What to do with your 401K or IRA and the decision to roll it over to a financial professional and some things to consider. These questions are answered in this episode.

If you're looking for a trusted source to help you stay on top of the ever-changing financial world of investing, retirement and estate planning, and asset protection, whether it's for you and your family or your small business, you're in the right place. This is the 1715 Treasure Coast Financial Wellness Podcast, where we'll keep you up to speed with the latest market news and conditions every week. Now here's your host, Thomas Davies. Well, hello, and welcome to another edition of the 1715 Treasure Coast Financial Wellness Podcast.

My name is Thomas Davies. I'm a wealth advisor here in Stewart, Florida, and welcome to the show. And so this week, we are going to talk about rollover IRAs and 401Ks and what should you do with them. This is a pretty hot topic.

The SEC is looking into these, as does it make sense to rollover your IRA or 401K? There are a lot of aspects to this, things that should be looked at. More importantly, fees, what you're looking to invest into, and as a fiduciary, and that is a big word, as a fiduciary, does it make sense to do this? These are things that I look at when I meet with clients, and we say, gee, does it make sense for you to rollover your IRA or 401K?

I will get into that in a little bit, and that's going to be the big topic of the week. Just for my regular listeners, I apologize for not being on the air, but the cold bug got me again, and without a voice, it just doesn't make sense to do a broadcast. So here I am, and glad to be back, and what a January we had. Nice little uptick there in the market, made some gains back.

Some of the biggest performers were those, some of the hardest hit, especially the FAANG stocks. That is Facebook, Amazon, Netflix, and Google, although it looks like Google and Amazon have given a little bit of that back due to chat GPTAI. If you don't know what chat GPTAI is, I suggest you look it up. It is the future, and the future is here.

So instead of going into Google, you can go into Microsoft and ask it a question, and imagine that. You ask a question into the browser, and it spits out an answer, and I can tell you the answers are pretty good. It's not perfect. It has to be proofread.

I have used chat GTP, GPT, excuse me, you're going to get used to saying that, in my practice. I had it write a couple just simple articles on bonds, how to invest, how to invest using annuities, and also had it write an article on asset allocation, and I got to tell you, it came out pretty well written, and what would probably take me 30 to 40 minutes to maybe an hour. This was done in five minutes, less than five minutes. It was done in about 35 seconds, and the article came out pretty good.

So you're more than welcome to check that out. It's on tdwealth.net. That is my website. We have a lot of articles there.

These are just short brief articles on all types of subjects, whether it be retirement, financial planning, asset allocations, different types of investments. It's all in the blog post, so I suggest you check it out. You can follow me along and subscribe, so anytime something new goes on the website, you'll get an alert. Relatively a quiet week last week, although Chairman Fed Powell came out and raised the Fed funds rate another 25 basis points, which was to be expected coming off the 50 basis point raises here previously.

Really didn't affect the markets that much. That's pretty much what everybody expected. Starting to see unemployment creep up a little bit, although not much. I'm sure the Fed would like it to go much higher.

And also the interesting mortgage applications raised were up 7% last week. The 30-year current fixed mortgage is about 6.6%. That's up 29 basis points over last week, so people are still out there buying homes. For those of us in Florida, the real estate just keeps going up, although there is more inventory on the market, which I think will also cool off some of the pricing, although it's still unbelievably high.

I got to believe Miami, Dade County is still probably the most unaffordable city to live in in this country. It's just unbelievable, along with the traffic, which has doubled. Just read an interesting article on how they are trying to force people out of their cars and into public transportation by closing down lanes and making the roads smaller. I don't get it, but I know a lot of people are upset about it, and it's going to be very hard for me to give up my vehicle, I can tell you that.

So with that, we're going to move on. Like I said, it was a relatively quiet week. There wasn't really a whole lot to talk about. The goods and services deficit increased by $103 billion, so that's pretty good.

Inflation is coming down, although if you go to buy a dozen eggs, it doesn't seem like everything is still really, really expensive. Last week they lost ground, earnings take center stage, and many of the big tech names announced layoffs. This is a lot of attribute to chat GPT and what's going on. Maybe I think maybe being down 60-70% in your stock price might have a lot to do with it also in 2022.

So here we are in 2023 going forward. There are going to be some opportunities, certainly a lot of those companies that were just absolutely hammered in the tech space. Start sorting through them, start looking to see where those bargains are. They've certainly had some nice gains so far this year, up somewhere 20-plus percent, but they're still down 40% from last year.

