What to do with my 401K?

[freshstart]

I rolled my DH's 401k over to Vanguard. They were helpful and straightforward and didn't try to offer any more assistance than I was requesting. He could have left the money where it was, but Vanguard had similar funds with lower fees. I used tools on Vanguard and info I learned on Mr Money Mustache forum and Bogleheads to determine asset allocation.

I was just going to say the same thing, Vanguard has never pushed me. My portfolio has saved my bacon now that I am not able to work. Without the usual almost 15% contributions invested aggressively, riding out the storms (seeing them as a "sale" on mutual funds so I actually would invest more) and money earned from interest, I would have no back up to disability should I need it. Had I not done the 403B and Roths, I'd be dead in the water right now.

And once I reached a certain threshold, I got a free session with a CFP. He looked at everything, not just what I had at Vanguard, he helped me plan for college, found that I could easily retire at 55, when wouldn't it be in their best interest to keep me working and dumping money into the funds according to Williamsmith's logic? knew I wanted index funds from Vanguard in my 403b, he helped me set up diversification that fit my risk tolerance (high) when that was not his job at all to help manage my 403B. It was a great experience and because I just had a large Rollover, I'm entitled to that level of help again, I'm just waiting to see where I land financially with disability.

they were also great when I panicked about not being able to contribute to retirement vehicles and what if I needed some of the money sooner, they told me what I could spend without ever touching principle.

Now, work had a guy who was supposed to do this kind of stuff for employees. So I met with him just like in the above paragraph, he pushed products in the 403b line up until he finally got it that I was only interested in Vanguard index funds. he then agreed I had a good plan in place and he also brought up retiring at 55. So he kinda confirmed to me that the Vanguard guy was decent.

yes to Bogle books, Boglehead forums- immensely helpful

[rodeosweetheart]

"When I left my old job, I left my 401K with the company because my new job didn't offer one. Another company took over my old company and now they are dissolving (A&P). So now I have to decide what to do with the money (about $30K) that has been sitting there.

I definitely won't cash it in; I'll be 50 yrs. old this year. The account is with Fidelity and I guess I'll just move it to an IRA or Roth IRA."

Exactly right. The very easiest thing to do is move it to a traditional IRA (assuming it is in a regular 401k and not a Roth 401k) right there at Fidelity. If you call them, they can set it up for you in about 20 minutes. I did this by phone when I turned 59 1/2, as you can take what is in your 401k at that time and convert it to a regular IRA. I thought about moving it to Vanguard, but I decided to leave it with Fidelity as that was the easiest and fastest. By the following day, I believe, I had the account funded. They gave me option of leaving it invested in what it was already invested in or cashing out;I went with cash because I wanted to do my own investing with it, and I wanted to use it as a cash source with my semi retirement, if need be.

So you can have Fidelity do it, and it will be completed fairly immediately.

Or, you could call Vanguard or Schwab or anybody else and have them set up an IRA and then have them do the transfer for you. That will take longer. When I switched years ago, an IRA, from another brokerage to Fidelity, it took about 6 weeks. But all those things are probably much faster now.


But which? Is there anything I should know to decide between the two? I've rad about avoiding fees with trustee-to-trustee transactions. They sent me a booklet but it's a bit wordy for me and I'm clueless. Currently don't have a job that offers an IRA. I also can't remember if I contributed before or after taxes, if that matters. And at the moment I'm not in a position to contribute anything to either IRA.

If you do a Roth conversion, you will pay taxes on it, but no early penalty. You should read up on which makes more sense, and that depends on your income this year, but most people would probably prefer the Roth. If you decide that it won't disrupt your taxes that much this year, then you could certainly go ahead and do that. Again, you would set up the account with either Fidelity or someone else and have them do the transfer.

So read up on Roths vs. traditional, consider you tax situation, and liberate your money from your old employer! Congratulations, it's a great feeling to do so.

[Williamsmith]

For freshstarts situation the investments in the stock market make so much sense. What other choices do you have if you are retired and/or can't work.

Depends on your reason for having the money set aside in the first place. For me, I want to minimize risk and preserve. I'm not hell bent or reliant on growth.

My primary target is my credit union savings account. The interest rate may surprise you, it is secure and liquid...available at any time without penalty. I like that in an uncertain world economy environment.

Another possibility is treasury department savings bonds. Again little risk, but also much easier to get ahold of after just five years of investment.

Real Estate......we aren't producing any more land. It is a finite resource and also a valued inheritance for your heirs.

