Twenty years ago, after graduating from Babson College with a finance/investments degree, I spent the summer backpacking through Europe. In the winter I worked as a ski instructor. And in the spring I got a job at Fidelity Investments. You can imagine how “proud” my parents were.
I worked in Fidelity’s 401(k) business which managed plans for Fortune 500 sized companies. This was the golden age of 401(k)s. It was the savings vehicle of choice for large companies, baby boomers were investing like mad—nervous about not having enough money in retirement, and the Dow Jones Industrial Average was about to put 4,000 in its rear-view mirror. Fast forward to today and retirement is staring baby boomers in the face and has already begun for many. And based on what I’m hearing, it’s not pretty.
I’ve heard some ugly stories as baby boomers begin to take their 401(k)s and roll them over into an IRA. And I don’t see anything stopping the horrible moves being made by some investors. It’s worth noting that $321 billion moved out of 401(k)s and into IRAs in 2012. That’s up 60% since 2002. And IRAs now hold $6.5 trillion, surpassing the $5.9 trillion in 401(k)s. But not all 401(k) investors make the right choice. They should rollover into an IRA, but many make fatal mistakes. Come back tomorrow for the story of Maria Lew and how you can avoid the same fate.