The X’s & O’s

One of the most popular questions we receive from our clients is about which of their company’s retirement plans they should choose. So this week, let’s clear the air about 401(k)s and IRAs. What’s the difference? What are some of the pros and cons to each? And ultimately, which is better? Tune in to find out.

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The Hosts:

Brent Pasqua, Matthew Theal and Joshua Winterswyk




Matthew Theal: Cue the music, Joshua.

Matthew Theal: Welcome to the Retirement Plan Playbook. I’m Matthew Theal, financial advisor with RPA Wealth Management. Joining me as always is founder of RPA Wealth Management, Brent Pasqua. Brent, how are you doing today?

Brent Pasqua: Doing great, Matthew. Glad to be here. Excited for this great show today.

Matthew Theal: And we’re also with our certified financial planner, Joshua Winterswyk. Josh, what do we have on deck today?

Josh Winterswyk: Today we’re going to talk about should you rollover your 401K to an IRA when you retire.

Matthew Theal: That’s a great question that a lot of people hire us to help answer, right? Not sure what to do with that employer plan when they retire. I thought we’d start today’s show though by kind of discussing really defining what a 401K is compared to a IRA, and then going through some of the pros and cons. Brent, what is a 401K?

Brent Pasqua: A 401K plan is a qualified employer sponsored retirement plan that eligible employees make tax deferred contributions from their salary or their wages to a post-tax or on a pre-tax basis. Essentially what you’re doing is your deferring money that you have from your paycheck into your 401K plan, this separate plan, for retirement.

Matthew Theal: It’s their retirement savings vehicle. That’s correct. Josh, what’s an IRA?

Josh Winterswyk: Well, similar. An IRA is an individual retirement account, but it is personal, tax deferred account that the IRS created to give investors an easy way to save for retirement.

Matthew Theal: So I would get my 401K through my employer. So if I work for a corporation, they’d set that up for me. Is that correct?

Brent Pasqua: Yes, once you’re eligible to make contributions, you can start putting into that plan, and if the company is generous enough, some of them will match your contributions or a percentage of your contributions.

Matthew Theal: Nice. And then what about an IRA? Can anybody open an IRA? How does that work?

Josh Winterswyk: Yeah. Anyone can open an IRA. I think the keyword in that IRA definition is personal. So you personally can go up and open up different types of IRA, and anyone can do it. There are some rules behind what types of IRAs and income stuff. But maybe save that for another show. But yes, everyone can contribute into an IRA.

Josh Winterswyk: I think now we’ll go into comparing the two. So have just some good topics, contribution limits, some key pros, and some key cons. Brent, I think I’m going to have you take the 401K side of those topics, and Matt, will you take the traditional IRA side?

Matthew Theal: Yes, sir.

Josh Winterswyk: All right. Perfect. Just do a little battle of the 401K IRA between Brent and Matt.

Matthew Theal: There you go.

Josh Winterswyk: So, Brent, to start off 401K, can you give us the contribution limits to a 401K?

Brent Pasqua: So for 2019, the contribution limits into your 401K plan, if you are under 50 years of age, is $19,000. If you are older than 50 years of age, 50 or older, then you can put in additional $6000 into your 401K, which would make your max contribution into the plan of $25,000 for the year.

Josh Winterswyk: All right.

Matthew Theal: On an IRA for 2019, you could put $6000 in if you’re under the age of 50. If you’re 50 or older, you could put $7000 in. Can I go back though?

Josh Winterswyk: Yeah, sure.

Matthew Theal: I just want to clarify for people, especially on the 401K side when Brent was reading off the $19,000, that’ll come out pre-tax. So it’s actually a tax deduction.

Josh Winterswyk: All right. Which is nice.

Matthew Theal: Yeah, very nice. And on the IRA side, the deductibility, you might not get it. It’s kind of based on income thresholds and eligibility, but anybody can contribute to an IRA as long as you have earned income.

Josh Winterswyk: So what that also probably means that if you want to make sure that you’re going to be able to get max deductibility based on your contributions, you probably should do it during the year into your 401K plan and not wait til the following April to make your IRA contribution because if you make too much, then you might not be able to deduct it.

Matthew Theal: Absolutely. Absolutely. Sorry for ruining the flow, but I just wanted to clarify.

Josh Winterswyk: No, that’s a really good clarification, and I think a lot of people have that question as well in the audience.

