sticking Around
As a result of this new desire to hold on to 401k accounts, some employers are offering some pretty enticing incentives to former employees:
- International Paper is offering low-cost investment options, financial planning and annuity-like products.
- The National Football League has created barriers to force people to stay in their plans for a number of years.
According to a recent survey from Casey Quirk & Associates, about two-thirds of plans with more than $1 billion in assets said they want to retain worker accounts after retirement. The evidence of this desire rears its head in the apparent attempts companies are making to keep the accounts.
IRA Players Fighting Back
While some employers have attempted to keep employee accounts by offering incentives, others have taken a political approach of throwing jabs at IRA accounts mainly be criticizing their advertisements. However, firms offering IRAs are implementing their own tactics to entice investors.
For instance, companies like Fidelity Investments, Charles Schwab and Scottrade have all rolled out new online blogs, retirement calculators and more to boost their IRA business. Some are even showering investors with cash incentives of up to $500 to lure them in.
What Should You Do?
There are benefits to sticking with a 401k or investing in an IRA. Sometimes it’s hard to know what to do with your 401k after leaving your job, but keeping it where it is isn’t usually an option on the list. To make your determination, of course, it’s good to look at the incentives being offered. But ultimately, you want to make the decision that will have the best impact on your retirement.
Also, you may want to consider that there may be rollover fees associated with your 401k. So pull out your calculator and begin adding fees, penalties and incentives to help you make your determination. If the choice has been left up to you then it’s important that you make the best one possible.