You look at Facebook or Meta, and it's up 20%, but it was really hammered last year. A lot of analysts now with Zuckerberg came out last week and basically said that they're focusing on what needs to be fixed in their company and moving forward, and a lot of people like that. They think that he's finally taken charge. With that, I'm going to talk about our main topic, which is about 401ks and rollover IRAs.

Is it important for you to do that? What are some of the things that I look at, some of the things you should look at if you're on the fence? Should I roll over my 401k and bring it to someone like myself, a registered investment advisor, a broker, whomever you want to roll it over to? What makes the difference?

The first thing most people want to look at is cost. Is it cost effective? Like myself, I charge a fee on the assets that I manage, whether that be 1%, half a percent, depends how much work's involved, and you've got to see how much you're paying inside a 401k. Most 401ks, the fees are going to be inside the funds that you are invested in, so sometimes there is no top-layer fee, meaning a brokerage fee.

Sometimes there is. You say, well, how do I find that out? Well, you're going to have to go to your human resource department, and then actually there is an advisor attached generally to your 401k plan, and find out who that advisor is. I can tell you that most corporate 401ks, most people have no idea who the advisor is that actually manages the investments in those plans, and I shake my head, because it's millions of dollars, but that's the way the system is set up.

Those advisors are there. They are there for your help, but a lot of times they're in the background. You never see them. You never hear from them, but they are there.

Costs are one of the things that you're going to want to look at if you are considering rolling over your 401k in an IRA or IRA. The next thing you're going to want to look at is the investment choices inside those plans. I've always said that when you're coming from a corporate IRA or a 401k, and you're going to roll it into a rollover IRA, what are the investment choices you have? Now, most 401k investment plans will not allow you to invest in individual equities, whether that be Apple, Microsoft, whomever it may be.

You cannot buy the individual equities inside a 401k plan. When I meet with somebody, I say, is this something that you would like to do? Do you want to invest in individual stocks or individual bonds? Nine times out of ten, they say yes, and we would like to do that.

I equate it to, you're in a sandbox inside a 401k, and you only have so many toys to play with, where if you jump in the sandbox with me, we're going to have everything under the sun. Once you roll it over, you're open to invest in just about everything that the market offers. I think that's really the big advantage of rolling over a 401k, is your investment choices. That is generally the outlier for me, and I try to express that, that you're restricted inside a 401k plan that you may have.

If you are unrestricted and you can invest in those investment choices, then it goes back to service. That's the third thing I'll talk about a little bit, and that goes with number one, finding out who manages that plan and the investment choices you have. A lot of IRA, 401k plans have what they're called target date funds. Those are those funds that say 2025 or 2050, 2070, however old you are.

A lot of people go in there and say, well, 50 years from now, that's when I'm going to retire. Let's put in that 2070 market, and generally that's an aggressive type of investment because it's probably like a 70-30 or even 80-20 mix. That means 80% equities, 20% bonds. The way that those are supposed to work is that as you get closer to that age, and let's say 2070, the investments should get more conservative as you get to that date, which in this case we're talking about, let's say 2070.

It has shown us from time and time again in 2008 and 2022 that those particular funds, target date funds, just don't do it. They don't get conservative enough because what happens is generally in those funds, as you get closer to that target date year, they invest more in bonds. Well, last year, those bond funds were down anywhere from 10% to 15%. I don't know about you, but I can tell you that if I was retiring and I was down not only my equity portion of the portfolio, let's say 20%, but now my bond portfolio is down 10%, 15%, that to me doesn't look conservative.

I can tell you that if you're in that five-year time horizon of retiring, you better have a plan. You better have an investment plan of which investments you have and how conservative they are or how aggressive they are. With five years, if you're going to start taking money out of those portfolios and use that in your retirement, well, that's just a whole other ball of wax that you really need to plan for because now you're taking money out. You're not putting money in, so there's no dollar cost averaging.

You just really have to time things out and hopefully those investments inside that retirement plan are producing income. Now, that's another thing that you want to look at about rolling over that 401k. What is that 401k? Are you going to take distributions out of that 401k and then are the investments inside that 401k plan, are they going to produce income for you to live on?

Those are things to look at also. The last part of it is probably the service portion of it. How is that plan being serviced? How are the investment choices being managed?

Are they right for you? Maybe you're pretty good at picking investments. Maybe you know what you're doing. Maybe you know nothing and you really need the guidance on how to manage your investments.

Maybe you're relying on a friend, a relative, co-worker, something like that, and you say, you know, I don't know anything about this stuff. What are you doing? I can tell you it's more common than not. That happens.

