What should I do with my 401(k) and pension as I plan to move abroad?

I have both a 401(k) and pension plan provided by my employer. I am planning to move abroad and I am not sure what to do with these funds. I imagine I can rollover my 401(k) to an IRA plan with the institution of my choosing, but I am not sure if I should also move money from my pension plan or leave it where it is. While my pension is insured at 104%, I am worried that in 15-20 years, my company may close and my pension plan would go along with it. What would you advise?

Financial Planning, Pensions, 401(k)
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June 2017
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More often than not it makes sense to move the 401k to an IRA that you fully control. 401ks are often loaded with excess fees that you can avoid by having the funds in an IRA. Additionally, a 401k will generally have very limited investment choices where your IRA has a whole world of choices including great low cost investments.

With that said, there are a lot of advisors that will recommend that rollover but then put your money into high fee stuff. Your best move is either to create a portfolio based on your needs and risks that is made up of low cost index funds and then make sure it is rebalanced regularly or work with a fee only fiduciary advisor that can help you with that process.

With regard to the pension, its a tougher question. Pensions generally have more favorable return numbers built in than what you will be able to achieve on your own. Additionally you are passing the risk of the investments to your company rather than taking them on yourself. If the markets dont do well, the pension still has to abide by the rules and numbers it has promised. On the other hand the risk of the company going bankrupt could present some headaches. 

Similarly to your bank accounts, Pensions are insured by an organization (similar to FDIC) called the Pension Benefit Guaranty Corporation (PBGC). However there is a limit to how much the PBGC will ensure and the process of getting those funds can be a little burdensome. I would generally say keep the pension where it is, especially if it is governmental organization or a large stable company. If you are worried about the company shutting its doors, its a tougher question and a risk worth looking into a bit further.

I hope this helps. Good luck.

June 2017
June 2017
June 2017
June 2017