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Jim Lentini: Know your options when it’s time to leave your company

Posted: January 4, 2010 10:07 p.m.
Updated: January 4, 2010 10:06 p.m.
 
When it's time to leave a company where you have money invested in a tax-deferred retirement plan, such as a 401(k), you will be faced with a decision: what to do with the money accumulated in your account.

While you may have the option to leave the money in your former employer's plan or withdraw it as cash, you may wish to roll it over into a rollover IRA (Individual Retirement Account).

Previous articles have touted the value of a rollover to a variable annuity that offers riders the guarantees, your principal, growth, step-ups, etc. that were not offered by the 401(k) plan.

Variable annuities are the only investment I'm aware of that can give you the peace of mind and "guaranteed" protection for your retirement income that you have worked and saved for all those years.

What is a rollover?
A rollover is the transfer of assets from one retirement plan to another, so it remains invested rather than withdrawn as cash. The rollover has to be a like-for-like investment so the funds remain in a tax-deferred plan in accordance to the rules that govern rollovers.

Convenience
By rolling your tax-deferred assets into a single Traditional IRA or Roth IRA, you can avoid the hassle of monitoring numerous statements and the need to understand investment options from multiple providers.

And most investment vehicles offer the lifestyle portfolios that give you multiple investment managers and funds for a well-diversified portfolio that is actively managed, maximizing potential performance and minimized risk.

Consolidation
Moving a number of IRAs or plans into a lifestyle portfolio mentioned above makes it easier for you and your advisor to select and manage your investments, and create an effective portfolio to meet your long-term financial goals for future lifetime income.

Control
If you keep your funds in a former employer's plan, you may not have full control over how to best invest your money, and you will be limited to the funds available in that plan.

With a rollover IRA you will be able to choose various investments with your advisor's help. The guarantees offered by the variable annuity riders mentioned before make a strong argument for a portion of your portfolio dependent on your future plans and goals.

Most importantly, you gain more control over how your assets are distributed to your beneficiaries.

In closing, I would emphasize the importance to review periodically the beneficiary selection in your retirement plans. In our ever-changing society and with changes to our lives such as divorce, remarrying and grandchildren, advisors hear horror stories about the wrong people getting retirement benefits of a deceased person who never intended that distribution of his or her hard-earned savings.

Keep those beneficiary designations "up to date." With the current climate we face in the recovering recession, and government difficultly trying to solve problems and creating others, it is imperative for us to control our personal planning.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments, Inc. His column reflects his own views and not necessarily those of The Signal.

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