The main point of Daniel Solin’s The Smartest 401(k) Book You’ll Ever Read is that your 401(k), or 403(b) or 457(b), and it’s employer match may not be a no-brainer investment because it could be filled with funds that fat on fees and poor on investment selections. His answer? It’s to model the Thrift Savings Plan, the retirement plan available to government employees that consists entirely of low-cost index funds (the expense ratio is around 0.03%), and use low cost index funds for your retirement options. Look inside your mutual fund options to find the ones that most closely model index funds and go with them.

I think The Smartest 401(k) Book You’ll Ever Read by Daniel Solin does a very good job of opening your eyes to the fee-ladened landscape of retirement investing. He takes specific aim at 401(k) because those “captive audience” type programs are more deceitful than you can imagine. Many companies use plan administrators that offer 401(k) plans for free because they know they can make a killing on the back end with expensive fund choices. If they really had the employee’s interests in mind, then they’d simply offer cheap index funds. In fact, some companies actually pay kickbacks to company HR departments to use them. The plan administrators pay companies for the opportunity to offer their fee fattened funds! It’s pretty ridiculous.

Unfortunately, this means that if you mainly invest in low cost index funds, you won’t get much value out of the first few sections of the book (it could spur you to rollover your 401(k) when the time comes!). The book continues to talk about other retirement investments such as IRAs, both Traditional and Roth, and annuities.

One characteristic I like about the book is that the chapters are short. Many are under three or four pages long, which is exactly how long it should take to explain many of the fundamentals about investing. For example, Chapter 14 is called Simple Investing Is Smart Investing is about three pages long and explains why a simple allocation of basic mutual and index funds will be sufficient for most. Chapter 22 is called “Why Fifteen Is Your Magic Number” and uses three pages to explain why you need to save 15% of your income if you want to expect to have a successful retirement. That, coupled with a applicable quote (usually from some important successful investor such as John Bogle), makes this book an easy read. There aren’t large chapters to digest, there aren’t huge concepts to wrap your head around, this book makes everything nice and simple.

Wow, June was a little rough. Net worth fell approximately 5.0% on account of two major reasons: quarterly estimated tax payments and retirement accounts. Outside of those two, which really consists of not much else, everything is progressing as expected. Neither income nor expenses, outside of the roof, had drastically changed. We don’t track our expenses as closely as we probably should but we have, at least qualitatively, gone out to eat less.

Eating Out

We’ve gone out to eat at restaurants less frequently for numerous reasons. First, gas prices have increased the cost of my wife’s commute, which is mitigated by my commute. Second, it’s far healthier to eat home on all accounts. You eat less and what you eat is healthier for you. Third, we need to learn how to cook better which only comes with practice. Eventually, whenever we have kids, eating out will no longer be an option (again, from the health and cost perspective) so it’s better to learn how to cook now than learn under the gun.

Estimated Taxes

Estimated taxes are paid quarterly, for the most part, and so the month in which those payments come due will be times when my net worth will see an “artificial” drop. Technically, that’s not accurate, it’s the other months that are artificially inflated, but you know what I mean. This is one of those cases where understanding the underlying cause explains away any concerns I might have, at least with this reason. Retirement is a totally different issue.

Retirement

Everyone knows that retirement accounts are long term. I know that when I log into my IRA’s, I can’t touch that money, unless I wish to pay a penalty, for another 40 years. However, it’s really difficult to look at the Dow drop 300+ points and not think about how one of our largest account balances is in an account pegged to that metric.

Retirement accounts took a 4.41% cut across the board, the largest single month change in my short adult life. I will do exactly nothing in response, though Todd Harrison, founder and CEO of Minyanville.com, who was a former trader at Galleon Group, Cramer Berkowitz, and Morgan Stanley, is in all cash. (there’s more to it but that’s the headline idea) A lot has happened in the last 10 years, there’s a lot more that will happen in the next 40.

The one thing I won’t be doing is adding to positions outside of the regularly scheduled retirement contributions. I think we already have enough invested in the stock market for our comfort level and unless we settle on our other long term investment goals (kids, college, home), we won’t be adding to our taxable brokerage account.