Brent Pasqua: I think a key is if you’re making contribution to your 401K plan and they’re giving you match money, that’s even better. IRA, I mean, there’s no money matching it.

Matthew Theal: Yeah, it’s all your money, right? Going into the IRA.

Brent Pasqua: Yes.

Josh Winterswyk: All right. Perfect. Thanks for the contribution limits. Let’s move onto the key pros. So, Brent, if you can tackle the key pros of 401K plan.

Brent Pasqua: The key pros, one that we just talked about, is you have higher contribution limits. So you can put more into your 401K plan than you can to an IRA. Your employer match, they can be matching into the plan. So if you’re putting in $19,000 or $25,000, the company could be putting in another $3000, $4000, $5000, $10,000 into the plan or more, which can really increase and ramp up how much you’re building your 401K plan up to and how fast your building your 401K plan into. And your contributions lower your taxable income in the year they are made. So what’s really nice is that those contributions that you’re making are really lowering your tax liability each year because they are on a tax deductible basis. And the eligibility is not limited by income. So you’re not subject to the limit of your income like you are on an IRA. And the cost in a 401K, that could be debatable. It could be more or less than an IRA, which is something I think we can talk about in a little bit.

Josh Winterswyk: Yeah. I think one thing just to kind of, Matt, before you talk pros of the IRA too, is just that it comes out of your paycheck every week.

Brent Pasqua: Automatic.

Josh Winterswyk: Automatic. So it’s kind of out of sight, out of mind. It’s that auto save mentality that all three of us really like too. So I think that’s also just a benefit from the convenience and easy. Just want to add that to their-

Brent Pasqua: Yeah. We don’t see as many people making auto contributions to their IRA as you do people making auto contributions to your 401K.

Josh Winterswyk: Right. Yeah. Perfect. Matt, will you jump in on the key pros for traditional IRA?

Matthew Theal: Certainly, Josh. So one thing that makes an IRA a little different than a 401K is with an IRA, you’re going to get a larger investment selection, and the reason that’s happening is because, like we said, it’s your individual retirement account. So you can actually open it at any pretty much brokerage that you want to. TD Ameritrade, Charles Schwab, Betterment, Fidelity.

Josh Winterswyk: Even banks offer them, right?

Matthew Theal: Banks offer IRAs. And you can pick any funds you want. Whereas on a 401K, you’re limited to what the company gives you essentially. The 10 to 15 menu funds. So that’s a nice benefit of IRAs. And then you can make a deductible contribution to reduce your taxable income. So that is nice. You can reduce it by how much you put in. That’s only if you’re eligible deduction, and that is a complex web that is beyond today’s show. So you can lower your taxable income like a 401K. You just might not be eligible.

Josh Winterswyk: Just a lot of rules behind it.

Matthew Theal: Yeah, it’s confusing. Like I said a few minutes ago, your CPA gets it wrong, and if your advisor isn’t very good, he probably gets it wrong. I fully, honestly didn’t understand the rule until I completely the CFP program.

Josh Winterswyk: Yeah. It became a lot more clearer after that CFP program for sure. But I think also we don’t know what your income’s going to be throughout the year. So to try to keep track of your income and IRA contributions, it becomes just a little bit more of a task I believe.

Matthew Theal: Totally agree.

Josh Winterswyk: Okay. Let’s jump into some key cons for 401K plan. Brent, can you tell us about some cons?

Brent Pasqua: One of the cons is you really have limited control over the plan. Like Matthew said on the IRA, you can pick what custodian you want to go to. You can pick a lot more. You have a lot more choices on investment options. But when you are opening and starting a 401K plan with your employer, you have one option on the plan. You’re going with that custodian, and then you’re moving forward and making those contributions. The other con is that you just really have limited selection to the funds. So if you wanted to buy stock ABC, you’re not going to be able to most likely to do that inside your 401K plan. You’re going to be subject and limited to those just 10, 15, maybe 20 choices that they have in there, which can be rough because if the company hasn’t selected good funds or funds that you believe in or funds that you have the same philosophy on, then you’re really limited to those choices and there’s really no way around that.

Josh Winterswyk: So I can’t buy beyond me inside my 401K plan?

Brent Pasqua: No, that would probably not be available unless you’re working for that company.

Josh Winterswyk: Got it. Okay. Anymore cons?

