Question: I know that we're supposed to do an "institution to institution" transfer when we roll over our 401K from one employer's plan to another, but I'm wondering if I should be rolling over my 401K balance from my previous employer at all in this current economic climate. I'm still fairly young (I'm only 41), so my 401K plans are still heavily weighted toward stocks, and I can't help but feel that if I transfer funds out of a mostly stock-based 401K I'm essentially "locking in my losses," even if I'm transferring those funds into another mostly stock-based fund where I'd be buying in at bargain prices. Is the convenience of having all my eggs in one employer's plan worth ignoring my (possibly irrational) fear of locking in losses? Packy, Jersey City, NJ

Answer: You shouldn't be locking in losses with the transfer, although there will be some minor "frictional" costs that will fade with the passage of time. I'm assuming you'll be able to transfer the money reasonably quickly from your previous 401(k) plan into your new 401(k). I'm also supposing that you'll transfer the savings into comparable investment portfolios. The frictional costs come from the inevitable time gap from moving the money, and the market could move agasint you during that time. Of course, it could also shift in your favor. There may be some other minor cost incurred if the investment options aren't exact mirror images of one another.

My general bias is for you to take control of the money by transferring it into your new 401(k) plan at work. (I'm assuming your new employer allows the new money to come into the plan; if not you can always do a rollover IRA.) Now, your previous company will live up to its obligations and behave ethically toward your retirement portfolio. That's not my concern. (And if there is a worry about management I'd get the money out as fast as possible.) It's really a question of control. It's your money and if it's under your control you'll watch it more carefully.

To emphasize a point you made, there are no tax consequences or penalties imposed by Uncle Sam if the money is transferred from your former plan directly into the your new 401(k). Check with human resources at both companies before you do anything to make sure you understand any transfer requirements.

There is one good reason for keeping your money in your former employer's retirement plan: If it has good low cost investment options, perhaps even better than your current plan. If that's the case leave the money alone for now.