How about investing in a trusted entrepreneur or family member.

Or a side business for yourself.

Im just not into the allure of the risky part of the stock market. Lacking control.....bugs me.

[rodeosweetheart]

I totally get where you are coming from, Williamsmith, and you raise many great points for Pony Mom to think about.

If she wants to get the money into her own control, she can either roll it over into a Traditional IRA while she figures out her long term plans for the money, convert it into a Roth IRA, or cash it out as you are suggesting. If she cashes it out (takes an early distribution) then that is a taxable event, and she will pay taxes on the money, and she will also pay a 10% early withdrawal penalty.

I think getting the money under her own control in a traditional IRA would be a good first step, unless she is sure she want a Roth and has carefully considered the tax implications.

Were she to cash it out with an early distribution, that would become a taxable event, and she doesn't seem to want to do that, since she brought up the penalty.

But yeah, you correctly identify many problems with the current retirement system,and no doubt she will want to consider her options here.

[Williamsmith]

Yes paying a 10% penalty would be foolish. Exactly why my plans are on hold for three more years. After that I am free to withdraw without penalty which at ten percent is a considerable chunk of change. I agree.

[Rogar]

No kidding. I recently had to contact the broker that manages my deceased father's IRA because I needed to do the minimum required distribution for 2015. I had hoped to do it online, but no such luck. I had to call them to do it and had to repeatedly shut down the guy's efforts to "help" me manage my money, first dad's IRA which only has about $3,000 left in it, and then all my other money.

I inherited my dad's IRA which he had at a local bank. I wanted to transfer this to Fidelity, which has some of my other investments. The transfer was one of the most frustrating financial transactions I've made, with the bank claiming they had lost the paper work or some other bogus excuse that complicated to process. I was assigned a Fidelity rep who dogged things to make sure the transfer went through, although it ended up taking a few months. I was so pleased with Fidelity's customer service that I wrote a personal letter to the rep and his boss with compliments. It has been effortless ever since.

Most everything else I know agrees with Rodeo Sweetheart's post. Whether you roll over into a traditional IRA or a Roth IRA depends on you personal philosophy and your anticipated tax situation, since you will pay taxes on the Roth upon transfer rather than when you start withdrawals. I get help from my accountant with that. However I do believe if you have money in a traditional IRA, you can then transfer to a Roth in smaller increments over more than one year or at any time to spread out the income you would have to pay taxes on.

I'm anticipating my income to increase significantly when I start social security, so I've been transferring small increments from my traditional IRA to my Roth every year to avoid a larger income tax burden in a higher tax bracket when I start social security. It's a plan my accountant has suggested and every year he comes up with a maximum amount to transfer from traditional to roth that will still keep me in a lower tax bracket.

[rodeosweetheart]

However I do believe if you have money in a traditional IRA, you can then transfer to a Roth in smaller increments over more than one year or at any time to spread out the income you would have to pay taxes on.

Exactly right, Suze Orman writes about doing just that.

I thought about it, but decided it was too complicated for my situation, and just left mine in traditional IRA.

[freshstart]

I thought about it, but decided it was too complicated for my situation, and just left mine in traditional IRA.

this was me exactly. I figure I'll look into it down the road when I don't have so much financial upheaval going on

[pony mom]

Thanks all. The traditional IRA sounds appealing to me, especially as it won't affect my income, which has been very low last year and so far this year as well. My 401K money is there for me for the future or a dire emergency so I've just left it alone when I left that job. I have no interest in learning about stocks and that sort of thing. The account I have is invested according to the time I retire--aggressive now and more conservative closer to retirement.

My mom's cousin has a financial advisor. I am his sole heir and have POA. My cousin trusts him but he is usually taken advantage of in most things he does so I don't know if I'd trust him with my own money. When he dies, I'll probably let him continue to manage my inheritance and see what happens.

[freshstart]

Thanks all. The traditional IRA sounds appealing to me, especially as it won't affect my income, which has been very low last year and so far this year as well. My 401K money is there for me for the future or a dire emergency so I've just left it alone when I left that job. I have no interest in learning about stocks and that sort of thing. The account I have is invested according to the time I retire--aggressive now and more conservative closer to retirement. .

you do know you can pick a Target Date retirement fund when/if you roll the money into the IRA? You can probably even find the exact same fund you are already invested in. But you'll avoid paying the employer layer of fees from now until retirement and that adds up.