Can someone help direct me what to do with 401k?

[CalDisneyMomof2]

My company was recently sold (just Tuesday was our last day). We reopened yesterday as a new company and new owners have no intentions on offering a 401k program. This is the only job I've ever had so I'm clueless on what to do.

What is the best thing for me to do? My account doesn't have very much (my husband has a healthier account than I do. I don't make as much.)-just under $13,000. I'm clueless when it comes to whether I should roll over to a ROTH or Traditional? I'm clueless on which company to use. I'd much rather do everything online.

I'm 27, so very far off from retirement if that makes any difference. Any advice would be appreciated.

 

[OrangeBirdGirl]

I'd suggest starting with your main bank. They should have an investment division and you could work with them. They'll give you the pros and cons of each way to invest it.

I believe if you funded your 401 pre-tax you may have some tax liability with conversion to a Roth IRA (or if you partially funded your 401 with pre-tax you'd be liable for that portion).

I think there's a lot of weird rules like that so that's why I'd recommend talking to a local expert. They will look at your annual salary too and possibly use that in determining where to invest it.

 

[havaneselover]

My company was recently sold (just Tuesday was our last day). We reopened yesterday as a new company and new owners have no intentions on offering a 401k program. This is the only job I've ever had so I'm clueless on what to do. What is the best thing for me to do? My account doesn't have very much (my husband has a healthier account than I do. I don't make as much.)-just under $13,000. I'm clueless when it comes to whether I should roll over to a ROTH or Traditional? I'm clueless on which company to use. I'd much rather do everything online. I'm 27, so very far off from retirement if that makes any difference. Any advice would be appreciated.

I'd roll it over to a vanguard ira. Vanguard's fees are very low because it manages so much money. I've kept mine as traditional.

 

[Disney Dynamite]

I would also recommend talking to a financial advisor or someone at your bank. A couple of years ago, I ran into a similar situation when I changed jobs. I couldn't leave my money where it was, so I rolled it into a traditional IRA after consulting our financial advisor. If you cash out your 401K before you reach retirement age, you stand to pay income tax on it and a penalty to the IRS.

 

[Skywise]

You'll probably want to roll it over to a traditional IRA (Individual Retirement Account) to avoid any tax issues. A Traditional IRA is basically the same as your company's 401k except only you contribute to it but you get to deduct the first couple of thousand dollars from taxes at the end of the year - so long as you didn't contribute to a 401k that year (which it sounds like you won't in the near future). With a ROTH IRA you don't get the tax deduction now -BUT in the future when you retire you can take your money out tax free. (tl;dr = Roth IRA no tax deductions now, pay no taxes when you're old - Traditional IRA get tax deductions now, pay taxes later)

Depennding on your comfort level for investing you can find places that will manage it for you like your bank or other full service investment firm. Note that this comes at a cost with them taking something like 1% of the account per year for service fees. Mid-range places like Charles Schwab that will either charge fees or let you take total control of your account with lower fees or places like E-Trade where it's all under your control but the fees are extremely minimal.

I did Charles Schwab for a few years after I rolled over a 401k and managing it myself before turning it over to a full service investment firm a few years ago - So far I did a much better job than my financial advisor has currently. But the economy was better and I was a little luckier - YMMV.

Good luck!

 

[Nebraska_Disney]

I second the idea of contacting Vanguard. They can help you set up something, probably a roll over IRA. You have a certain amount of time to do this before tax issues develop.

 

[jedijill]

Who is your 401k with? You can call them and they can help roll it over to an IRA as well.

Jill in CO

 

[*pixie*dust*]

I'd roll it over to a vanguard ira. Vanguard's fees are very low because it manages so much money. I've kept mine as traditional.

I totally agree with this. Vangard offers some great very low cost options, including Target Date Funds. I would be leery of investing with someone (like an investment person at the bank) that will make a large commission from selling you something.

 

[MomToOne]

Rolling over to a traditional IRA is definitely the easiest, and you maintain dollar for dollar what you had.

If you want to convert it to a Roth, you can do that after you roll it to the traditional. Just research all the IRS rules about that conversion - there are plenty of publications on it.

Will the company be cutting a check to you for your 401K, or will they do an institution to institution roll over for you? If they are cutting you the check, expect them to withhold 20% of the amount - you will then have to make up that difference when you deposit it into the IRA. At the end of the year, though, you'll get it back if you file things correctly on your taxes.

 

[Anthony1971]

1. Find out who the 401K is with ie Prudential, Vanguard......
2. Find out the rules of leaving with the company it is with some have a minimum amount some do not.
3. if you need to draw the money you will have to put it into a new IRA or 401K account.
4. you can deem any account at a local bank or such this type of account so long as you open it as such or you can research other options.