Brent Pasqua: Those are the main cons that we see right off on the surface, and I think we’ll talk about a few more of them as we kind of progress through here today.

Josh Winterswyk: Perfect. Great. Matt, what about traditional IRA and their cons?

Matthew Theal: Well, some cons in the traditional IRA are like we mentioned above. The contribution limits are less than the 401K, essentially you are putting away less money in your IRA for retirement if you’re using that over a 401K. So your balances are going to be less. Then we talked about the deduction. You might not be getting that deduction if you make too much money. You get the phase out. Finally, your distributions will be taxed in retirement. So you’re putting away on a pre-tax basis, but when you go to take income from the account, you will be paying ordinary income taxes. And lastly, it’s subject to the dreaded RMD beginning at 70.5 where the government forces you to start taking money out to pay the taxes.

Josh Winterswyk: And then that’s the same with the 401K. I think we’re going to jump into that topic about the RMD and the withdrawals after 70.5 for both accounts and just to kind of summarize, Matt, what you had said. So contribution limits are less. So less deduction potentially, little limitation on the deductibility and the potential growth because you’re contributing less into that account.

Matthew Theal: Yeah, it’s going to compound at a lesser rate.

Matthew Theal: All right. Let’s move on to some FAQs or frequently asked questions. These are questions that a lot of people come and ask us that we thought we’d answer on today’s show. Brent, I’m going to kick this one to you to start. So what are kind of the major differences on the investment landscape between a 401K and an IRA?

Brent Pasqua: Well, some of the things that we already touched on are under a 401K plan, usually somebody who starts the plan elects a third party administrator and a custodian, and they kind of come together. They start picking some options on what funds they want in the 401K plan. So they’ll pick like a main plan, a fund company or two or three of them, and then they select those funds, and those are your 15 options that you have to pick from. And those are really the only things that you can invest in with the fund. Now some plans are more diverse and some plans have more options. We’ve seen plans have as low as five, six funds sometimes I know. There’s been some plans that have very limited amount of funds in them. So you do have very limited investment choices on the 401K plan.

Brent Pasqua: On the IRA side, you do have a lot more. You are open to the entire market. You can invest into whatever you want.

Matthew Theal: Yeah. Some key differences for the IRA is cool is you can actually use ETFs.

Brent Pasqua: Right.

Matthew Theal: I don’t think there are any 401Ks using ETFs. I might be wrong. There might be one or two new ones that popped up in the last year.

Brent Pasqua: Right.

Matthew Theal: But the last time I checked, there’s none. And then individual stocks as well.

Brent Pasqua: Right.

Matthew Theal: The only way you’re getting individual stocks in your 401K is if you work for that company.

Brent Pasqua: Right. It just seems to me like you’re just subject to that underlying neutral fund fee that’s in the 401K, which we talk about things controlling what we can control, and being limited on the investment options also means you’re limited to how low you can drive your cost of the underlying investment.

Josh Winterswyk: And sometimes we’ve seen these plans where they’ve had such high fund fees. Like you’re looking at these 401K plans, and you’re like, “How do you even help somebody working there,” because the fund fees are just outrageous.

Brent Pasqua: Yeah. It just like rips out one of the key factors. When we talk about successful investing, which is lower cost, because there are no low cost fee options within the 401K plan. My wife’s plans like that.

Josh Winterswyk: Oh wow.

Brent Pasqua: And so I help her with her rebalance and your 401K. There’s no low cost options within her 401K plan.

Josh Winterswyk: Yeah. It’s just like you throw your arms up because there’s just nothing you can do. You’re just trapped at that point.

Brent Pasqua: Right. And then that’s when we determine is it better to contribute to a traditional IRA after the match or whatever.

Josh Winterswyk: Right. But if you want to put more deductibility into your plan, I mean, your hands are tied.

Brent Pasqua: Yeah. Your hands are tied. You just got to go with the high cost funds.

Josh Winterswyk: Right.

Matthew Theal: To summarize, I think for people planning at home try the general rule of thumb of what I’ve seen of your plans at ADP, Lincoln, or some of the other high fee ones you guys see.

Josh Winterswyk: Lincoln was the one I was just going to say.

Matthew Theal: American Funds. You probably have high fees if you’re at Fidelity, VanGuard, they might be a little lower.

