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Ask the Expert

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Jim Lentini: Should you roll over your 401(k)?

Posted: May 25, 2009 6:33 p.m.
Updated: May 26, 2009 4:55 a.m.
 
Regardless of the economic environment, about 18 percent of American workers (more than one in six) leave their jobs every year.
About two-thirds of all job-changers will seek the help of a financial professional. With the current economic downturn, a startling 45 percent of individuals are cashing out their 401(k) plans when leaving their companies.

What's worse, many frightened investors abandoned their diversified investment portfolios in favor of treasury bills and cash.

But while cash and treasuries have offered protection, their yields may not be sufficient to help you reach your long-term investment goals.

While the market appears to be recovering, those who have moved their portfolios into cash positions will be missing the upsurge, if indeed we are beginning one.

Nobody can predict when a recovery might begin, but past markets did eventually recover. Companies emerged healthier and asset prices rose.

That is why investors who maintain a diversified portfolio, including cash, and stock-and-bond mutual funds, may be better positioned to participate in an eventual recovery than those holding only cash.

One of the valuable options we recommend is to consider a rollover, or moving a portion of your retirement plan into a variable annuity that offers living benefit riders.

What this offers is a guarantee of principal, guarantee deferred growth and lifetime income for both you and your spouse, and flexible options for contingent beneficiary's to minimize taxes.

Changing jobs may represent an exciting point and opportunity in your career. It can also provide new challenges to enhance your skills and abilities.

On the other hand, many people leave jobs suddenly and are faced with an uncertain future.

Whatever the case may be, a job change represents a good time to discuss your options and choices you have to receive distributions from your qualified retirement plan with your financial advisor.

Don't be too anxious to rationalize cashing out your plan.

This would be very costly tax-wise, and you may be losing the opportunity and rhythm of building your retirement income.

And, remember, please investigate and evaluate this opportunity to consider a variable annuity and what it can offer for your retirement planning.

Jim Lentini is President of Lentini Insurance & Investments, Inc. He can be reached at (661) 254-7633. His column reflects his own views and not necessarily those of The Signal.

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