Ask an author: David Loeper here to answer your retirement planning questions!

[Julie Rains]

Originally Posted by David Loeper

In terms of executing a rollover, if your company's 401k is not cost effective, the best way to handle this to avoid potential tax problems is to execute what is known as a "direct trustee to trustee transfer." While you can document getting the check from your balances and placing it in an IRA rollover, it is safest to avoid handling the money if you want to avoid potential tax problems.

In regard to the direct trustee to trustee transfer, do you need to sell the funds or authorize the funds to be sold prior to the transfer or can you keep same funds (as long as they aren't proprietary funds), make the transfer, and then make your trading decisions after you have control of the account? I am not really trying to advocate market timing but I am wondering if the 401(k) participant can control the when the funds are sold? Or all the plans different?

[David Loeper]

Originally Posted by Julie Rains

In regard to the direct trustee to trustee transfer, do you need to sell the funds or authorize the funds to be sold prior to the transfer or can you keep same funds (as long as they aren't proprietary funds), make the transfer, and then make your trading decisions after you have control of the account? I am not really trying to advocate market timing but I am wondering if the 401(k) participant can control the when the funds are sold? Or all the plans different?

While there may be exceptions, normally a direct trustee to trustee transfer would involve cash instead of the securities moving between the 401k and the new IRA rollover. Hopefully your 401k doesn't have surrender, redemption or CDSC (contigent deferred sales charges) upon separation of employment.

[admiral]

David,

Thank you in advance for your reply.

I'm a small business owner and have the pleasure of selecting a plan for my employees.

As most of the $$ in our current plan is mine, I'm looking for a low cost provider. As you know, finding one is extremely difficult.

Beyond your company, do you have any recommendations?

Thank you,

Gene

[David Loeper]

Originally Posted by admiral

David,

Thank you in advance for your reply.

I'm a small business owner and have the pleasure of selecting a plan for my employees.

As most of the $$ in the plan is mine, I'm looking for a low cost provider. As you know, finding one is extremely difficult.

Beyond your company, do you have any recommendations?

Thank you,

Gene

The vendor that administers our plan is a company called Employee Fiduciary Corp. Their url is www.employeefiduciary.com. They have very simple and low cost pricing.

[davoscat]

Sending a thank you note for their help and the gift of the book is pretty hard to perceive as confrontational...don't you think?

Maybe we should all send you a thank you note too.

I have one more question (sorry I don't mean to hog him guys). Your resume mentions that you used to be on the investment committee for Virginia's public employees. Does that mean you have a wide range of expertise in retirement planning? What other investment vehicles would you consider yourself an expert in besides 401ks?

[prosper2]

David, you mentioned saving too much as one of the mistakes. Do you then disagree with this view:

How much money should I put in my 401k?

If you can afford to, the maximum. Save for the future! Actually, what you should do is put as much as you can afford to while maintaining a reasonable lifestyle. You don’t want to max out your 401k at the cost of enjoying life now but you shouldn’t be making weekend trips to Paris and ignoring your 401k. If you want to make an error in either direction, then err on the side of caution and pump up the 401k now because time will be on your side. Waiting even five years to start contributing can result in a difference of tens of thousands when retirement comes around the corner.

By the way, I assume you also work in the financial industry. Are you getting dirty looks for blowing the whistle on these hidden views? Thanks in advance.

[David Loeper]

Originally Posted by prosper2

David, you mentioned saving too much as one of the mistakes. Do you then disagree with this view:

Well, it is a bit more balanced than a lot of what you see out there, but I don't like generalizations because invariably there are going to be people it does not apply to. It all depends on your individual circumstances.

Starting early is a good idea to let time work for you, but, I could see plenty of people who should skip making an additional contribution above their match to take a 25th anniversary trip to Paris for example.

(Matching contributions by your employer has such a high certain econonmic value, it is very difficult to find reasons why one wouldn't at least make the contribution up to the level to get the maximum match...but there are exceptions.)

By the way, I assume you also work in the financial industry. Are you getting dirty looks for blowing the whistle on these hidden views? Thanks in advance.

