Interview with Dan, Sharebuilder President about 401K and IRA Rollover’s

Being an ING DIRECT customer for almost 5 years, I am currently taking advantage of quite a few of their offerings like Orange Savings, Electric Orange Checking, Orange Business and Sharebuilder accounts. I am amazed by their different way of approaching customers which can’t be compared to any other banks. You can read more about their Orange Code of Ethics and more from a recent interview by ING Direct CEO to Costco Connections.

ING Direct,  an online banking legend is going to celebrate it’s 10th year anniversary with 10 million customers weathered the past economic storm by taking a unique approach, persuading customers to save instead of spending more. Through social media like twitter, facebook and their own blogspace, wethesavers.com, they encourage customers to share their thoughts and ideas about saving, spending less and being frugal.

With their new subsidary ShareBuilder, an online brokerage designed for automatic, long-term investing. They also started offering investment and retirement solution. As we been talking about 401k and IRA in the last few posts, I wanted to bring something from ING Direct. So I got in touch with my PR contact at ING Direct and able to get a short email interview with M. Dan Greenshields, President of ShareBuilder.

Vijai: Thank you for taking time to answer few questions about IRA Rollovers.

Dan:  It’s my pleasure.

Vijai: Dan, as we all know there are millions of people out their looking for job and not finding them. So many are planning to dip into their retirement savings. How is ING DIRECT helping their members who lost their job and have 401K? Do you help educate them with options?

Dan: Because of the potential for taxes and penalties, we feel that qualified retirement savings should be some of the last assets that people tap into. As an organization, we encourage customers through our website, service team, and advocacy efforts to build an emergency fund and educate them on the value of regularly investing in their retirement, even if that means just a few dollars a month. An emergency fund could be used for exactly this purpose, which we hope they’d tap first.  

Vijai: How different is ING DIRECT’s IRA Rollover options from other brokerage and mutual fund companies?

Dan: We feel we have a distinct advantage on two fronts: our low-cost investment options and our people. Between ING DIRECT and our brokerage subsidiary ShareBuilder, we are able to offer both investment (stocks, ETF’s and mutual funds) and FDIC-insured options (high-interest savings and CD’s), providing more choices than a standalone bank or brokerage can offer.

At ShareBuilder, there is no minimum investment required to open an account and no inactivity fees. Customers are able to invest in stock, as well as a range of exchange traded funds and mutual funds, and are able to buy fractional shares of stocks.  We also created http://www.RetireMyWay.com, a consumer-friendly retirement savings and investment channel.  The Retire MyWay planning tool allows users to create a personalized retirement action plan specific to how they want to live during their golden years. Customers can create and commit to retirement goals using interactive calculators and tools, and they can learn about places to invest and review model portfolios designed to match their investing style and needs.

On the service front, we have a dedicated team of Retirement Specialists who understand both bank and brokerage products, and can talk customers through these alternatives while helping them navigate the rollover process. 

Vijai: Does Dollar cost averaging methodology really works and how, show me with proof?

Dan: The longer your time horizon, the better the results.  That’s what history shows.  Dollar based investing allows you to purchase partial shares of your favorite companies for a fraction of a share’s total cost.  In a sense, it democratizes investing, lowering the entry barrier and giving everyone a chance to own a piece of the market.
 
Take the simple, hypothetical but fairly typical example of a market that starts at 10,000, drops to 8,000, increases to 10,000, and then increases further to 12,000. In this case, an investor would be better off with dollar cost averaging.  Here’s why: If you are the person that knows to buy at 8,000, then congratulations – you’re probably a professional investor. For the rest of us, however, you might have been better off investing $1,000 at each of those four points in time (resulting in holdings of $4,900), than investing $4,000 up front (resulting in holdings of $4,800). In addition to the fact that it’s mathematically advantageous, it also just makes sense as a discipline. Because most of us make monthly payments in other facets of our lives (utilities, car, mortgage, etc.), it’s relatively easy to adopt and stick with an investing plan that is monthly as well. 
 
Vijai: I saw advertisements for free Transaction Fee on IRA Rollovers with some fine prints. I always thought ING DIRECT don’t like gimmicks to attract customer. Any comments?

Dan: Last year, 40 percent of Americans believed the economy would cause them to retire later than expected, but as we begin the New Year, we want to make saving for retirement easier. Currently, we’re allowing customers who open an Individual Retirement Account (IRA) by April, 15, 2010 to make an unlimited number of free automatic investments in 2010. These credits apply to any stock or exchange traded fund, plus any mutual funds so long as the mutual fund’s minimum has already been met. Go here for more information: www.sharebuilder.com/retire. We feel this offer will lend a helping hand to those people who are having a hard time getting started investing in their retirement or need help getting their retirement goals back on track.
 
Vijai: Is IRA Rollover easier to do without much paper work through ING DIRECT? Explain the process.

Dan: There are a few different ways to initiate and complete a rollover, depending upon the type of plan the participant’s assets are in and in what form the participant wants to roll them over, but the process almost always involves a little paper at some point.  We try to reduce the paperwork and fine print, and make that process as seamless as possible. Our goal is to understand each participant’s particular situation, and use that information to help them complete the process as quickly and as easily as we can. 
 
Vijai: If a person has ING DIRECT mutual funds thru employer and lost his/her job, can they keep their plan and maintain low fees after becoming non-participant?

Dan: Generally, if a participant has less than $5,000 in a plan, the employer may have the right to cash out the participant, or automatically roll their assets into an IRA. However, as long as a plan participant has over $5,000 in a 401(k) plan, they always have the option of keeping their assets in that plan. If the plan has no annual administration fees, and a broad mix of funds that perform well and have low expense ratios, this can be a good option. If the plan has limited options, poorly-performing funds, or expensive funds, than it usually makes sense to complete a rollover into an IRA. 

Vijai: Final comments or any other thing you want to add about ING DIRECT’s goal towards 401K and IRA Rollover?

Dan: Awareness of your financial situation is a critical component to getting on the retirement saving track. Try to fully fund your 401K (or encourage your employer to set up one if it doesn’t exist), diversify your assets within the account and regularly rebalance them.  Also, an IRA Rollover can help you consolidate and better manage your retirement funds. 

Vijai: Thank you for your time Dan. 

Dan: 
Glad to answer and explain our position to our customers. Thank you for this opportunity.

Websites discussed above are,

www.retiremyway.com and www.sharebuilder.com/retire.

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