Actions from May

In May I listed three “action items,” I merely said it was looking towards the future, and I think it’s important to revisit them to see where we’re at. Think of it like my own little checklist of important things to do and where we’re at with them. I want to thank everyone who leaves comments with advice, suggestions, etc. because it definitely helps me out in many of these areas. I don’t have experience in a lot of these things and your insight, even if it’s what you did or what you’ve, is a tremendous help.

• Jewelry Insurance: A year after first discussing it and a few weeks after putting it into a monthly review, I finally got jewelry insurance for my wife’s engagement ring. If you read the article when it first was posted, I invite you to go back and read the comment Tim left as it covers many points I missed or misunderstood.
• Auto insurance: I mentioned earlier this week that being married doesn’t affect car insurance premiums and readers pointed out it was the multi-car discount, not the marriage aspect, that decreased premiums. The process will now be to get car insurance and register the car in Maryland, which includes paying the 5% tax. There may also be a penalty involved because you’re supposed to register a car within 60 days of moving to Maryland (you get a credit for taxes paid elsewhere), so we will see how that plays out.
  One interesting point, when I requested a quote, they lowered my six month premium from $282.60 to $203.30 even though it was a sample quote. This reflects something Dedicated said in a comment: “The discount comes from the wife expectance to drive a portion of the time on the mans vehicle. Thus, his rate goes down.” Cool! The addition of the new car only increased the six-month premium to $355.40. The insurance doesn’t include collision and comprehensive coverage.
• Water heater, Roof: The roof replacement is complete and the charge is sitting on our Citi CashReturns card, due next month. We opted for the 1.2% cash back over the six months 0% financing. 1.2% cashback is $53.40, 6 months 0% financing in a high yield savings account earning 3.50% is about $56 - not worth the effort. Water heater is still pending… the prospect of a tankless option is more and more attractive as energy prices increase.

Looking to the future:

• Further Consolidation: My wife and I still has some accounts floating around out there that have since outlived their usefulness. I made a big push to the last few months to consolidate as many accounts as I could, so we will have to keep plugging along. Consolidation sounds easy enough, they’re just activities that take longer than you expect.
• Getting A Pet: Every once and a while my wife and I watch my parents-in-law’s two Scotties. They’re adorable, lots of fun, and they poop everywhere (most of the time outside). My wife thinks I need more companionship during the day, the SAHMs at the gym don’t count, and so we’ve discussed getting a dog. Right now we’re leaning towards adoption from a local pound because there are so many there, it makes no sense to look elsewhere. An added benefit is that often those dogs have had their shots and are current on everything. Before pulling the trigger, we think it’s important to look at the finances just to be sure.
• Continuing Education: One of the longer term goals we have is for my wife to return to college and get her Masters or a Ph.D. Many programs offer tuition assistance or funding, but some don’t. Plan for the worst, hope for the best. This is one of those farther in the future type things, but one of the reasons why we bought those Series I bonds was because earnings are tax free when used for education. Just something to keep in the back of our minds.
• Kids: Ahhh just kidding, not yet.

My retirement is forty years away and I have a portion of my brokerage account invested in a 2050 Target Retirement fund at Vanguard. The Target Retirement fund makes an excellent choice for me because it handles all the asset allocation and rebalancing issues without my interference, all with a target withdrawal date in mind. That’s when I got to thinking, why not utilize target retirement funds for shorter goals?

Let’s say you have kids that are planning on going to college. The natural choice is to go with a 529 plan or some other educationally advantaged account. After you open the account, what are you going to invest in? You could figure a safe allocation, given when you expect your child to go to college, and handle the finances or you could, if your account offered it, just go with a target retirement account. Simply buy the year closest to your target date, rounding down so you’re on the conservative side, and forget about it. It’s time-wise more efficient than managing it yourself and, if you go with the right firm, the fees will be reasonable.