Well, I was licensed in the brokerage industry for almost 20 years, I let my brokerage licenses lapse after starting my company that teaches financial advisors an objective process to advise their clients. (We are an SEC Registered Investment Advisor)

So, I've been getting dirty looks from my old cronies for quite some time since teaching financial advisors how to do the right thing for their clients involves exposing the fallacies of much of what brokers are trained to sell.

The book has ticked off a wider audience though, so I have recently been checking underneath my car before starting it.

[David Loeper]

Originally Posted by davoscat

Maybe we should all send you a thank you note too.

I have one more question (sorry I don't mean to hog him guys). Your resume mentions that you used to be on the investment committee for Virginia's public employees. Does that mean you have a wide range of expertise in retirement planning? What other investment vehicles would you consider yourself an expert in besides 401ks?

Yes, I've been around the industry a long time and have written papers and taught classes at numerous industry conferences covering wealth management, asset allocation, active versus passive investing, Monte Carlo simulation, alternative investments, etc. In fact, Monday I'll be speaking at IMCA's mathematics of investment consulting conference in Las Vegas on "Understanding Monte Carlo Simulation." As you can tell by my picture...I am a geek.

Until now with this book, my work has been targeted to financial professionals. My whitepapers are available free at this link if you have any interest in what we are trying to teach financial advisors:

http://www.financeware.com/f_frame.asp?load=advisors/whitepapers.asp

[michelleogden]

David,

My question is not regarding a specific plan but regarding if you would mind if I took some passages from your book and referenced them on my website www.MichelleOgden.com. I specialize in Retirement Plans and ONLY because when I first looked into one a few years back (for a fellow business owner) I thought "WHAT A RIP OFF" and have been at it ever since. I was in absolute SHOCK at how difficult it was to compare the different plans and I literally took over 3 weeks to learn all the lingo (wish I had your book HA HA). I found it interesting that the sales rep for each plan only would point out all the "GREAT" things about the plan. They would fail to mention that the fees would go through the roof after we signed up more people. HOW CONVIENENT FOR THEM ha ha! I had nightmares about the upfront commissions they wanted to pay me. I also got a bunch of calls from different companies about the end of last year saying “We have improved our fee structure” (mainly insurance based companies) I felt like saying WAS THAT BEFORE OR AFTER ALL THE LAWSUITS started coming. I know these companies didn’t grow a conscience over night! My firm has since moved away from the commission world to the “Fee Only” world in an effort to be as transparent as possible about the fees of the plan and remove the conflict of interest.

Thanks for all you do!

Michelle Ogden, CRPS®, CFP®

Portfolio Manager
mo@michelleogden.com
When one door of happiness closes, another opens, but often we look so long at the closed door that we do not see the one that has been opened for us.
Helen Keller

[David Loeper]

Originally Posted by michelleogden

David,

My question is not regarding a specific plan but regarding if you would mind if I took some passages from your book and referenced them on my website www.MichelleOgden.com. I specialize in Retirement Plans and ONLY because when I first looked into one a few years back (for a fellow business owner) I thought "WHAT A RIP OFF" and have been at it ever since. I was in absolute SHOCK at how difficult it was to compare the different plans and I literally took over 3 weeks to learn all the lingo (wish I had your book HA HA). I found it interesting that the sales rep for each plan only would point out all the "GREAT" things about the plan. They would fail to mention that the fees would go through the roof after we signed up more people. HOW CONVIENENT FOR THEM ha ha! I had nightmares about the upfront commissions they wanted to pay me. I also got a bunch of calls from different companies about the end of last year saying “We have improved our fee structure” (mainly insurance based companies) I felt like saying WAS THAT BEFORE OR AFTER ALL THE LAWSUITS started coming. I know these companies didn’t grow a conscience over night! My firm has since moved away from the commission world to the “Fee Only” world in an effort to be as transparent as possible about the fees of the plan and remove the conflict of interest.

Thanks for all you do!

Michelle Ogden, CRPS®, CFP®

Portfolio Manager
mo@michelleogden.com
When one door of happiness closes, another opens, but often we look so long at the closed door that we do not see the one that has been opened for us.
Helen Keller

Michelle, I've emailed you with my contact information to discuss what you have in mind.