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I have a 401k with my employer with about $50,000 in it. The performance is terrrible, and the fees are even worse. I have a choice of a few bond funds that perform way below market (which is saying something these days), and a few stock funds that track the market roughly, but have very high costs. They all have a 1% back end load, and the stock fees have a cost as high as 2.3% per anum.

Of course the trick with 401ks is you can only use the funds they offer, and if they all suck, you are stuck. My company does not offer matching of any kind, just the funds for tax free investing.

One of my colleagues here said that he transferred the money to an IRA, which he has more direct control over. However, obviously a 401k has a higher contribution limit than an IRA. (BTW, I have a regular IRA and a Roth, and I contribute to both the Roth and the 401k. I used the regular IRA before I worked at my current employer.)

My question is can I roll over all $50k to the regular IRA without penalty? Can I contribute to the 401k, and then roll the money over to the IRA too? The goal is to get the higher 401k limit, but have more direct control over the money, so that I don't get screwed by the fund manager's terrible performance.

Your advice on this or other recommended options would be welcome.
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