This plan does have drawbacks. You often don’t much international exposure, which you may or may not want given our current economic environment. Many emerging markets are growing at breakneck speeds but the dollar is weakening, there’s plenty of uncertainty. You might want international exposure and a fund like the Vanguard Target Retirement 2030 has only 17.2% invested outside the United States, of which the lion’s share, 9.2%, is in Europe. Another risk is that you don’t have exposure to the asset class that has been growing the most recently, commodities (oil and gold, anyone?). Of course, we could be in a bubble right now or we could be seeing the start to something bigger - no one can see the future.

Either way, it’s an option on the table and one that I wanted to bring up to see if you all had any thoughts on the subject. Good idea with potential? Or just buying into the marketing hype of these lifecycle funds?

Last month was the return of these monthly net worth reviews and the first time, probably since when we bought our house (closing costs are brutal), that our net worth decreased across the month (taxes are brutal too). This month, we saw our net worth increase by a healthy 8.6% helped along by a mild recovery in the stock market (1.39% increase in retirement assets).

Last month I talked about three things in the future - roof replacement, water heater, and diversification of our investments. The roof is set to be replaced on June 16th, contingent on good weather, at a cost of $4,450. The roofing company offers a six month same as cash option but I think we’re going to put it on the Citi CashReturns card for the 1.2% cashback since interest rates are so low (it’s nearly a wash after taxes, so we figured for simplicity the credit card option was better). We knew the roof needed to be replaced so we were prepared, there won’t be any other financial impact (other than the -$4,450 to the bank account).

As for diversification, my lovely wife and I had a chat about the future on a recent walk around the lake. We plan on outlining major milestones over the next thirty years, as best as we can guesstimate, and then adjust our financial plan to meet those milestones. I’ve come to the realization that after you’ve maximized your 401(k) and Roth IRAs, you have to begin saving for specific goals. We already have a house so that’s one significant goal achieved, so we have to determine the other milestones on the list (such as education) so we can chart a path forward. One idea I had was to use target retirement funds to simplify saving for specific goals.

Looking to the future:

• Jewelry riders and homeowners insurance. We got an appraisal for my wife’s engagement ring and need to add a jewelry rider to our homeowners. I called them up and got a quote for $100 a year for total coverage from our current insurance provider, Travelers, and a quote of $105 from an independent jewelry insurer, Jewelers Mutual Insurance Company. Why haven’t I pulled the trigger? I actually wanted to contact Erie Insurance and figure out whether it’s worth it for us to go with them for homeowners. In thinking about it, I should probably mail off the independent jewelry insurance form and then talk to Erie.
• Auto insurance for my wife may be a little tricky. The title for her car lists her and her father as co-owners, which allows her to be on her parent’s auto insurance. The auto insurance now has four vehicles listed, which probably isn’t good. We should be on the same policy, now that we’re grown ups :), but the sticking point is that putting the insurance in Maryland may force her to register the vehicle in Maryland - that’s a 5% tax on the blue book value of the car ($500). We will have to investigate further.
• Water heater is still on the radar but now on the back burner with the roof. We actually just bought a really nice Fridigaire dishwasher (to replace this old Whirlpool dishwasher) for $150 thanks to a find by Fred at One Project Closer. It was a rush sale by a guy who was being foreclosed on and moving out of state in two weeks (yikes), but a great deal. Getting a new dishwasher wasn’t a priority, I had been looking around, but $150 for something worth around $500 was too good to pass up. Quite fortuitous!

One nice benefit of these net worth monthly reviews is that it forces me to think about what we’ve done this past month and what we need to accomplish in the next month. As I was writing, I was forced to think about things I had set off to the side. In looking back, the net worth portion is really a minor part (I mentioned the increase, what was a main contributing factor, and then moved on to more “strategic” level ideas) but I think that’s a good way to approach it. Please let me know what you think!

On Sunday, I reviewed Gotcha Capitalism, a powerful and comprehensive guide for consumers, and gave it glowing reviews. Today, I want to talk about a couple stats Bob Sullivan shares with the reader about complaining to companies and success rates (Keep in mind that the book was published in 2007).