Be aware that if you have to roll it into a new account and receive a check without doing so you will not only pay the taxes on the funds but incur a 10% penalty. The place where you have the account will only withhold a portion of the taxes if you tell them you are NOT rolling the money over. if you do roll it over you will then claim on your taxes that you withdrew the funds and rolled it over to X.
My advice would be to leave it where it is if you can so long as it is with a name institution. When you have a job with a 401K you can than roll it over if you so desire. Be aware that it is not free to have a check issued from a 401k and in general it will be twice as much to have a check issued in your name which would happen if you open your own account as compared to an institution name should you have another 401K.
As far as fees are concerned no matter where you go you will pay them and in general it is not a large difference anymore as you need to compare apples to apples with this... an index find will incur low fees no matte where a highly managed find will incur high fees. The past performance rates quoted on any fund is inclusive of fees. However with 13,000 this is not a concern.... let it grow you are young and have plenty of time to ride out any ups and downs in the stock market.
lastly review the funds or options at the present institution and put your money on a fund you are comfortable with or simply leave it in what it is in if you are comfortable.

 

[Anthony1971]

Forgot
Roth IRA's
you will pay the tax on what you have in the account at your current tax rate but it will be tax free when you draw from the account when you retire....
there is a lot that goes into the thinking behind this working well for you or not..a lot of people believe when most under a certain age retire they will no longer enjoy exemptions offered to people who retired today where they only pay taxes on 401K amounts that exceed a portion of their social security.... There are many many many other thoughts as well..
IMO it is not a bad option at your age as all the gains will be tax free when you retire but that is providing you can pay the taxes due out of pocket.
HOWEVER you should do this next year... why... Jan 1 you can declare this a Roth IRA no matter where it is and on that day the amount you have in the account becomes taxable. (due when you file next year) Dec 20 you find that you have lost money on the account due to the stock market tanking... you still have to pay the taxes on the Jan 1 amount... BUT you still have the option of converting back to a traditional IRA which is what you would do. Opposite if you have large gains from the stock market doing well you than still only pay the taxes on the what you claimed on Jan 1.

 

[eliza61]

If you do go the bank route please be careful and check out the person you get to advise you.
Are they true financial advisor or just bank employees with a little training?
Are they fee compensated or commission based. If they are commission compensated they may hard sell you on bank products because that's where they get their commission from.

Go to www.bogleheads.org. It's an investment site that follows the principles of Vanguard founder Jack Bogle but they are uber knowledgeable and will give you great information

 

[Kies99]

I work for a large investment company.

Do not listen to any advice here on this board other that that which tells you to speak to a certified/registered investment professional. Talk to your bank or if you have an investment firm, talk to a broker there.

 

[Lowell317]

I work for a large investment company.

Do not listen to any advice here on this board other that that which tells you to speak to a certified/registered investment professional. Talk to your bank or if you have an investment firm, talk to a broker there.

This. 100% this. I also work for an investment company (of the mid-sized variety) and deal with things like this daily. A licensed professional (preferably a Certified Financial Planning designate holder) is your best bet.

 

[tvguy]

This. 100% this. I also work for an investment company (of the mid-sized variety) and deal with things like this daily. A licensed professional (preferably a Certified Financial Planning designate holder) is your best bet.

I think the only safe advise on this forum is this......other than....don't cash it in and spend it.

 

[havaneselover]

I work for a large investment company. Do not listen to any advice here on this board other that that which tells you to speak to a certified/registered investment professional. Talk to your bank or if you have an investment firm, talk to a broker there.

For $13k?????

A rollover is easy. I've done it myself. Many of us are quite adept at making prudent financial decisions without speaking to professionals.

 

[Tinkerbellie16]

Roll it over to an IRA and do it soon before you get a penalty. You can do this yourself. Take a couple hours to look into it. Or you can hire a professional to do this but I would only do that if you intend on having a long term relationship with someone for your ongoing needs. Don't hire someone for a one time thing.

 

[fac]

For $13k?????

A rollover is easy. I've done it myself. Many of us are quite adept at making prudent financial decisions without speaking to professionals.

 

[crisi]

For $13k?????

A rollover is easy. I've done it myself. Many of us are quite adept at making prudent financial decisions without speaking to professionals.

And its YOUR money, it matters to you far more than it matters to a professional. You need to learn this stuff well enough to evaluate a professionals advice, because not all their advice is good - and some of it is very expensive bad advice - and if you can't roll over an IRA, you don't understand your money well enough to trust your money to anyone else.

 

[MillauFr]

It is far easier to figure out how to roll an IRA over to a low cost brokerage firm, E*Trade, TD Ameritrade, Schwab, Fidelity, etc... and picking a couple of low cost index funds than it is to find a good financial advisor. Too many of them are leeches and it is impossible to determine this after talking with them for a few minutes.