Analysis & Opinion

401k: To Roll-Over Or Not... That Is The Question

But don't call investment plans a 'retirement program'

by Steve Selengut

Mr. Selengut is a private investor and a contributing editor to LIFE&Health Advisor. He is the author of the book ‘The Brainwashing of the American Investor: The book that Wall Street does not want you to read.’ He can be reached at

The major purveyors of 401k products, and those who benefit from using them remind me of politicians… they press the party line, and use their power to demonize the competition. Their deep pockets allow them to get the message out, and no one doubts the conclusion. 2% is better than 6%… even after expenses

LinkedIn group discussions have been comparing the pros and cons of "rolling" 401k assets into IRA portfolios. Most articles seem to be institutionally biased advertisements for low cost Mutual Funds and ETFs… securities with absolutely no "preparation for retirement income" bones in their mass marketed bodies. When the market corrects, and values crater yet again, the DOL will be there to fine the Plan Sponsors for allowing plan participants to make investment judgment errors with their own money (plus matching employer contributions).

The 401k "space" as they call it, has become a lucrative product shopping mall, totally out of touch with what should be the purpose of these "quasi" retirement programs: it's the monthly retirement income that pays the bills, not the market value. If a person were a conspiracy theorist, a case could be made for institutional manipulation of interest rates… keeping them near zero to allow for stock market returns to appear better than those with income securities.

Most articles seem to be institutionally biased advertisements for low cost Mutual Funds and ETFs... securities with absolutely no "preparation for retirement income" bones in their bodies

None, of the products peddled by the institutions produce nearly as much after expenses income as Closed End Income Funds. These outstanding managed portfolios are never, ever, found in 401k Plans… except the Self Directed, "safe harbor" variety. Interestingly, many 401k product providers also manage CEF products with generous income, even after higher fees. CEFs paying over 6% after expenses are common in private retirement income portfolios.

Yeah, I know 401k plans are not the retirement programs that regulators, plan sponsors, congress, POTUS, fiduciaries, and participants seem to think they are. The experts are so audit paranoid they have lost sight of the plan target… the retirement income. Look inside the multi-billion dollar Vanguard 2020 TDF: 60% invested in equities (roughly 7000 positions) and income 1.5%.

What's in a name?

Wake up regulators… the "unfairness" is in the "emperor's new clothes" products the plan sponsors have to pick from. You the fiduciaries, you the regulators, you the witch hunters, and you the do-gooders need to look at the product providers instead of their victims. If you insist upon calling investment plans retirement programs (ERISA = Employee Retirement Income Security Act), perhaps you need to mandate the use of outside-the-mainstream, "Self Directed", income programs as well.

Until the "official" focus changes from market value to after expense income, these plans cannot possibly provide "retirement readiness". So, "To rollover or not to rollover the 401k", I would say: "Run like _ _ _ _, just as fast as you can.

Get out of that 401k and learn how to invest for growing income. As long as portfolios of only high quality IGVSI companies and Income CEFs, are regulated out of 401k "space", rollovers to IRAs are a requirement, not an option. See how they run…