The point of the section was to illustrate that the places where you are more likely to succeed are exactly the places that people don’t try. The success rate at a grocery store is 57.1% but only 14% of people ever try, whereas the success rate with a television company is an abysmal 20.2% yet 84% of people complain. If you want to make the most out of your time, go after credit card companies. Ask to have fees removed, refunded, or waived because you’re such an awesome customer.

Here are the numbers:

1. Credit card companies: 64.6% success rate
2. Airlines: 60.0% success rate
3. Grocery stores: 57.1% success rate
4. Retirement: 52.2% success rate
5. Internet: 51.5% success rate
6. Hotels: 37.0% success rate
7. Banks: 33.3% success rate
8. Insurance: 28.9% success rate
9. Cell Phones: 26.8% success rate
10. Television: 20.2% success rate

Here are the rates at which people actually complained:

1. Television: 84% complaint rate
2. Credit card companies: 79% complaint rate
3. Cell Phones: 71% complaint rate
4. Hotels: 54.0% complaint rate
5. Insurance: 38% complaint rate
6. Internet: 33% complaint rate
7. Retirement: 23% complaint rate
8. Banks: 18% complaint rate
9. Airlines: 15% complaint rate
10. Grocery stores: 14% complaint rate

If you have all the time in the world, complain to everyone!

(Photo by aturkus)

I had a lackluster experience with an alleged financial planner and I’ve read many articles detailing how you should find a financial planner, what you should ask him or her, and everything else you need to do to make sure you don’t a raw deal in the process. I’m sure many of you have read those same articles warning you about how you need to find fee-only financial planners or sleep on their advice. Well, I wanted to highlight a columnist at CNNMoney called “the Mole.” The Mole is an actual practicing financial planner who gives you the full skinny on what you should do to get the right financial planner.

Here are the one’s I felt were valuable reads:

• When you should dump your adviser - some red flags that your financial adviser isn’t up to snuff.
• Are investment newsletters worth it? - “You’d be much better off just throwing the money in the nearest dumpster than buying these newsletters and risking a big chunk of your nest egg in following the newsletters’ advice.” (he’s very honest)
• What a good financial adviser should be doing for you - Discussion on the various aspects financial advisers should help you with.
• Four good questions to ask your adviser
• What your adviser doesn’t know might hurt you

You can find all of The Mole’s articles here.

Cash-Rich Retirement by Jim Schlagheck, seen on public television’s Retirement Revolution, seeks to turn the retirement advice community on its head by taking “the investing techniques of the mega-wealth” and bringing it to the masses. It’s quite a bold statement to make, since we all know the mega-rich are afforded a much different set of rules than the rest of us, so we’ll see if Mr. Schlagheck can deliver.

The dust jacket says that Schlagheck’s advice “breaks with conventional advice that tells the public to invest mightily in stocks, flip holdings, and seek capital gains.” I’m not sure that the conventional advice says you should be actively trading stocks, but then again personal finance bloggers live in a world where we are exposed to the sage advice of Buffett and Bogle, two accomplished investors who actively advocate index funds for the masses. However, even if you accept the belief that the conventional advice is flipping stocks, Schlagheck advocates investing for “prudent income… Build a ‘life-cycle’ annuity package for lifetime retirement income. Focus on dividend-, interest-, and rent-producing investments and insurance.” If your alarms went off when you red “life-cycle” annuity package, you weren’t alone - mine went crazy. Annuities are actually one of the “six straight-shooting, show-me-the-money steps” in the Cash-Rich Retirement plan. We can see what Schlagheck means when we get to them.

The six steps are:

• Change your “automatic pilot”
• Diversify your holdings in radically different ways
• Build out your investment plan with funds and objective research
• Get all the professional help you can
• Build income streams with a ladder of annuities
• Invest in long-term health care insurance

Setting the stage

The book begins by discussing retirement and how the rules of the game have changed. Schlagheck has a very straight forward and easy to understand writing style and the book is organized in a way that makes it very easy to follow. He makes excellent points about how the retirement is changing, given the changing demographics, solvency of Social Security, and a whole collection of other issues. It really does drive the point home that the old rules of retirement are changing (because they are!).

