401k advice

[lorax123]

Hi all.

My wife was laid off in October and she has the option of rolling her 401 into an IRA (non-Roth of course, we are under 40 and would take a massive tax hit) or leaving it ride in the current plan, but that takes a $200 hit per year.

My thoughts are, both our 401s are back to the pre-crash levels, but that is because of a contributions and recovery, so I wouldn't mind letting hers ride out for the moment. Since the market is heading up, I hate selling off those shares bought before and after the stock dive.

I did investigate our local banks IRAs, and those are very low interest rates and are only for a year. Of course we could do that and transfer the money to another retiremet fund in a year.

I really have not had a lot of opportunity to investigate options, since I'm embedded in a massive job hunt for myself and that has eaten up a lot of my time.

Any advice against letting it ride for now and wait for her to find another job to transfer the funds to or eventually put the funds into an IRA?

Thanks

 

[RitaE]

Roll it into an IRA at a reputable brokerage firm that has a wide variety of stock, bond, and cash funds for you to choose from. Banks usually do not have a large number of options.

Certainly do NOT pay a $200 yearly fee for the privilege of having your retirement money on deposit with anybody. If you are going to pay fees, then you should be getting value from those fees such as investment advice from a qualified professional.

I'm personally fond of the low cost index type of funds that allocate your investments based upon your age - but you will need to investigate those for yourself to make a decision.

 

[tar heel]

I'd roll it over to somewhere with lower than $200 a year fees.

 

[Kika]

Roll it into an IRA at a reputable brokerage firm that has a wide variety of stock, bond, and cash funds for you to choose from. Banks usually do not have a large number of options.

Certainly do NOT pay a $200 yearly fee for the privilege of having your retirement money on deposit with anybody. If you are going to pay fees, then you should be getting value from those fees such as investment advice from a qualified professional.

I think this is good advice. I would check out a Fidelity, Vanguard, or something similar. They have tons of options.

 

[brerrabbit]

Whenever you leave a job that has a 401 (k) you should role it into what is termed a self directed IRA. Mine has been with Fidilety for years. What it allows you to do is invest in a large number of choices from mutual funds to stocks, bond funds, etc. You might want to check with several firms and look to see who gives you the most investment options. Some limit you to their own products while others give you more variety. I have been very happy with Fidilety's choices. They also will not charge fees with a certain balance or if you invest in their mutual funds.

 

[snowywhite89]

Hi all.

My wife was laid off in October and she has the option of rolling her 401 into an IRA (non-Roth of course, we are under 40 and would take a massive tax hit) or leaving it ride in the current plan, but that takes a $200 hit per year.

My thoughts are, both our 401s are back to the pre-crash levels, but that is because of a contributions and recovery, so I wouldn't mind letting hers ride out for the moment. Since the market is heading up, I hate selling off those shares bought before and after the stock dive.

I did investigate our local banks IRAs, and those are very low interest rates and are only for a year. Of course we could do that and transfer the money to another retiremet fund in a year.

I really have not had a lot of opportunity to investigate options, since I'm embedded in a massive job hunt for myself and that has eaten up a lot of my time.

Any advice against letting it ride for now and wait for her to find another job to transfer the funds to or eventually put the funds into an IRA?

Thanks

I would call Vanguard and have them help you set up your brokerage account. They can also initiate, in many cases, the transfer for you. You will have to pick what accounts to put them in. A good option is the targeted funds.

 

[lorax123]

Ugh. Seems like a lot of homework that I am just not prepared for. This is why I was going to let it ride for now. Our local banks IRA is so low interest, I couldn't justify pulling out and putting it in there.

Her getting laid off has been an immense pain in my butt. From finding private health insurance for her, to setting up the unemployment compensation. Add on a trip to Disney next week, getting the FSA distribution for daycare for 2010 and two months of applying and interviewing for a new job for me... $200 really doesn't look bad.

 

[clutter]

I don't think there's a tax hit if you roll it into an IRA. Like someone said, call Fidelity or Vanguard or Chas Schwab. All you really have to do (well, your wife has to do) is set up the account. Then complete the paperwork her company is asking for with the account information. They should transfer it directly to your new IRA. Pretty simple. She can simply invest in one account for now and re-allocate it when you all have more time.