Josh Winterswyk: Yeah. I think it’s just a good time to drive that curiosity to see what you’re actually playing if you don’t know, and to look at that underlying investment cost.

Brent Pasqua: I mean, when we created our 401K plan, it was critical to us to put funds that have low cost in there, right? We wanted our funds available in our 401K plan to be on the same investment philosophy that we use with our clients.

Josh Winterswyk: Yeah. I think that was very important to all of us when you were discussing that.

Brent Pasqua: Yeah, we weren’t sticking those high expense ratio funds into our plan.

Josh Winterswyk: No, I don’t think we… I think probably like the average is just so low from all the funds that are in ours. There’s only a few, but all very, very low cost funds.

Matthew Theal: So another fact that we get is, and Josh, I’ll give this question to you because it’s probably one of your more favorite ones. But will a 401K or an IRA give you more retirement income? Is there like one or the other? How does that work? Which ones better for retirement income?

Josh Winterswyk: Well, I’ll start answering that question with it depends. There’s a lot of variables to that question, but we do get that question a lot of which one is going to give me more retirement income, and again it depends on the contribution and how it’s being managed more importantly. So the principle amount, how it’s being invested, the fees a driver in that as well, the way that we’re withdrawing from the account too. So there’s all of those variables that go into it. I think that deciding whether a 401K or an IRA is situational, and that will determine along with all of those factors which account is going to give you more income. But I don’t think that there’s a for sure answer behind one or the other. But generally, if you wanted to ask me just generally too, typically the 401Ks because they do have higher contribution limits, have higher dollar amounts than the IRAs, and potentially we can generate some more income off of that one.

Josh Winterswyk: Kind of went around about that question, but-

Matthew Theal: So your nest eggs going to be bigger.

Josh Winterswyk: Yeah, nest egg would hopefully be bigger because the contribution limits are higher. If you are contributing than an IRA contribution into the 401K.

Matthew Theal: Sure.

Josh Winterswyk: Does that answer your question?

Matthew Theal: Yeah, it does, and I’ll add on a point. Your retirement savings is going to go faster, most likely in a 401K because the contribution limits. But once you do retire, there’s actually no difference. Your nest egg is what it is.

Josh Winterswyk: Right. Yeah, at that point you have what you have.

Matthew Theal: Mm-hmm (affirmative).

Josh Winterswyk: And if you’re no longer working, the treatment of the accounts are the same tax wise.

Matthew Theal: Okay. And then another… This really isn’t a question, but I always makes me chuckle is when I’m sitting across from either a prospective client or a client, and I say, “All right. We’re going to do the fee analysis on your 401K to see if it’s better to do an IRA or 401K.” And they say to me, “My 401K doesn’t have any fees.” Okay. So people do things for free?

Josh Winterswyk: Right.

Matthew Theal: That’s cute.

Josh Winterswyk: That’s not possible.

Matthew Theal: So where 401Ks have fees is there’s a couple different levels. The first is going to be just the straight forward fund fees, which would be the expense ratio. So every mutual fund has a fee. You’re paying somebody to manage that money. The second fee is going to be your third party administrator fee. Your third fee will be your custodian fee. You’re paying somebody to hold the money and safeguard it for you. And then finally, the last fee is going to be the investment advisory fee, and the investment advisors role in a 401K is to select the funds for the plan and they take a fee for that as well.

Matthew Theal: Did I miss any fees?

Josh Winterswyk: Potentially a participant fee.

Matthew Theal: Yeah.

Josh Winterswyk: On the 401K. I think that’s the only one you missed.

Matthew Theal: Yeah, like a flat fee.

Josh Winterswyk: Per participant.

Matthew Theal: Couple hundred bucks usually.

Josh Winterswyk: Yeah. However they break it up, but that’s potentially another fee that the employer will put onto the actual participant to take care of themselves.

Matthew Theal: Right. And then so on an IRA, you’re going to really strip some of those fees out. If you place a trade in your own IRA, you’re probably just going to pay the commission. If you’re buying an ETF with your mutual fund, you’ll have the expense ratio just like a 401K. And it’s your choice whether you hire an investment advisor or not depending on what their fees are.

Josh Winterswyk: Are these fees clearly defined in the plan?

Brent Pasqua: They’re supposed to be transparent, right? But how often do we see 401K participants when we ask them what they’re paying in 401K fees, either say they’re not paying any fees or they don’t know.

