3A%2F%2F0.gravatar.com%2Favatar%2Fad516503a11cd5ca435acc9bb6523536%3Fs%3D96&r=G /% By Kim Luu April 14, 2010 June 27, 2010

Once you have left a company, whether involuntary via a layoff or to transfer to a new job, a wise action is to transfer your 401K account from the old employer to a Rollover IRA as soon as possible.  Please note, I am not saying cash out and go to Vegas.

Here are some reasons and real life examples why a 401K shouldnt be neglected.

• Control A 401K has a limited number of mutual funds that you are allowed to invest in. In some cases, you are restricted to the same funds family because of the custodial company that the employer chose. Not all 401Ks provide enough choices for a diversified portfolio.  Some 401K do not even have a cash or fixed income option.At an old employer, my only investment choices in my 401K were company stock and six mutual funds managed by my employer. Four of these were not well managed. I had no choice of a fixed account to temporarily park my retirement savings if I had wanted to sit out an anticipated slowdown in the market.

Nothing changed with the plan for decades since I was probably the only person out of thousands of employees to complain about the 401K investment choices.

Transferring the retirement balances out of a 401K puts you in charge of your retirement and gives more investment choices ranging from:

• stocks
• bonds
• mutual funds
• managed accounts
• alternatives
• CDs
• TIPS
• Treasuries
• ETFs
• futures
• commodities
• real estate
• annuities and many others

A friend of mine recently cited his reasons to stay in his 401K as: The market is down and I dont want to miss any run up so I am not doing anything and staying in there for a couple of years. If your account is down, it is even more critical to give yourself the freedom to choose the best investments out there and capture the upside. Your chances of recovering from a loss is better if you get to pick from the best of thousands of options instead of a handful of mutual funds.

Why would you  stay and handcuff yourself?

Coming next: 7 Reasons to Dump Your 401K After a Layoff Part 2 COSTS