You probably already know that when you leave a job, you can transfer your retirement plan balance into an IRA through a tax-free rollover.

This can be a good move particularly if you pay attention to your investments (or work with someone who does). You may find lower investment costs than the retirement plan offers. Also, with a self-directed IRA, you have the entire range of investment options rather than a limited number of choices.

What most don't know is that you may have access to retirement plan funds right now.

This is not a loan or a penalized distribution, but a genuine tax-free transfer called an "in-service rollover." It's usually employees of government agencies or nonprofit organizations who qualify, and, in most cases, you need to be close to retirement age.

Some local examples are University of Colorado employees in a 401(a), voluntary 403(b) or 401(k) plan who can roll their funds over to an IRA as long as they have attained age 591/2. Teachers and other governmental employees in a PERA 401(k) and federal employees covered by the TSP can do the same. Check with your plan administrator to see if you qualify.

Why would you do this?

You may want a firm to manage your funds and have the fees paid out of the account. You may be in one of those costly 403(b) plans that charge over 1.5 percent annually and wish to reduce costs. There may be desirable investment options that are not available in your current plan.


Just make sure that before you arrange the transfer, that it will be an improvement over your current plan as the decision may be final. The TSP, for example, has rock bottom costs and investment options not available in an IRA.

Laid Back Portfolio

In this column we track the Laid Back Portfolio and the second quarter was an interesting one.

The S&P 500, which is a broad representation of U.S. large public companies, was up 2.9 percent for the quarter. The Aggregate Bond Index was down 2.3 percent. Once we include 1 percent annual fees, the Laid Back Portfolio was up 0.7 percent for the quarter and is up 6.8 percent for the year to date.

You read that correctly -- bonds were down.

How did that happen? Those applying for a mortgage know that interest rates have jumped smartly over the last few months. While savers may rejoice at the higher rates, bond holders suffer because the value of bonds goes down as interest rates increase. This happens because a bond pays interest based on the original value of the bond.

Imagine you purchased a 10-year Treasury bond for $10,000 at the end of April that pays 1.7 percent. That means every six months you receive $85, and in April 2023 you'll get your $10,000 back.

The problem is that now investors can purchase a 10-year Treasury bond that pays 2.6 percent. Your $85 payment looks comparatively pathetic. To compensate for this, the price of your bond goes down per by about $800 to a level where the future bond appreciation (back up to $10,000 in 2023) over time makes up for your paltry payment.

As you might expect, long-term bonds and bond funds really got burned with the Long Government Bond category down 6.2 percent last quarter according to Morningstar. It's a good reminder that bonds can go down quickly and significantly.

Investors previously lulled into complacency by a protracted benign interest rate environment now understand this.