Josh Winterswyk: Right.

Brent Pasqua: So how transparent can they really be if all of our clients and the people that we talk to about 401Ks don’t know what their 401K fee actually is.

Josh Winterswyk: Or they think it’s low because they don’t know.

Brent Pasqua: Right. Or they don’t see it because it’s baked in.

Josh Winterswyk: Yeah. So if you don’t see it, you don’t think you’re paying anything.

Brent Pasqua: Right. You’re return is minimized. Now what do you think?

Matthew Theal: I could be wrong, but does the DOL, so that’s the Department of Labor, they regulate the 401K industry. Do you have to put a fee statement on a 401K like we do?

Brent Pasqua: You do now. You have to disclose it.

Matthew Theal: Oh, you do?

Brent Pasqua: It was like last August or something.

Matthew Theal: So they just changed the law. That’s good.

Brent Pasqua: You remember when we went to a conference, and they were talking about these 401K guys. And what the 401K guys will do is they would go into big companies and then they would try to bid out to try and change the 401K plan from the current plan that they had and they wanted to exchange it for their new plan. And some of these plans are so large. I mean, these are millions and millions of dollars inside of these plans and sometimes even larger that they would bring in these attorneys to run audits on these plans. And even when they would run audits on these plans and they’d bring these attorneys in, they still couldn’t figure out all the fees that were inside of these plans because so many of them are just hidden. That’s very difficult for somebody to be contributing to something that they don’t even know what the real cost is.

Matthew Theal: Yeah. It’s awful, and it’s a shame because I know the deal I was trying to really help clean up the retirement industry, and then the political winds shifted.

Brent Pasqua: That got squashed real quick.

Matthew Theal: The rule got squashed. All right. So our last fact today is I’m going to shoot this one to you too, Joshua. So if you rollover a 401K to an IRA, do you avoid the RMD?

Josh Winterswyk: Oh, I like that question. I get that question a lot. A lot of times when retirees are coming to a required minimum distribution age, so that’s the rolling of the IRS that we have to take a minimum distribution out of your IRA or 401K at 70.5. A lot of the questions that we get from retirees is how do we avoid that, don’t want to take that money out. So will the 401K avoid me having to take an RMD? Will the IRA avoid me having to take an RMD? If you are retired, no it will not. So we still have to take the RMD from the 401K and the IRA.

Josh Winterswyk: Now the 401K does have some different rulings if you’re still working about delaying it, and we’ll get into that another day. And I think in the last episode, we might have talked about that a little bit.

Matthew Theal: Yeah. We did touch on it in the last episode.

Josh Winterswyk: Yeah. But rolling over your 401K to IRA does not waive your RMD, guys.

Matthew Theal: All right. So let’s get some good banter going and discuss the main question of today’s episode now that we know the characteristics and the differences and the pros and the cons. We kind of have a good background of IRAs and 401Ks. Let’s take a case study and look at someone who’s retiring at 65. What do they do with their employee sponsored 401K plan? Do they keep it there or roll it over? Brent, what are your thoughts?

Brent Pasqua: Well, I guess the first question is do you agree with the funds that are inside the plan? So is there options in there that you like and do you have a great portfolio that you think is really well put together? So can you put together a really good portfolio with the funds that you have? So that’s the first question to ask yourself. Number two is the fees acceptable? Are you okay with the fees, and do you actually know what they are? And is actually anybody giving you any assistance in managing that portfolio? A lot of people are like, “Oh yeah, somebody’s managing my 401K plan all the time.” Well, that’s not really happening. You’re making the choices of the investments that you have. You may be able to call somebody, but that person you’re calling is most likely not looking at your 401K plan unless you call.

Matthew Theal: Yeah. So let’s jump right there. That’s a great point. Can I jump in? I’m going to. So you call Fidelity, ADP, Lincoln, you’re getting a call center employee. If you start asking investment related questions, they may pass you on to a broker who has their Series Seven license or an investment advisor who has their Series 65 license. But that first person you talk to, they are not a professionally trained investment advisor at all.

Brent Pasqua: Right. And if you’re 65, are you okay with that minimum management?

Matthew Theal: Depends if you’re a do-it-yourself-er or not, right?

