When Your 401(k) Makes A Change On You

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When Your 401(k) Makes A Change On You

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December 02, 2011

In the past year, many of our clients have seen changes made to their 401(k) plan. These changes may happen from two separate businesses merging, your employer trying to save costs, or simply a change of funds within the existing 401(k). Usually, you will get either an electronic or written notification of these changes. The problem is that most 401(k) participants usually don't take the time to read the changes which can affect the overall performance of your largest retirement asset. Here are three things to watch out for when a major change gets made to your 401(k) plan.

  1. Be aware of the mapping process - The idea of having a map or a Garmin is to get specific directions on the most efficient way to get from point A to point B. When your existing 401(k) plan merges into a new 401(k) plan it will go through a process called mapping. What generally happens is that the new 401(k) provider will offer mutual funds that most closely match the existing mutual fund positions you have today if you do NOTHING when the change happens. Remember, you have the opportunity to review and select a set of new funds based upon the new choices in the 401(k) plan. However, if you elect to make no changes at all your existing 401(k) will automatically be redistributed into like kind funds. I stress the word like kind because the funds will not likely be exactly the same nor will the funds necessarily have the same exact fund manager. It is important when these changes happen that you reassess each and every choice within the new 401(k) plan.
  2. Be aware of the blackout period - When a complete overhaul happens with your 401(k) from your old plan to a new plan, it will go through something called a blackout period. This is a period of thirty days where you won't have the ability to make any changes to your current overall investment mix. With today's extremely volatile market, you could consider moving your entire balance to a money market or stable value choice if you feel uncertain about market volatility during that period of time. If you are not confident in what choices to make with the new funds, creating a more conservative mix of your 401(k) will also allow you time to make more informed choices within the new plan.
  3. Be aware of a fund manager change - Remember, that each mutual fund within your 401(k) plan is either run by one manager or a team of managers. Some funds over time develop a very consistent track record of performance. However, if there is a change of managers on the mutual fund the historic performance may not represent what might happen in the future. When you analyze your mutual fund selections you should not only look at the track record of the fund (which many people do), but you should also look at the tenure of the fund manager to see if there is a match.

As I've shared before on Your Smart Money Moves, not opening your 401(k) statement is likely a poor way to plan for your financial future. Since changes are happening more frequently with your 401(k) plans, you need to think like a CEO and analyze those changes so you can come up with the best outcomes for your money.

Contact Ted Jenkin at www.oxygenfinancial.net to request a free review of your 401(k) plan.

Written by:

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®

Co-CEO and Founder of oXYGen Financial, Inc

Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice and Smart Money Moves to the X and Y Generation.

Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), Member FINRA/SIPC. Oxygen Financial is not affiliated with NFPAS. NFPAS does not provide tax or legal advice. This site is published for residents of the United States only. Registered Representatives and Investment Advisor Representatives of NFP Advisor Services, LLC (NFPAS) may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact NFPAS Compliance Department at 512-697-6000. PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. NFP Advisor Services, LLC makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is NFP Advisor Services, LLC liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

This site is published for residents of the United States only. Registered Representatives of Kestra IS and Investment Advisor Representatives of Kestra AS may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact Kestra IS Compliance Department at 844-553-7872.

PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. Kestra IS and Kestra AS makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is Kestra IS and Kestra AS liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.