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401(k) In-Service Distributions to Protect Your Retirement Savings from Loss of Value

Written By: Jeremy Smith | Amerishield

If you’re currently saving for retirement in your companies 401(k) program you will soon, if not already, be informed of the fees you are paying to your plan sponsor to have the “privilege” of their services.  Until now, these fees may not have been disclosed to you.  Now Federal Department of Labor law requires your 401(k) plan sponsor to spell it out for you on your statements.

Prior to this, the only deduction you may have seen were attributed to market loses.  Your statements now will contain more information.  What you do with that information can be critical to your future retirement savings and plans to live that comfortable life you’ve been planning. So let’s take a look at what fee disclosures you may see in your statement and answer some questions you might begin to wonder about.

Who pays the fees and why is it important to me?

YOU PAY THE FEES!  Your employer should be accountable for the performance in your 401(k). Yes, your employer.  It isn’t coming from the employer coffers. They are the ones who chose the plan sponsor to manage your money.  If they did not take great care in choosing a superior plan sponsor the fees could have kept you from earning even more on your retirement savings.  In previous years, the money you lost in fees was never known to you.  It might not have even been known to your employer.

Why do I have to pay fees?

To invest in a 401(k) and have someone else actively manage your money has a cost to it.  You may have never known or thought of that.  This cost is created from multiple sources involved in handling your savings funds – processing, handling, investment management, and other layers of administration.  Additional costs will depend on your own choice of investments within your company’s plan sponsor, the value of your companies plan, and the number of employees among other factors.

Now that you know this what can you do about it?

Okay, so you now know that you are paying fees.  For example, if the cost of these fees average 3% per quarter, your savings investment needs to grow at least 3% to break even with the cost before it can even begin to grow.  Once the executives in your company that have their own large 401(k) investments learn about their own fees they may not like this at all.  Remember, they are paying the same fees you are.  Perhaps your company can either negotiate with the plan sponsor for lower fees, or shop around for a different plan sponsor with lower fees.  If not you may be able to make some yourself.

If you are 59½ your company may allow you to do a penalty free “In-Service Withdrawal” from your 401(k).  You can find out by getting a copy of your plans rules from your human resource department 401(k) manager.  If you are able to you can transfer, tax-deferred a portion of your retirement savings to your own IRA.  Now you are in control of your retirement savings and can choose to find a tax-deferred product with no fees to protect your money for the rest of your life.

What do you know about annuities?

Currently, annuities have soared to the top of the list as the most-asked-about product, beating second-place Roth individual retirement accounts and exchange-traded funds, which came in fifth place, according to data from Cerulli Associates Inc.  Commodities and currency products took second place, followed by Section 529 college savings plans, municipal bonds and ETFs in third, fourth and fifth places, respectively.  In the same survey last year, annuities came in sixth place, while Roth IRAs were first.

One way to make your IRA guaranteed to never lose its value is to purchase a fixed indexed annuity.  With this product, you’ll have the opportunity to earn some of the gains of the market, but never any loss in value if the market decreases.  Most of the fixed indexed annuities have zero fees, unless you choose to purchase some optional riders to enhance the annuity.

Whether you use the In-service transfer method to protect your retirement savings from your 401(k) or are already managing your own IRA, a fixed indexed annuity can be a valuable tool in your search for safety and financial guarantees.  Give us a call at AmeriShield and have one of our retirement advisors review your situation and future goals then educate you on your choices to help you plan to have your retirement savings the rest of your life.

Note: Jeremy Smith is a Featured Advisor with Annuity123. AmeriShield agents discuss your complete insurance and risk tolerance as well as your goals for retirement and what you plan for your insurance products to do for you and your family before we discuss any products with you.   We fully educate you on the differences in the types of fixed and indexed annuities that meet your specific situation and offer you “The Power of Choice” to achieve your goals.

About Annuity123: Created to ensure that individuals across America have access to unbiased educational material about annuities in additional to an unprecedented network of retirement counselors to seek for personalized retirement planning help.

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