Brent Pasqua: Right. I mean, if that’s your nest egg, you probably want somebody keeping an eye on it and aligning that portfolio with your goals, that would be guess. There is reasons to keep it at the 401K plan if it makes sense for you, but it all has to align for it to make sense to stay there.

Josh Winterswyk: Just seems like a lot of variables that it has to make sense for. I mean, even for a do-it-yourself-er, you’d still want to look at what type of tools that that 401Ks providing you because a lot of the custodians provide good tools for retirees and also looking at the fees again. You know? Even for a do-it-yourself-er, you’re still having to make that decision. It’s not just a no brainer of keeping it at your 401K.

Brent Pasqua: We just had a client that had to move over their 401K to their IRA just based on the fact that he needed to take more withdraws than the 401K would allow, right? The 401K plan would only allow I think one withdraw a year where he needed to take ongoing withdraws. So the plan, it had to get moved or else he wouldn’t be able to support his expenses.

Josh Winterswyk: Yeah, and I think that’s underrated as well because from the IRA, you can take from the account quarterly, monthly, biweekly, and a lot of the 401K plans, it’s not that easy to set up the income from the account. And that can be a big benefit to the client because they want to see that income in different periodic forms.

Brent Pasqua: I’ve seen most plans have restricted withdraws. It’s been [crosstalk 00:22:58]

Matthew Theal: What do you mean by restricted withdraw in the 401K plan?

Brent Pasqua: They limit the amount of times that you can take out of the plan. So you can’t set up a monthly distribution on a lot of these plans. So if you needed $4000 a month to cover your expenses and you wanted that set up to be paid to you on the first of every month, the plans aren’t supporting those types of withdraws.

Matthew Theal: So [inaudible 00:23:18] IRA, we could set it up to be monthly, biweekly, quarterly, however you want it.

Brent Pasqua: Yeah. You have basically unlimited options on how your distributions come out.

Matthew Theal: That’s interesting. I didn’t realize that.

Brent Pasqua: I think one big thing though, like to go on that, is the protection behind the 401K plan. So if you’re in the midst of a lawsuit or a different legal situation, not to go too deep into that. I think we could probably talk about that in more depth in the future episode. But protecting the assets is one thing that someone’s going to have to look at as well, that projection and the laws behind he 401K that IRA.

Matthew Theal: Should you get special protection in a 401K?

Brent Pasqua: Well, just the protection on the IRA is limited. So depending on how the size of your nest egg, you’re going to want to look at the laws behind the 401K and the IRA because if you do roll it over to the IRA, then your protection is limited.

Josh Winterswyk: I think that we see that the most people leave their money in their 401K plan if you are retiring at 55 or you’re under 59.5 and you know you’re going to need some distributions. You’re not going to want to roll it over to an IRA at that point because you have a tax penalty before 59.5 on an IRA. So it really makes a ton of sense potentially if you’re retiring from 55 to 59.5 to possibly leave it in 401K.

Brent Pasqua: Yeah. We saw that recently too.

Josh Winterswyk: Yup.

Brent Pasqua: But if you’re retiring early, great point. Matt, what do you got for us?

Matthew Theal: Yeah. I mean, I think that it makes a lot of sense to actually roll it over in my opinion when you do retire. I mean, before you retire, you might just want to keep it in the 401K. But after that, I mean, I’m a big control guy. I want control over my money. I don’t want some corporation I used to work for managing the fund. I mean, just imagine what happens if three years down the line that corporation gets bought out, and now your plans getting transitioned somewhere else.

Matthew Theal: Roll it over, take control of your money. And I know it’s a big issue for these 401K plans because they are putting a lot of effort in to keeping assets now.

Brent Pasqua: And they also want to roll it over to their IRA side. So a lot of 401K plans, they’re a custodian. So they do have the individual side also, and they want you to keep it with them on some level, whether it’s in the 401K plan or move it to an IRA.

Matthew Theal: Yeah. I don’t have a problem with that if you’re one at one of the bigger custodians, Charles Schwab, TD, Fidelity, VanGuard. Yeah, absolutely roll it to your own IRA and control it. Keep it there.

Brent Pasqua: But then also we see so many times that a lot of people have more than one old 401K plan or IRA. So I think that is another variable to look at when you’re asking the question should I rollover my 401K to IRA because do you want four different accounts. We’ve talked about the benefit of consolidating accounts on a previous podcast. Again, that’s another variable that I think we throw into the mix when we’re looking at should you roll it over or not.