Let’s see these six steps…

Change your “automatic pilot”

Schlagheck’s term of “automatic pilot” refers to the fact that you concept of “saving for retirement” is investing for speculative gains. It means taking stocks in your Roth and going after high flyers, it means pushing your 401(k) contributions into microcaps or other more risky investments, and he argues that you need to rewire the way you think and act differently. Less like a slot-machine player and more like a saver and cautious investor. Mostly, he’s saying you need to take your retirement seriously right now. What does he recommend you do?

• Save at least 20% pre-tax income
• Hold savings in tax-sheltered accounts (401k, 403b, etc.)
• Automate saving (think, Automatic Millionaire)
• Don’t chase speculative gains

So far, nothing super incredible or only within the realm of the super-rich. It’s just straight up, smart personal finance advice that’s been repeated before, though it does have some eye-opening statistics not often included in other books.

Radically diversify your holdings

This chapter focuses on how your asset allocation is probably off, though it focuses on many of the simple mistakes people may make such as investing too much in company stock or being too risky in allotments. He advocates investing in things that provide cash flow. That includes dividend stocks, interest bearing accounts or investments, and “rent” producing REITS or rental properties. This is probably where the “Cash-Rich” in the title comes from. Another category he says you should increase in is international exposure, an idea that probably would’ve netted you quite a tidy sum had you implemented several years ago.

From here, this book has some nice ideas but nothing that’s radically new or unheard of. Since the annuity chapter sounded some alarms, let us skip to that chapter.

Build income with annuities

Annuities are like timeshares, they’re not inherently bad, they were just pitched by inherently bad people. The book makes an excellent case for annuities and one that I buy into, though, as they say, the devil is in the details. Annuities provide protection against longevity risk, which is the risk that you’ll outlive your retirement savings, by providing a guaranteed constant income stream and Schlagheck recommends using them after everything else (401k, Roth). I believe that to be prudent advice.

Schlagheck explains annuities, how they are structured, the four main types, the benefits, drawbacks, etc. If you want a primer on annuities, Schlagheck has a good one in his book. He warns about the costs of an annuity, which are 2.3% average, and says that there are many excellent ones at a fraction of the cost.

So what’s this life cycle strategy? The idea is that you want to ladder your annuities so that you get different amounts of income at different points of your retirement. His example has three annuities, each paying out for three different time periods. The first pays out income for 9 years from age 65 to 74, #2 pays out for 9 years from 75 to 84, and #3 pays out from 85 and onward. I’m afraid the details are outside my capability to detail with much clarity so you’ll have to check out the book if you want to know how their structured. He also provides a lot of explanation that I think is crucial for understanding how to ladder annuities, such as tax implications, purchase tactics, etc.

Overall Impressions

Overall, I felt Schlagheck did a good job explaining his cash-rich retirement plan, even though I skipped a few of them in this review, though nothing seemed exclusive to the mega-wealthy. Granted, the ability for most retirees to invest in rental properties is slim (but not unheard of) but investing in dividend stocks, buying annuities, and many of the other suggestions are not anything special. His explanation of annuities, for someone who knows little about them or the fact that laddering them would be a good technique, was comprehensive and easy to understand. If you have the basics of retirement down and are looking to learn more, I think getting this book, either at the bookstore or your local library, would be a great first step.

A bank is a bank is a bank is a bank right? So, why are there so many banks in the United States? Well, there are plenty of reasons but one of which is that each and every bank out there solves one problem or another for those people who hold accounts there. In the next few hundred words I’ll tell you which types of bank accounts you’ll need and where to go look for that type of account. By types of account I don’t mean savings, checking, money market, brokerage, retirement, or whatever account - I mean the purpose of the account. Once you identify the purpose of the account, it’s far easier to pick the right bank for you.

