Is Your 401(K) Safe? Is it SIPC-Protected? Are Your Retirement Accounts Safe?
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- Опубліковано 27 бер 2023
- Your 401(k) retirement account is not SIPC protected, regardless of whether it’s held with Fidelity, Schwab, Vanguard, etc (at least not in the “classical” way that many of us think of SIPC protection).
Watch on as I talk about all this & more today, including:
- How SIPC protects a 401(k) vs an IRA & how it doesn’t
- What/ who actually keeps your 401(k) safe
- The last high-profile case that directly impacted 401(k) reform
SOURCES:
www.dol.gov/sites/dolgov/file...
www.sipc.org/for-investors/wh...
www.sipc.org/for-investors/in...
www.ici.org/401k
www.forbes.com/2003/10/20/cx_...
www.forbes.com/sites/dereksau...
www.pionline.com/courts/linke...
www.epi.org/publication/issue...
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Jennifer Thank you soooo much for your informative videos. After watching this I did some of my own research and found out I can roll over a portion of my employer sponsored 401k from Vanguard while I am still employed. Now I am diversified into Fidelity SIPC protected with many more investment opportunities. Thank You again
Jennifer, simply put: YOU ARE THE BOMB!! Wow, I love how you present your information! So educational and user-friendly!!
I join the other commenters in hoping you will talk about protections and safeguarding of 457plan accounts. I appreciate your videos. They are pleasant to watch as well as informative.
Thank you for this important information.I learned a lot .
Awesome. Learning a lot from your videos. ❤️
Thank you! As always, your videos are so informative and easy to understand.
I just watched this video today and benefited a lot, but it still depends on the region, some service after sale is very poor, this is because their local offices are managed by "only" delegated sales people
Thank you for the education.
145 million is a slap on the wrist for Wells Fargo. They had a gross profit of 74 billion and a net profit of 13 billion after tax. 145 million is more of a "see, we are doing something" amount than an actual penalty. A 1.1% fine on net after tax profit is easily erased by any number of investments including T-bills and bonds.
Love this, Jennifer 😊
Excellent video. Thank you
I think I have watched just about every video you've made in the past 6 months, what a wonderful presentation of the info you manage to convey. I wonder if I may ask .... when you buy new T Bills (Fidelity or Schwab) and there is a few days delay between placing the order and the issuance of the TBill, since the money is gone from my account, where is it and who gets the interest as it seems to be in limbo somewhere?
Awesome video!!
Thank you for this informative information. Question: What about 401K that has been rolled over (after leaving a company) into a personal 401K in Vanguard (for example). Thanks!!
Jennifer - can you please do a video on what most 401ks cash option really is.
Great Video!!
Thank you 😊
Suspense in the first part!.😂
Video is educational.❤
I love the way you explain things. You are a great teacher. My 401k has grown a lot due to a very high company match and also being with the same company for 15 years. It is kind of unsettling to know that my 401k savings are not as safe as I thought they were. On a different note, does a Rollover IRA be counted as a new type of account for the purposes of SIPC protection( along side Roth, Traditional Ira, Joint brokerage etc)? Would really appreciate your response.
I believe Rollover is just a marketing term. It is still IRA or Roth IRA.
The answer is yes, 401k is generally rolled over to a Traditional IRA. You need to ensure that the fund is covered by SIPC
what about 401k thru The Standard based in Oregon. They are not even partially covered by SIPC. thank you for a great breakdown on this topic.
You must have read my mind! You covered the safety/limits of accounts at banks and brokerages and I was hoping you cover 401k's. Lots of good info. Do you know if any of the Enron employees got their 401k investment back? Or, did they have to get in line with all the other creditors during bankruptcy proceedings?
SIPC protection would not have mattered in the Enron case because the employees who lost money invested in Enron's stock (and were locked out of selling their stock as the company collapsed). Their stock was not stolen, it lost value. Stockholders are not creditors of the company - they were wiped out. The 401K law was beefed up after Enron to require more investment OPTIONS for participants, but many plans still allow people to invest in company stock. If you invest in company stock, and the company goes belly up, you will lose your investment. SIPC protection prevents against theft of securities, not bad investments. It's certainly possible there may be some small 401k plans where the employer stole the participants assets, but it's hard to imagine such a case if your 401K plan assets are managed by a big brokerage company.
