By Chris Hanson, Esq.

A talented horror story writer can masterfully turn a happy occasion into a bone-chilling tale of terror. When you start a dream job, mismanaging your existing 401k can be the opening paragraph of another unnerving story.

Let’s consider a short story penned by Boston native Edgar Allan Poe, The Cask of Amontillado. Taking place in an unnamed Italian city during the festive Carnival celebration, this is a tale of fatal revenge. The narrator and murderer, Montresor, felt insulted by his “friend” Fortunado and lures him into the catacombs for a private wine tasting. The already inebriated Fortunado was so excited to sample the fine Amontilldo sherry he could not resist the invitation—but Montresor quickly chained him to the wall, and built another wall enclosing Fortunado in the space, effectively burying him alive.

Similar scary stuff can happen to your legacy 401k if you are not careful. Maybe you’re imagining I will recite this gory tale: You travel down a corridor to the Haunted Human Resources Department. While the ground fog and eerie organ music alert your survival instincts, you are unable to speak. A ghoulish, Lily Munster-looking benefit manager hands you some parchment document written in terminated employees’ blood and demands you sign it. Once you have passed the point of no return you fall through a trap door while being tortured with the blood curdling sound of an evil witch’s laugh. (That’s the VP cackling.)

It does not happen this way.

Usually, the start of a new job is a time of great optimism. You got a raise and you’re looking forward to new challenges. The company is happy to have you and they want to keep you happy. The human resources manager is not a financial planner, but it is their job to be the cheerleader for the company’s 401k plan. With good intentions, they may offer to roll your old 401k into the new company plan to reduce paperwork and make your life easier. After all, you’re at a good company with a great benefits package; you simply assume the firm has a great 401k. So, you fall into the “convenience trap” and move your existing retirement fund there.

Most likely this is a big mistake and years later it will sully this happy occasion. When you leave a job, you have the opportunity to move your 401k fund to an IRA account without tax consequences. You have the choice of almost anything from the universe of mutual funds. The new company’s plan is limited to a much smaller number of choices. It will be tough, if not impossible, to build a portfolio that takes advantage of low investment costs, a broad range of asset classes, and global diversification.

Proven factors like these provide optimal returns over the long run. If you simply fall into the “convenience trap” and roll it into the new company’s plan, you have somewhat buried this money alive. It will be stuck in that plan until you leave the company. The opportunity costs could be huge. For example, $100,000 with an annualized return of 6% totals $320,714 after 20 years. Getting an extra 2% annual return is possible, and if this calculated risk pays off, you could accumulate $466,096. The difference is about $145,000, nothing to Boo! at.

Avoid the convenience trap, invest some time into researching the best options and maybe you’ll be giggling through an earlier retirement picnic on the lush lawns of Castle Island. I’d be careful though, Poe was stationed at Fort Independence and he based “Cask” on a legend taking place within those gloomy walls.