Matthew Theal: Yeah, that’s complicated. If you’ve got too many 401Ks or IRAs going on.

Brent Pasqua: Yeah, especially if you’re taking RMDs and managing that, it just makes it very, very complicated.

Brent Pasqua: I think what we see here is that the amount of times that it sense to keep it under the 401K plan is probably more limited. Like you have a smaller window, a smaller bubble of people that should keep it under the 401K.

Matthew Theal: Yeah. I agree.

Brent Pasqua: Especially if they’re retired. Like, Matt, you said that earlier. You’re retired, yeah. There’s just a lot more-

Matthew Theal: There’s not a lot of benefits to keeping it there.

Brent Pasqua: Right.

Matthew Theal: I’m trying to think of a good analogy of what keeping your 401K is at your employer, but I really can’t think of one. I guess I should’ve prepped a little more for a good one. Anything left on this, guys?

Josh Winterswyk: No.

Brent Pasqua: A lot of different situations we talked about. I really enjoyed it.

Josh Winterswyk: I think it makes sense to move the money to an IRA mainly also if you want to pick your own investment options. You want that more control. To summarize the benefit of an IRA, I mean, an IRAs just have a tremendous amount of benefit for control, like you said. So I think if you want to take control, you want to have unlimited options, you want to be able to take out money, you want to be able to do the things that you want to do, and you want to align yourself possibly with an advisor who has your goals in mind, most importantly. And you need to take out money for income. I mean, that all has to align. It’s more aligned if you move it over to your IRA.

Matthew Theal: Yeah. I agree or don’t hire an advisor. Do it yourself. But it’s still probably better to do it in an IRA than at your employer’s 401K plan.

Josh Winterswyk: Yeah, I agree.

Brent Pasqua: And look at all the variables we just assessed.

Matthew Theal: Yeah. All right. Well, Brent, last time we talked, you kind of maybe discussed a little preview of this vacation you’re going on. You look tan. You kind of looked refreshed, but you’re looking at me like you’re a little mad right now. Why don’t you tell me how your trip was?

Brent Pasqua: I mean, is anyone ever ready to come back from Hawaii?

Josh Winterswyk: No, I don’t think so.

Brent Pasqua: Even people who are our clients who are retired and they’ve spent two weeks there, they’re like, “Oh, I’m still not ready to come back. I could spend another two weeks here.” It’s paradise. It’s beautiful. Weather is nice. I mean, it’s a little humid, but it’s perfect. I mean, you got winds coming in. It was beautiful. It was a wonderful trip. My kids swam a lot. They love swimming in the pool. I took them paddle boarding. They saw turtles.

Josh Winterswyk: How’d you do on the paddle board?

Brent Pasqua: What’s that?

Josh Winterswyk: Have you paddle board before?

Brent Pasqua: Yeah, a couple times before.

Josh Winterswyk: Oh, nice. So you enjoy paddle boarding? You stood up the whole time, no issues.

Brent Pasqua: Yeah. I would sit on my knees, and then I had one of them in front of me. And then I’d paddle board out there, and they’d either want to go further or go a different side away. Then there would be… Because the water’s so clear, they could see some of the fish and the coral.

Josh Winterswyk: Yeah, that’s cool.

Brent Pasqua: So they like looking at the coral, and then we paddle around. And then I went back, and I grabbed my son. And then he went on there with both of us. And then I took him out by himself.

Josh Winterswyk: Very cool.

Brent Pasqua: It’s fun to take them out there and have them just kind of experiment.

Josh Winterswyk: Is the water pretty calm where you paddle board?

Brent Pasqua: Yeah. There’s some days where I wouldn’t take them out because it’s just too choppy. One of the days it was really… The winds were down and it was clear. So we just took them out there. They enjoyed that.

Josh Winterswyk: Awesome. Matt, have you ever paddle boarded?

Matthew Theal: I have. I’ve done it in the Bahamas, Costa Rica, I don’t know if I did it in Hawaii. But when we did it in Costa Rica, the water was pretty choppy.

Josh Winterswyk: That’s like when I first did it, water was choppy.

Matthew Theal: Yeah. It’s a lot harder when the water’s chopping.

Josh Winterswyk: Yeah. Maybe I just wasn’t that good.