It’s my understanding that creditors are first in line and employees are last in line.
@@teresawood6830 It's more complicated than that. It depends on what kinds of claims the employees have. Some employee claims (unpaid wages a 90 days before bankruptcy) actually have priority over creditors. Other employee claims (earlier unpaid wages) are equal to creditors and are paid dollar to dollar with the creditors. 401(k) assets are not owned by the company - they are held in trust for the beneficiaries - and cannot be used to pay the company's creditors. So if you have 401k assets invested in a mutual fund, and your company goes broke, your mutual fund assets are segregated for you and are safe from the claims of your employer's creditors. However, in Enron's case, the 401k beneficiaries invested in Enron stock rather than diversified mutual funds, and the value of that stock fell to zero. As 401k investors, they were not creditors of Enron - they were stockholders - and thus their investments wee wiped out by the fall in the value of Enron's stock. That's why the law was changed to require 401k plans to offer other investment options besides company stock.
Love your show. Does SIPC cover cash balance plans
4.85% Money Market Fund Better Than Cash? | Fidelity's SPAXX, Schwab's SWVXX & Vanguard's VMFXX
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Long time watcher. Great content. Question - The Bank Brokered CDs listed under Fixed Income options in Fidelity they are FDIC approved Am i correct. There are many that are offering 4.9% and up for duration of 6 weeks to 6 months depending on Banks. These are even better than T Bills. Are they FDIC approved up to 250K for each Bank. says FDIC just checking. Also why are they paying higher than T bills. Is it because they want to have more deposits to meet the health check? Does it also mean these banks paying higher than normal rates are in some sort of trouble?. Thanks a lot
1. I think you need to check with each institution to make sure the bank issuing the CD is an FDIC insured institution.
2. Medium and small Banks need deposits, as a lot of money has flowed from them to the giant banks.
3. I do not think the health check failure is the reason for most, but again, check the health of the bank. No point chasing 0.1% higher for a lesser product. (Warren Buffet .........paraphrased)
Another great video! thank you! Now, how is my 403b protected? Is it protected? Should I be concerned? I've tried researching it but with no luck. Thanks again.
I'd like to know this too about 403b. Could not find this info as well. Mine is with TransAmerica. I left the company some years ago but never moved my account.
@@lanabass2407 same! I would like to move it.
Another very informative video. The one retirement income stream I am most worried about is my pension. Lots of info on government pensions, most in serious trouble. Many of us have single employer defined benefits retirement plans. Example ConAgra. I am currently retired and have been collecting for more than five years. I can’t find any info if my future income stream is safe. Any help that you can provide?
Thanks
Yea, there is a lot to worry about because your claims are promises from the company rather than segregated securities held by a brokerage firm in a 401k. You have to look at PBGC coverage if you ER can't pay. That's a different topic entirely.
The federal government is incentivized to protect 401k’s, etc for most Americans since it doesn’t want to pick up the costs of more social benefit costs of more people on Welfare, Medicaid, etc.
Jennifer, would 457 plan be covered or not covered by the same criteria you mentioned for 401K?
How about 457 accounts? Are they not protected as well?
Are 457 plans also protected by ERISA, which are offered by some government institutions ?
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Is there an amount limit in 401k account which the ERISA will protect? My 401k from Bank of America is over 500k which is managed by Merrill. Appreciate an answer.
I have 401K and Roth with TDameritrade... I'm retired for 5 years and I'm managing the funds myself... are they under Erisa or Sipc protection?
I just sent in paperwork to rollover 4 401k’s, 2 annuities and a 457 plan into one IRA with ETRADE. Just to have it in one place in case anything happens. Most will just play the tbill game. If Etrade goes down, would my tbills and cash be safe??
Wonder if a brokerage link 401k qualifies as a separate capacity and is therefore covered by both SIPC and ERISA
Is there any security for a Fidelity Multi Year Guaranteed Annuity?
Can unmatured T-Bills be transferred from Schwab to Fidelity?
