Ask The Experts: What If My Money Manager Defaults?

My problem is that i have a 401(k) through my employer and it is well funded now that I have been working for 30 years. However, I am seeing now on the news this week that the money managing company that my employer uses to manage the 401(k) is having serious financial difficulties. I am now worried that my 30 years of savings could go up in smoke if the money manager defaults. Can you recommend any steps that I should take to protect my money? I have considered crazy things like rolling over the 401(k) into my IRA, which is via a different money manager. Your help is appreciated. -Leonard, NJ

I'd start by confirming that your 401(k) account is segregated from the companies assets and is not subject to the claims of any creditors. Next, I'd make sure that your firm is a member of the Securities Investor Protection Corporation (SIPC). Accounts protected by SIPC shield accounts of each customer when a firm is closed due to bankruptcy or other financial difficulties. SIPC protects brokerage accounts of each customer up to $500,000 in securities. Lastly, I'd check with your HR department to see if your 401(k) plan allows for an in-service withdrawal transfer. Some companies, not all, will allow active employees and participants to roll some or all of their 401(k) plan money to a rollover IRA with another custodian. This could provide the peace of mind you're looking for.

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Bill Losey, CFP®, CSA, America's Retirement Strategist®, is the resident retirement planning


expert on CNBC’s “On the Money”. He has been named one of America’s Top Financial Planners and is the author of Retire in a Weekend! The Baby Boomer’s Guide to Making Work Optional. He also publishes Retirement Intelligence, a free weekly award-winning newsletter. Bill can be reached online at