Say, you know, I really don't know any of this stuff. Can you help me with it? You're really relying on someone that has probably little experience or no experience in the market, in the marketplace, whereas someone like myself, a 25-year veteran, can come in and take a look at what you're doing, give you advice on how to plan, set up a retirement plan, make sure that as you get closer to your retirement age that your investments and everything in your financial life becomes more conservative and more planned. Listen, face it, when you're retired, you want to simplify things.

Most people go from that three-, four-, five-bedroom home down to a one- to two-bedroom condo somewhere. You know, the downsizing starts to begin. If you have children, you know, you're downsizing. Maybe if you don't have children, you're just trying to simplify your life, and that could be from going to have three-, four-bank accounts down to one.

It just depends on where you are in that lifestyle. There really is a lot to look at when making that decision to roll over the 401k, and I'll go over it again. The first thing you're going to want to look at is fees. That is highly important.

You don't want to be overpaying for something that you may not be getting, and then that also talks about service. Number two is the investments, which is my specialty, and I look at those investments and you should look at the investment choices, and do they match what you think is going to fulfill your retirement plan, and are they going to be there? You know, once again, if you're taking money out of that plan, is it going to provide you the income needed that you're going to need? And then the third is the service, you know, the service aspect of it.

You know, is there someone there that you can go to, that you can ask questions? You know, what are these retirement choices that I have inside my 401k? Can you help me with that? Can you set me up with a retirement income plan?

These are some of the critical things that you want to look at, and ask yourself, you know, a couple of these quick questions. Does it make sense? So, you know, if you want to give me a call, certainly my phone is open and on, or send me an email and I'll be glad to answer your questions. If it doesn't make sense for you to roll over that IRA or 401k, you know, and certainly help you out, that's what I'm here to do.

That's kind of why we do the podcast, is to give some information out, and, you know, if it doesn't make sense to you, just give me a call, drop me a line. When you're making those decisions, let's just not make them alone. Let's make an informed and educated decision, and, you know, put your best interests first as a client, and that is what the fiduciary does. I still shake my head, and I know I've mentioned it before, that they had to make a law to put a client's best interests first.

It should always be that way, whether you're a broker, whether you're a fiduciary, an RIA, any type of advisor, you know, that person's interest should, your client's interest should always be first, and not the commission that's in front of it. A lot of people, you know, and I've talked about annuities a little bit, you know, that's another platform where you can roll over those IRAs and 401ks into an annuity. Sometimes that makes sense. Once again, fees, important, investment choices, service, and then, you know, I'll add a caveat onto that, number four, and that's going to be income, because we're talking retirement, and are you going to need that money at retirement, and whether, when you roll that money over, whatever you're rolling it over into, or staying inside that 401k plan, because we want to make sure, is it going to provide the income that you're going to need?

You know, with interest rates rising, annuities starting to look a lot better, you can go out now and get four and a half, five percent on a CD, but that's not keeping up with, you know, keeping pace with inflation, so you're still kind of losing a few bucks, a few points there to inflation, but, you know, these are some of the things that you want to look at. I hope you find this useful. We will be back next week. You know, CPI number comes out this week, that is the Consumer Price Index.

For those of you that go out to the grocery store, you know, things have gotten a little better, so, you know, we see that inflation trending down. I still think that we had a recession in 2022, although, you know, a lot of people are still trimming down, and we're still going to see the lagging effects of all these interest rate raises, and the question is, have they gone too far too fast? At a six percent mortgage, I think that's still tolerable. If mortgages, you know, interest rates rise up to eight, nine, ten percent, then I think, you know, we're headed in the wrong direction.

For those of you that have not heard of Michael Burry, a very interesting character, I suggest looking him up on Twitter. He is also the one that they made the movie about, The Big Short. He made that famous, and, you know, he made the right call at the right time, which brought him to popularity, and a couple weeks ago, he made a tweet that just said sell. So that's kind of interesting in itself.

Could he be right? No one has that crystal ball, but looking forward, inflation coming down, interest rates stabilizing, the Fed is not paused. The question is, when will they pause those interest rates increases? We don't know.

We still think there's two, maybe three out there. Most economists think that there's two to three more interest rate raises out there, but we will see, and that's going to be it for this week. Thank you for listening to the 1715 Treasure Coast Financial Wellness Podcast. Once again, my name is Thomas Davies, I'm here in Stewart, Florida, and I am out.

Thank you for listening to the 1715 Treasure Coast Financial Wellness Podcast. If you enjoyed this episode, share it with a friend who might like it, and please rate, comment, and subscribe. If you'd like to contact us, find more information, or if you'd like to keep up with us on Facebook, Instagram, Twitter, or LinkedIn, check out our website at www.tdwealth.net. Have a great day, and we'll talk to you next week.