Jennifer, When I retired in 2006, I rolled my 401k plan into a self-directed precious metal IRA. The company I chose was a trust company. Should I be worried? Also, because of the situation we all are experiencing should I be thinking about bringing the precious metals I have stored there home? What would you do? Thank you, AB
Do you have to pay a fee to roll it over to a self directed Ira account? I am interested in doing this but wasn’t sure if I would need to pay some company to hold it
Do you same rules apply to a 403(b)?
Are the coverages with erisa the same for 403b? I’m retired, but that’s what I have through my employer. And I can only choose what they offer. Mostly mutual funds. They let you buy t bills through a complicated system. But only on the secondary market. I wish I could transfer into a brokerage acct like my fidelity to have more options.
Jennifer made ERISA sound like it was a government enforcement agency. It's not - it's a law. The Dept of Labor enforces it. 403b plans are generally ERISA qualified (very much like 401k plans, but for non-profits and government entities), so same fiduciary duty rules would apply.
@@glgermain thanks for the explanation!
So why don't you roll it over to Fidelity if you want more investment options?
@@mafarnsims I’m trying to look into that, but I doubt that’s an option from what I read on the website. That would be optimal!
So, when one retires, or leaves an employer, should they roll their 401k to a Trad IRA to gain SIPC insurance on those funds?
Is the $ in 403 (b) protected by SIPC? Thank you for your informative videos!
403b is the equivalent plan for non profit organizations so like the 401k it is not covered by SIPC
@@mafarnsims Thank you for your reply! Are ROTH and Traditional IRAs protected by SIPC with Fidelity or Charles S.?
unaffected
Uhmm so I just opened a roth ira at vanguard by my own, so is that protected?
What about the Rollover IRA assets which came from the old Jobs?
@@jbirdsong5413 I heard from other channel Rollover IRA have unlimited coverage just like in 401K
Can you address the Thrift Savings Plan (TSP) please?
I assume, perhaps an error on my part, it’s backed by the U.S. government and not any of the insurance covered in this video.
If the federal government steals your securities, I think you will have a promising defendant in the United States Government! That doesn't mean that your investment choices will do well. The mutual funds that you buy are subject to investment risk just like any other funds.
@@glgermain thanks for your response but loss of funds due to investor or broker incompetence/bad choices is a known feature that’s not covered.
@@BryanPAllen Investor incompetence (you investing in funds that go down in value) is certainly not "covered." That's market or investment risk, and that is certainly very real and not guaranteed by ERISA, SIPC or anyone else. I don't know what "broker incompetence/bad choices" means, or what you mean by it being a "feature that's not covered." If you invest money in one of the TSP's investment options, the government buys securities in the particular fund that you've selected. Those funds are held in trust for you, and tracked by accounting entries that are audited and have to balance against the depository bank's records. I'm not saying it's impossible for an employee or hacker or something to steal your funds, just that the government as the administrator of the account would likely be liable for the loss, and that it's very unlikely not to be promptly caught. If you want to worry about this, feel free to worry. I think there are much bigger risks in life to worry about than that.
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Hello,
What about pensions? Are they covered under the same act?
Pensions are also not subject to SIPC, the key point is to see how your pension is stored
most 401's have more tha 5 hundred thoueand in them, How or what can you do to protect the remaining balance?
Protect from theft? Not much, but risk of theft is very very low (approaching non-existent). You can't protect against your investment choices losing money because investment risk is inherent in any investment. But some investments are more risky than others. Investment risk is not particular to 401ks.
@@glgermain I think he is talking about protection if the brokerage firm goes belly up. My take on it is to split that up like your CDs in the bank not to exceed 250K. Correct me if I'm wrong.
I don't trust the cash option in my 401k..
Crap...I have close to $1M in my Fidelity 401K. I'm pulling the plug at work on 8/1. I'm hoping I still have a window to roll it to an IRA before the SHTF. Pray for me.
I believe once you retire you can call Fidelity and they will essentially close the 401K and set it up as a Fidelity brokerage IRA. At this point it is covered through SIPC.
@@patricewhitehouse3952 Thanks Patrice - I think $500K of it will be....I may have to open a second account with another brokerage to cover the balance. Just hoping I have the time - alot can happen in 4 months.
