Retirement plan participants weigh different factors in deciding whether to roll over their balance into an IRA
Rollover, or not to rollover? That is the question for high balance retirement plan participants deciding what to do with their money when they leave a company. These investors approach this decision differently depending on whether they use an advisor or not.
In seeking information about Rollover IRAs, self-directed plan participants with balances of $200,000 or more are most likely to consult with their plan provider (57%) or their employer (44%). They are least likely to attend workshops and seminars, which are typically used to screen potential advisors.
Self-directed high balance plan participants are also more likely to do online research on their plan provider website or the website of another financial company. This is understandable as it is characteristic of this group to take the initiative to use the tools available to them. This correlates to findings that more than twice as many self-directed high balance plan participants are using the Internet to set up an IRA as those who work with an advisor. However, those who do work with an advisor are most likely to use a website other than a financial company, such as Yahoo Finance, for their own research.
What are these plan participants deciding to do with their balances? Nearly three-quarters of those who work with an advisor choose to rollover their balance into an IRA, as opposed to 61% of those who make their own financial decisions.
It is illustrative of the two groups that 35% of self-directed high balance plan participants—almost twice as many as those who work with an advisor—choose their plan provider to rollover their balance into an IRA (They are also nearly twice as likely as those who work with an adviser to let their money sit in their previous employer plan).
Both groups are most likely to choose a company with whom they already have investments, while those who follow the recommendations of their advisor are more than twice as likely as self-directed plan participants to select a company with whom they have never dealt.
There is a marked difference in the factors these two groups of plan participants consider most important in selecting a company to rollover their balances into an IRA. Those who work with an advisor put the most stock in their advisor's advice, followed by whether they have an existing account and the company's investment performance record.
For self-directed high balance plan participants, it is most important whether the company is large and financially solid, the fees it charges, and whether they have an existing account.
Brokerage accounts are the most popular for both groups of investors, but self-directed plan participants are more than twice as likely to invest their money in a bank. Their investment strategy for their rollover IRA is similarly conservative. Forty-three percent invest more toward fixed income. However, they are also more likely than those who work with an advisor to change their investment strategy and invest in equities.