Daily Access Account

The daily access account is an account that you want conveniently located such that it’s easy for you to get your money very quickly. With the proliferation of automated teller machines (ATMs), it’s often just as good to have access to your bank’s ATM and not an actual full service branch. For me, my daily access account is a savings and checking account at Bank of America. I’ve heard of some horror stories from Bank of America (then again I’ve heard horror stories from every bank) but when it comes to ATMs, I don’t think anyone has them beat. Everywhere I go I see a Bank of America ATM and anytime I’ve needed money, a BoA ATM was just around the corner. What you need is a bank just like that in the places you go.

One important consideration with your daily access account is whether there are fees. Usually you can avoid fees by keeping a balance above a certain amount or by setting up a direct deposit. Since your daily access account’s interest rate will probably suck big time, you will want to keep as little as possible. You also want to pay exactly $0 in fees so pick this account wisely.

High Yield Savings Account

Let’s face it, right now CDs and bonds just don’t cut it. Everywhere you turn is another online bank that is offering you over 4.00% APY on your savings. While I’d be wary of picking any hole in the wall, ING Direct and Emigrant Direct have been doing the online thing for quite some time. Emigrant is also an online extension of their brick and mortar bank. Either way, your high yield savings account is where you will want to store the bulk of your regular savings. Emergency fund? Stick it in a high yield savings account.

One recommendation I have is that if you happen to be one of the lucky folks who has their Daily Access Account at Citibank, you’re in luck because they also have a high yield savings account that you can link directly to your regular Citibank account. Instead of waiting the 5-7 days to transfer funds from one bank to another, Citibank customers can do it instantaneously. If it were convenient I’d have a Citibank account.

International Account

If you do a lot of traveling, an international account is a must. I don’t know how many banks do this but one big one is HSBC. Many of my relatives hav HSBC accounts that they can get access to whenever they are in Taiwan and China or here in the good old US of A. From what I hear, the international account and the domestic account are held separately but you can transfer funds between the two relatively easily. Either way, I think that this is preferable to exchanging cash at the ripoff counter at the airport. (if you have a Capital One card, you can make international purchases without that pesky surcharge, Discover too but that’s less widely accepted)

Good Loan Terms Account

Nothing beats a credit union in this department. In fact, I’m a member of a credit union only because they generally have favorable loan terms! (I currently have exactly $6 in my account there) Credit unions are designed to work in favor of its members, so it will usually have the best loan terms compared to a commercial bank (they are designed to work in favor of its shareholders). Everyone can find a credit union they can join and everyone should join one because it will likely cost you nothing and you never know when you’ll need a loan.

Retirement Account

This can be at a bank or with a brokerage but having a retirement account is crucial. What you want to do is pick a bank or brokerage that has what you want with the lowest amount of fees. You want mutual funds? Life cycle / target retirement funds? Find the cheapest brokerage because those little percentage points are going to add up over the next few decades.

Brokerage Account

Everyone should have a brokerage account if they are saving their money and have more than they need in an emergency fund. This account can be tied into your retirement account but you will want one so you can start putting some of your hard earned money to work.

That’s it, those six bank account types cover essentially everything you need. (I hope! If I’m wrong or missed something, please let me know!)

My fiancee and I put a portion of our savings, that is those funds aren’t earmarked for future taxes, weddings, or other purposes; in a Vanguard mutual fund account that is fully invested in the Vanguard Target Retirement 2050 fund. The latest rattlings of the stock market have unnerved me and while my brain is telling me “think long term,” my heart is telling me to sit out the next month or so and let everything settle down. I know a lot of you will probably respond by saying “you should be thinking long term! why are you trying to time the market!?!?” and a less open blogger would’ve probably never mentioned it, but I feel that it would be remiss if I didn’t share with you my decision and why I did it.

1. The Fund Isn’t Long Term

I’m still in the target retirement funds via my SEP-IRA and my Rollover IRA and we haven’t touched our 401k allocations, we’ve sold the fund in this particular account because it’s not a long term account. The purpose of the fund was to get some stock market exposure instead of putting it all in a high yield savings accounts.