Brent Pasqua: Yeah. The kids are pretty safe on there. I mean, obviously I had life vests on them and stuff just because they’re younger.

Matthew Theal: You’d be a pretty bad parent if you didn’t put a life vest on-

Brent Pasqua: Yeah. Really risky parent.

Matthew Theal: Yeah.

Brent Pasqua: I have some stories about what I saw other parents doing out there. I was like, “I wouldn’t really feel comfortable doing that with my child.”

Josh Winterswyk: You just better be a really good swimmer.

Matthew Theal: Yeah. Exactly.

Josh Winterswyk: Any good food out there?

Brent Pasqua: Yeah. Food’s great. We went to a couple different restaurants out there. We went to dinner four different times, and then made dinner there three different times. So it was nice. We like going to restaurants. We went to Italian and steak and it was wonderful. I took some nice hikes with my son and my daughter and my wife. So it was beautiful. It’s such a gorgeous environment and such a nice landscape. I could spend two or three different times there every year.

Matthew Theal: Yeah. I mean, definitely. You should’ve stayed a little bit longer. Josh and I were doing good.

Josh Winterswyk: You wouldn’t want to miss the podcast today.

Brent Pasqua: Yeah, I couldn’t miss that.

Matthew Theal: Miss the recording.

Brent Pasqua: I guess I could’ve podcast from out there.

Josh Winterswyk: Yeah, we could’ve just tapped you in.

Brent Pasqua: Yeah.

Josh Winterswyk: We’re done with the first leg of vacations though.

Brent Pasqua: I was thinking the last podcast we were talking about the summer vacations. Leg one’s done. Matt, you’re leaving.

Matthew Theal: Yeah. I’m leaving. Going away. Going to be where there’s no internet access.

Josh Winterswyk: I mean, are we going to miss him?

Brent Pasqua: That’s a tough question.

Josh Winterswyk: Yeah.

Brent Pasqua: It’s like bittersweet, I don’t know if that’s the right word for it. I’ll kind of miss him, but it’s going to be really nice for him to get a break from him as well.

Josh Winterswyk: Yeah. I mean, we like having him here, but-

Brent Pasqua: We’re also like, “Ah.”

Matthew Theal: Don’t worry. As soon as I close this show, I’m going to go send five emails, and I’m packing up and getting out of here.

Brent Pasqua: Oh geez.

Josh Winterswyk: Well, make sure you go get a fanny pack.

Matthew Theal: Yeah. I will. I need one.

Josh Winterswyk: I brought my fanny pack in today. They’re making a comeback, and Matt was digging my fanny pack.

Brent Pasqua: I think the vibe right now is like I just got back from vacation. So I’m like a little down about it. Matt’s ready to go on vacation, so he’s really up on it. And so-

Matthew Theal: Josh should be planning his trip. So he should be a little excited too.

Josh Winterswyk: No, I’m excited. Yeah. Because we’re planning it. But yeah, your guys’ attitudes right now are two [crosstalk 00:31:48]

Brent Pasqua: Different places. Exactly. Yeah.

Josh Winterswyk: Vibes.

Brent Pasqua: That’s a better word for it. The vibe is completely opposite right now.

Matthew Theal: All right. Well, the faster we close the show, the faster I go on vacation. So-

Brent Pasqua: Should we keep him on it?

Josh Winterswyk: Let’s keep rolling.

Matthew Theal: Anything else for today’s show, boys?

Josh Winterswyk: No, I think if anyone has questions on more differences between 401Ks or IRAs to always reach out. Those are things that we can discuss in more detail. There is some more rules and laws to be discussed here, but without over-complicating it, we went through some of the more specific main ones that apply to more people.

Matthew Theal: Absolutely. That’s a great point, and one more frequently asked question that we always get is, “Hey, we wanted to talk to you guys. We have some questions. How much does it cost?” We do free initial consultations. So all you have to do is go onto our website and book an initial consultation, and there’s no cost to that. So we can kind of start to answer some of those questions.

Josh Winterswyk: Yeah. It’s

Matthew Theal: Thank you for joining us on The Retirement Plan Playbook. We really appreciate you downloading today’s show and listening to it. To read the show notes, go to, and you’ll be able to get a transcript of today’s show or you can go to and click on the podcast link. Thank you very much and have a great day.

Josh Winterswyk: Thank you.

Brent Pasqua: Thanks, guys.

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