Transcript:
So maybe you're wondering how your 401K stacks up to other 401Ks.Well, I can tell you I look at a lot of 401Ks as a professional. I’m constantly evaluating what fund choices they have, what the expenses are, and I can tell you that the things that I think are most important in a 401K.
The first one is access to information. So being that as an individual you’re going to be managing your own portfolio within this 401Kyou want to be able to build a broad diversified portfolio, and hopefully it’s going to be low cost as well. So, having access to information that I can then pull out what funds are available and where their exposure is. Are they small cap, large cap, mid cup? Are they international? Are they foreign? And I want to be able to drill down into the specifics if at all possible either through information that's provided on the website or, better yet, if I have a ticker or if I can find that fund somewhere else I can get a lot more information about it. So access to information is probably the most important piece for me.
The other thing I want to do is I want to be able to understand what the expenses are. I’m a big believer of investing in low cost exchange traded funds or mutual funds if possible, and just driving down those costs within the investments that you own. And anything greater than one half a percent, I would say, is expensive, so I'm looking for those low cost funds, and hopefully I can get exposure to those funds. And I want to have easy access to information about what they have available and how much they cost.
If you find yourself in a situation where you don't have broad diversified funds, you have only expensive funds, I try to work with what I have and a lot of times what that might be is I might buy a low cost large capped fund within the 401K and then I can diversify into other funds outside of the 401K.So maybe in a brokerage account, or a rollover IRA, or something along those lines. So I'll hold the US large cap in the 401K,and I'll hold the smaller cap or midcap in an IRA and that's an option.
Another option is you can roll your 401Kout into an IRA. Check and see from the provider whether you can do an in-service distribution, that is if you're currently working whether you can roll your 401k out. People who are over 59 and a half usually have the ability to do this, and sometimes people who are under 59 and a halfhave the ability to do this so check with your provider about that. And then you can also, when you're switching jobs or you're separate from employment, you often can roll your401k out to an IRA, and that can give you access to more broadly diversified funds.
The other thing that I talk about in the prior videos is called the brokerage window which basically gives you access to a lot of additional choices low cost funds to as well, so that might be an option too as well depending on whether your 401K has that option and I can provide you the additional video on that topic. Other than that, let me know if you have any question. Certainly not a recommendation to take any specific actions in your portfolio. Just for educational and informational purposes only. Take care. Bye bye.