2. We’re Not Panicking

Panicking would’ve been pulling out a little over a week ago when the first rumblings really started, with Bear Stearns telling everyone two of their hedge funds basically went bankrupt. More panicking would’ve coincided with American Home Mortgage firing 90% of its employees and filing for bankruptcy. You would’ve had yet another opportunity to panic if you sold it yesterday because BNP Paribas, France’s largest bank, froze the assets to three of its sub-prime funds. Today? The Federal Reserve pumped $38 billion dollars of liquidity into the banking system… so we should be good right? Now is exactly the least panicky time to liquidate, so it’s not panic causing our decision.

3. The Climate Looks Awful

Dollar at historic lows, China pushing us around with all the dollars they hold, slow housing market, jumbo loan rate hikes, liquidity crunches… I don’t know how many warning signs you really need to start acting when thinking short term. Take this very simple scenario… in October, $50 billion in adjustable rate mortgages will reset. Let’s say 10% of those folks will not be able to make their payments - that’s $5 billion in inflated property value that will be foreclosed. How much will the banks be able to get for them? Mortgages will be harder to come by, they’ll have higher rates, and so if you assume that they get 90% value on that $5 billion, that’s $500 million dollars up in smoke on the bank’s balance sheets. I might not be a banker, but those percentages sounded rosy to me and that analysis, again I’m not a bank, makes my stomach turn.

What do you think? Was this a mistake? If so, please explain why because I think this issue is on the minds of quite a few people.

Photo by Cishore.

This is a psuedo-Devil’s Advocate because it’s not generally assumed that one should always roll over their 401k’s when they leave their job but a lot of folks have recently been asking me, since I had just gone through the process, who they should roll their 401k over to (I wish with Vanguard). The troubling aspect of that question is that they’ve already decided to rollover their 401k before they’ve answered the crucial questions leading up to that decision. See, you should rollover your 401k if it makes sense - that is if you can get better options, better pricing, and better management elsewhere. By asking “where” to go after “if” you should go, you can’t analyze the differences. There are many reasons why you should stick with your 401k administrator even after you leave your job, here they are:

Employer institutional funds may be superior
Depending on how big your company is, you may be dealing with your company’s own special institutional funds that aren’t available on the open market and they could be awesome (or awesome in certain aspects). This was the case at my former employer who had about a dozen actively managed funds (they weren’t index funds) with fees under the average expense ratios of typical actively managed funds and performance on par with its benchmarks - so you get actively managed while paying near index fund prices. Now, if you don’t have many good options with your current administrator, the fact that they’re cheap doesn’t help (but cheap is better than expensive).

Custodial fees and balance requirements
Your 401K funds probably don’t have any balance requirements and reasonable custodial fees, that’s usually not the case with major brokerages. Vanguard doesn’t have low balance fees for retirement accounts but it does have initial minimum investments (usually $3,000 to $5,000) and Fidelity does have low balance fees though it’s phrased as they “may” charge a $12 fee for a balance under $2,000, so be sure to check whether the brokerage you choose has this low balance fee. The same applies for custodial fees, be sure to double check those before you roll over.

You can roll it over whenever you want
You are thinking about rolling over your 401k because you just left your job (otherwise you wouldn’t have this opportunity in the first place) and that usually comes with a whole host of other issues you have to deal with. You may have been fired or you left of your own free will but either way, don’t feel like you need to worry about whether you should roll your 401k within a certain short time frame. Some plans give you three or five years (check with your administrator) to roll it over, don’t think you have to do it in the next month. I waited six months before I rolled mine over and I could’ve waited even longer if I wanted to.

Rolling over your 401k, especially if its because you just lost your job, can be a very complicated and somewhat confusing time, don’t feel that you should, 100% of the time, always roll it over to an IRA. Most of the time, you will probably want to roll it over to open up your options, but don’t feel it’s a forgone conclusion. Also, remember that you have plenty of time to weight your options, perhaps after things have settled down, so don’t make any rash and hasty decisions.