Wow
Please what happens to Roll Over IRA?
IRAs are covered by SIPC. Watch her SIPC video.
Hey, my TD Ameritrade retirement account will be moving to Schwab. ??? Good, bad, or so what. Second time my retirement account has been changed with out my say so, started with Scottrade. I liked Scottrade, didn't like Ameritrade, site is/was too complicated.
So what. If you don't like the service, you can move it somewhere else.
@@glgermain what brokerage do you use or recommend?
@@debrabullion3766 Well, I have brokerage accounts at Vanguard, Ally and Interactive Brokers, but your funds will be safe at any major brokerage, and I'd recommend that you use a broker who provides good service and low costs because I don't think there is any real risk of theft at any of them. The only brokerage that anyone is worried about is Schwab because they have a bank with somewhat large unrealized losses, but it is a very well run brokerage which I'm confident is entirely safe to use as a brokerage.
@@glgermain Missed the point.
A former employee can keep their 401(k) with a previous employer or roll it over to an IRA. Might the information presented here nudge one to roll it over in addition to other reasons such as broader fund types offered?
I just did that :)
The risk of having one's 401(k) assets stolen is so small that it is not much of a nudge. There are lots of other more important considerations like protection from creditors, investment options and costs, and many others.
😅
@@glgermain 401k offers more protection against claims from creditors than an IRA, does it not?
So, if you have a million $ in a 401k, tomorrow run and roll over $250k into 4 separate IRA accounts at 4 different custodians to be safe, correct? Then I would feel safe!
My 401k at Fidelity has a brokerage link allowing me to invest in pretty much anything. Are those investments covered differently?
Whether you have full SIPC coverage or not is highly unlikely to matter. Your 401k assets are in segregated trust accounts, held by depository banks, and are virtually certain not to be stolen. Whether your investments perform well is the significant risk, not theft. I would not worry about theft and SIPC coverage at Fidelity or any other large brokerage firm.
I have the same question ... only my 401k is at Schwab. I moved most of my money to what they call a PCRA (personal choice retirement account) which is very much like a traditional brokerage account. I'm not limited to a few funds like the 401k. I can purchase stocks, bonds, mutual funds, etfs, etc. It is still accessed through my 401k login at Schwab ... is it covered under ERISA? Are those assets in a trust? Or is Schwab loaning my assets out or otherwise using them? Referring to the comment below..... I'm not worried about theft and I understand investment risk... my concern is if Schwab goes broke like SVB bank, WAMU, or Enron. Are my assets in the PCRA held in a trust?
@@butterbean8746 Yes, it's part of the 401(k) plan and covered by ERISA. It's a self-directed investment option as part of the 401(k) plan. Schwab holds your assets in trust, and they use depository banks like State Street to hold the actual securities. The chance of your securities being stolen at a major brokerage firm like Schwab, Fidelity, Vanguard, etc., or from a depository bank, is as close as you can get to zero. And maybe since it's a separate Schwab investment option you'd get SIPC protection as a separate account - I'm not sure -- but it's really academic. Your concern should be the market risk of your investments, not having your securities stolen from a Schwab trust account.
I answered my own question with a quick internet search. Yes, the PCRA is considered part of the 401k plan and covered under ERISA guidelines, per the Schwab website.
@@sdoken I have Fidelity for my 401K - I have a cash account, 401K and a brokerage link account. My question to the Fidelity rep (this was last week) could I put 1/2 in my brokerage link and the other 1/2 in a 401K account like Stable Value/US Govt, or anything else...?....the answer was this: 401K and Brokeragelink are looked at as ONE ACCOUNT. Brokeragelink is a subset of 401K. If you're in a 401K, you're exposed.
Love your videos. Ah, Enron. Always remember the father of convicted felon Elizabeth Holmes was a vice president at Enron.
Is roller IRA (rollover from 401k) considered traditional IRA for SPIC purposes？
DEAR DIAMOND, COULD YOU PLEASE SHARE YOUR VIEW ON FZFXX AND OTHER MONEY MKT FUNDS FIDELITY IS HIGHLY ADVISING RECENT DAYS VS T-BILLS?
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