As a result of over 45 years of working at various and sundry jobs, a few years ago I found myself with multiple sources of retirement funds waiting for me.
One insurance company I worked for in the 70s had been merged with another company which was then engulfed and devoured by another company, and I didn’t hear from them when I turned 65. It’s not like they couldn’t find me…a simple search in Google and my name and address are very public. I figured that somewhere along the line their pension plans had merged or been discontinued, but after researching the history of the corporate shenanigans I was able to determine which company had survived. I made a phone call, talked to a few confused people, and eventually got a contact phone number for the company that the pension had been outsourced to. That service company sent me a stack of papers that was pretty intimidating, but I did my best to fill them out and return them. Naturally, they then demanded different forms and copies of all sorts of my identification forms, but eventually, I was set up with a lifetime income and a surprise: since my pension was supposed to start at age 65, they also sent me money for the months all the way back to that birthday. The amount wasn’t overwhelming (about $150 a month), but every little bit helps. It was really found money.
That’s pension is not what this is about, but it’s important to contact every company you ever worked for that had any sort of defined benefit that might be vested.
Beginning in 1974 it became possible to set aside funds for retirement using IRAs. From time to time since then I’ve dropped money into multiple IRAs with different companies, and beginning in 1998 I also opened a Roth IRA. Particularly now that there are Required Minimum Distributions from IRAs beginning at age 70 it makes a lot of sense to reduce the number of accounts to one (the tax law requires distributions from every…single…non-Roth IRA every year). I picked one account as the survivor and contacted each of the other IRA custodians to roll their funds into that account. If you go through this step, it is important that you DO NOT have any money sent directly to you since that creates a withdrawal that is probably taxable; instead, you should direct each trustee to transfer funds directly to the survivor IRA.
I only had one Roth IRA, so I didn’t have to mess with that at all.
This left only one account to deal with: the 401k from my last employer (all previous 401k’s were closed out and transferred to IRAs when I left the former employers). Once again I tried to simply transfer the funds into my surviving IRA, but there was a surprise: not all the funds could be transferred!
Like many other people investing for retirement, I put a portion of my 401k deposits into a fund that was essentially a money market fund (because once upon a time they paid more than a quarter of one percent). Recently this seems a poor idea, but from January 2004 to December 2008 the total stock market return was a loss of about a half percent, so a 3% return in a money market helped moderate losses. When I went to transfer my 401k funds to my IRA I was told I could not transfer the money from the pseudo-money market funds. My choices: take the money out in ten annual payments (while it sat at the current minimal rates) or use the money to purchase a lifetime annuity.
Thanks to the Fed, interest rates have bottomed out in the past few years. To get a return approaching even 3% or 4% it is necessary to invest in long-term fixed instruments like bonds or mortgages; if those investments have to be sold to allow customers to make withdrawals they may well have to be sold at a loss, so it turns out our 401k plan limited withdrawals from that bucket.
Repeating that: the 401k plan that my employer set up limited the availability of funds. Leave your job, retire, or simply get tired of the low return on those funds and you cannot take them out except over ten (or more) years.
Taking a lifetime income would at least approach a 6% return on the funds I couldn’t have, so I took that option for the funds I couldn’t get out. Long-term that may not be a bad idea, but it did force me to start another lifetime income before I really needed it. All told I now already have a monthly income of $500, so at least I have enough money to pay for (sigh) health care premiums.
There was no mention of the withdrawal restrictions when I set up my 401k, and the human resources department at my former employer was surprised to learn about the restrictions as well. I suggested that they make all past, present, and future employees aware of the problem; no word on whether they did or not.
If you have any money in a 401k at work you need to check and see if there are withdrawal restrictions on any of the funds you are using. If there are, do your best to get the funds out of there as quickly as possible. At the very least, make sure you don’t invest any additional funds into that kind of a vehicle; if you want to reduce your exposure to the stock market simply seek out balanced mutual funds instead of ETFs – but that’s a topic for another day.
Once upon a time in the dark distant past typewriters were manual, not electric. No monitors, either – you pushed on a key and a metal arm flew up and hit a piece of paper and left ink on it. If you kept typing, when you got near the end of the line a bell would sound to warn you that you were running out of space. The Lovin Spoonful experimented with many different sounds on their records, from a jackhammer on Summer In The City to a record which used a typewriter as a rhythm instrument: Money also focuses on the process of saving and investing your money.