 

[lorax123]

Well it's the ROth IRAs we would have to take a tax hit on. Since all of our 401k dollars are pre-tax.

I'll look into some of the other funds that have been suggested. Such a pain. My friend is going through this all too, since he was laid off. So much paperwork...

 

[AmberHeartsDisney]

You can roll to another IRA with no tax hits. We roll 401 to roll over IRA's all the time.

 

[dodukes]

I would look over the plan again. When I was fired from my last job since I had more than 5k in the 401k it was eligible to stay in their plan for free. Its it stil there and its been 3 years. Its acutally a good plan and the people that manage do a heck of a job, which is why i choose to leave it there, and of course, they do all the work for me!

Just saying cuz this might be for more than just my office plan, i thought it was a standard thing you could leave it at yor current pan for free.

 

[rkrivas]

You can roll to another IRA with no tax hits. We roll 401 to roll over IRA's all the time.

If you roll 401(k) money (that's otherwise taxable) into a Roth IRA, you will owe taxes for the year that you roll over. After that point, it becomes treated as Roth money and you may be able to avoid paying taxes on future earnings.

 

[tvguy]

If you roll 401(k) money (that's otherwise taxable) into a Roth IRA, you will owe taxes for the year that you roll over. After that point, it becomes treated as Roth money and you may be able to avoid paying taxes on future earnings.

Consult a tax expert on a Roth IRA. Your age, and how much you have in your 401k are huge factors in this decision. I left my last job after 16 years of putting 15% pay in each year, plus a 3% employer match, and right at the peak of the stock market boom. The tax hit of a Roth would have taken me about 20 years past my life expectancy to regain by the money being tax free when I retired.

 

[manning]

Hi all.

My wife was laid off in October and she has the option of rolling her 401 into an IRA (non-Roth of course, we are under 40 and would take a massive tax hit) or leaving it ride in the current plan, but that takes a $200 hit per year.

My thoughts are, both our 401s are back to the pre-crash levels, but that is because of a contributions and recovery, so I wouldn't mind letting hers ride out for the moment. Since the market is heading up, I hate selling off those shares bought before and after the stock dive.

I did investigate our local banks IRAs, and those are very low interest rates and are only for a year. Of course we could do that and transfer the money to another retiremet fund in a year.

I really have not had a lot of opportunity to investigate options, since I'm embedded in a massive job hunt for myself and that has eaten up a lot of my time.

Any advice against letting it ride for now and wait for her to find another job to transfer the funds to or eventually put the funds into an IRA?

Thanks

Can you pay the taxes without using the money in the plan? If so maybe consider a Roth IRA. You would 1st convert it to a regular IRA, then convert it to a ROTH.

 

[manning]

I am several years away from the mandatory 70 1/2 withdrawal. At that time this is what I plan to do with my 401-k

I will cash it all in and take it in the form of stock (no way as money.) Here's why and it is not widely known.

Normally you pay taxes at ordinary income tax rates.

Taking it as stock you pay ordinary income tax on the amount you and the company contributed to the plan throughout the years you contributed. You take the value of the plan as stock. This changes the tax status. Instead of paying taxes as ordinary income you pay taxes as capital gains instead of ordinary income tax and now is at 15%.

It saves a bundle in taxes.

So if you had $500,000 in the plan and you and the company contributed $50,000, you would pay ordinary income tax on the $50,000 and Pay capital gains on the rest when you cash in the stocks. And there is no time limit when you have to.

 

[Nicolepa]

Can you pay the taxes without using the money in the plan? If so maybe consider a Roth IRA. You would 1st convert it to a regular IRA, then convert it to a ROTH.

I just converted my 401k to a Roth. I didn't have to do an IRA first. Both accounts were w/Fidelity so all it took was 10 minutes at my local Fidelity. I even had the option of taking out the taxes when I rolled it over.

