| Transfer Restrictions |
In life, things don't always go according to plan. You thought you'd be a doctor but ended up being a firefighter. You swore you'd never fall in love, and now you have twins. You thought you'd stay at your first job forever, but you've now had three great jobs in your career. The point is, in life, it's best to have a plan – and then build in some flexibility just in case things don't go according to plan.
In the same way, while it's wise to invest retirement savings for the long haul, you might have to make some adjustments along the way. You could change jobs and need to roll money to another plan. Or, you might decide you want a less aggressive strategy when you get closer to retirement – because you'll need your money sooner rather than later.
Keep in mind that most retirement plans do not allow you to take money out of the plan before you've actually retired without paying penalties. (This is for your own protection – so you'll keep your nest egg growing.) But most will let you move your money between funds at any time – that is, unless your investment fund has a transfer restriction. Here's how transfer restrictions can make it harder or more expensive to change your investments:
- Fixed or guaranteed funds sometimes limit the amount you can transfer each year or charge "back-end loads" that act like penalties. Some simply don't let you get to your money.
- Stable Value funds won't always allow you to transfer your money to certain "competing" funds such as money market funds.
- Even some mutual funds charge "back-end loads" or penalties if you move your money before a certain amount of time has passed.
The FRS Investment Plan has several Stable Value funds that have transfer restrictions that may apply in certain circumstances. These potential restrictions are described in the Fund Profiles found on this Web site.
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What should you do about transfer restrictions? Learn whether your investment funds have them before you invest, so that you can understand all of the potential positives and negatives of your fund choices. Carefully consider what might happen if your life changes and you truly need to move your money. Transfer restrictions can cost you plenty over the long term, especially at times when you most need flexibility.
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