“In a recent survey of over 500 Vanguard IRA clients who completed a rollover in 2023 but were still in cash in June, 68% didn’t know how their IRA money was invested,” explains the WSJ from a Vanguard study on rollover IRAs.
The report continues to illustrate how investors who move money from their 401(k)s do not invest the money when it’s in an IRA. This is not good.
When Your Survival Guy worked on the 401(k) team at Fidelity Investments, I was involved with processing rollover IRA transactions for participants. The money would be sent to participants, made out to the institution of their choice, for their benefit, and rolled into an IRA for them to self-direct.
401(k) rollovers to an IRA are usually done when a participant retires. But then, what the Vanguard study points out is that much of the money then sits in cash with the investor, either not knowing or not knowing what to do. “Here’s your money. Good luck.”
Cue the music: Vanguard is proposing to put this money automatically in their Target Date funds, which you know I’m not a fan of—too many investors in the same boat (read more about Target Date funds here and here).
When you begin Your Retirement Life, you want to be well informed. There are too many investors who enter the most stressful stage of their retirement life without a well-defined plan. The fact that so many are sitting in cash without even knowing it is terrifying.
Action Line: Take care of your money or have an expert like me guide you. I’ve seen how the sausage is made. I’ve seen what can happen when money is left to rot. It’s not intuitive to know what to do. You have enough on your plate already. When you’re ready to talk, let’s talk. But only if you’re serious.
P.S. There’s trouble at Vanguard. Find out what it is in my SPECIAL REPORT: The Trouble with BlackRo… er… ummm, Vanguard.
P.P.S. I have a confession to make about why I’m being so hard on Vanguard. Read my SPECIAL CONFESSION: Why I’m Being Hard on Vanguard.