I held mine w/my former company for several years (no fees, good options), then I heard in 2010 only you could convert your 401K to a Roth regardless of income limits or funding limits, so I waited a couple more years.

 

[suzanna1066@comcast.]

Whatever you do, don't pay $200 per year in fees. I work in the industry and that is a racket! There are plenty of firms that offer no-fee/nominal fee IRAs.

 

[golfgal]

I just converted my 401k to a Roth. I didn't have to do an IRA first. Both accounts were w/Fidelity so all it took was 10 minutes at my local Fidelity. I even had the option of taking out the taxes when I rolled it over.

I held mine w/my former company for several years (no fees, good options), then I heard in 2010 only you could convert your 401K to a Roth regardless of income limits or funding limits, so I waited a couple more years.

Technically you did convert to a regular IRA then to a Roth under the conversion provision in 2010 anyone can do this (typically there are income restrictions). The paperwork you filled out just streamlined the process.

OP, since you don't have the time to look into this I think you need to find a financial adviser in your area with a reputable company to help you get started on the right path. I think people assume that the $200 is a fee when it is probably just losses. You need to work on your asset allocation and a good adviser can help you with that. After you find one you can figure out which company is best for you. Don't automatically assume that a "no fee" IRA is going to be the best route, especially if you don't want to learn about investing. Also, the no fee IRA's don't always have the best performance and over time it ends up costing you more.

 

[arminnie]

Roll it into an IRA at a reputable brokerage firm that has a wide variety of stock, bond, and cash funds for you to choose from. Banks usually do not have a large number of options.

Certainly do NOT pay a $200 yearly fee for the privilege of having your retirement money on deposit with anybody. If you are going to pay fees, then you should be getting value from those fees such as investment advice from a qualified professional.

I'm personally fond of the low cost index type of funds that allocate your investments based upon your age - but you will need to investigate those for yourself to make a decision.

I have liked Fidelity because of the many online tools that are available - but there are plenty of others that are just as reputable.

Ugh. Seems like a lot of homework that I am just not prepared for. This is why I was going to let it ride for now. Our local banks IRA is so low interest, I couldn't justify pulling out and putting it in there.

It could not be easier to make this change. I moved my 401k into fidelity with a phone call - I have no Fidelity office anywhere near me.

Even a money market account at a brokerage firm such as Fidelity or Vanguard will pay more than the bank and not charge the $200. You can do the homework portion later.

Since your income is low right now due to enemployment it might not be a bad idea to put some of it into a Roth IRA - your tax hit may be minimal.

One of the easiest mutual funds is one of the S&P index funds. I have full confidence that our economy will recover. It may not pay the best return but you at least keep up with the market.

I am not an investment counselor by any means - but I do have an MBA in finance from Stanford Business School. But even I prefer mutual funds - there are people who spend all their time evaluating how to invest those funds.

I wish the Roth had been available to me when I was still in the work force. I am glad for the IRA but I am eaten alive in taxes when I withdraw money - I am now retired. It kills me to pay taxes on my social security.

 

[manning]

I have liked Fidelity because of the many online tools that are available - but there are plenty of others that are just as reputable.

It could not be easier to make this change. I moved my 401k into fidelity with a phone call - I have no Fidelity office anywhere near me.

Even a money market account at a brokerage firm such as Fidelity or Vanguard will pay more than the bank and not charge the $200. You can do the homework portion later.

Since your income is low right now due to enemployment it might not be a bad idea to put some of it into a Roth IRA - your tax hit may be minimal.

One of the easiest mutual funds is one of the S&P index funds. I have full confidence that our economy will recover. It may not pay the best return but you at least keep up with the market.

I am not an investment counselor by any means - but I do have an MBA in finance from Stanford Business School. But even I prefer mutual funds - there are people who spend all their time evaluating how to invest those funds.

I wish the Roth had been available to me when I was still in the work force. I am glad for the IRA but I am eaten alive in taxes when I withdraw money - I am now retired. It kills me to pay taxes on my social security.

That is why I will take it in stock to minimize taxes, If at all possible try to pay taxes with money outside the plan if converting to ROTH.