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Author: fredl14 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 50191  
Subject: 401(k) rollover -- broker? Date: 2/10/1999 9:00 AM
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Having left my former employer, I have decided to move the 401(k) funds I have into an IRA with another (hopefully better :))investment fund. Do I have to deal with a broker for this? Can I deal directly with the fund? I don't plan on rolling over the funds for at least another year so I don't think I need a lot of services.

Also can I split the 401(k) funds between two or more different investment funds (e.g. a Vangard and Janus fund)when I rollover the plan funds into an IRA?

Thanks for your help with my probably pretty foolish questions.

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Author: UUinMN Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10117 of 50191
Subject: Re: 401(k) rollover -- broker? Date: 2/10/1999 10:46 AM
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No, you don't need to use a stockbroker to roll your money into a mutual fund.

Have you already withdrawn the IRA money from your former employer? If so, you MUST open a new IRA account within 60 days, or pay taxes and penalties on the withdrawal. If your former employer is still maintaining your IRA account, you can have it rolled over directly into your new IRA. Just include an account rollover form when you apply for the new IRA.

" I don't plan on rolling over the funds for at least another year..."

Your use of "rolling over" makes me nervous. I hope you mean moving from your new mutual fund to something else. To the IRS, "rolling over" is a technical term, meaning moving money from one IRA to another. You don't have a year to do this--just 60 days. See above.

I'm not sure about rolling into two separate funds. You are restricted to one rollover per year, when you take possesion of the funds yourself. Direct rollovers (from IRA to IRA--no check to you) are unrestricted. Don't know if you could split an IRA in two in a rollover. Ask the fund companies. Or a broker. I expect that policies vary.

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Author: zgriner Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10119 of 50191
Subject: Re: 401(k) rollover -- broker? Date: 2/10/1999 10:57 AM
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Hey fred,

I'd tell you to read the FAQ (hint, hint, TMF people), but their isn't any, so here's the answer.

Your former employer (if its large enough) should be sending an info packet regarding your 401k money, and any pension benefits. Find out if there is a window for rolling your money from your 401K. I had a 4 month window, otherwise, it was stuck until I was 59 1/2. Each plan is different.

How you handle the rollover depends on your old 401k. My old 401k would only send a me a check. So, when I was ready to roll the money, I had the check made out to the custodian of my new IRA and sent the check to the custodian. If your plan will handle a direct rollover, you can ask your new IRA custodian to handle the paperwork.

If you plan on rolling your money into a mutual fund, like Vangaurd or Janus, then you don't use a broker. Just get an IRA application from the fund managers. There will be a transfer form that you fill out.

Regarding splitting your 401k, I would advise you put all your money into one fund, then transfer part of it to another fund. Its less of a hassle and neither Vanguard nor Janus will charge a fee to do that. BTW, I do know that if you keep > 10k in a Vanguard IRA, they will not charge you a custodial fee.

Zev

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Author: RheS Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10124 of 50191
Subject: Re: 401(k) rollover -- broker? Date: 2/10/1999 12:49 PM
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fred14 is asking about 401(k) rollovers: "Having left my former employer, I have decided to move the 401(k) funds I have into an IRA with another (hopefully better :))investment fund. Do I have to deal with a broker for this? Can I deal directly with the fund?"


zgriner has answers, most of which are pretty good. One, at least, strikes out: "I'd tell you to read the FAQ (hint, hint, TMF people), but their isn't any...."

Um, Zev, what's that in the green stripe at the bottom of the window. It's the FAQ. Although, it's true, it doesn't cover this particular situation much, there's still a lot of stuff in there. Not only that, but it's a user-created FAQ, rather than us wimps just waiting for the mighty Fool On High to come up with something. megeranski did a nice job.


sgriner: "Your former employer (if its large enough) should be sending an info packet regarding your 401k money, and any pension benefits. Find out if there is a window for rolling your money from your 401K. I had a 4 month window, otherwise, it was stuck until I was 59 1/2. Each plan is different."

If your company's plan is like most big-company plans, there's a phone number. Call them and ask... since the packet they send will certainly take a while, and you don't want to miss a deadline like the one above. Be ready to stay on hold for a while... you know the routine.


zgriner: "How you handle the rollover depends on your old 401k. My old 401k would only send a me a check. So, when I was ready to roll the money, I had the check made out to the custodian of my new IRA and sent the check to the custodian. If your plan will handle a direct rollover, you can ask your new IRA custodian to handle the paperwork."

This is how mine worked, too. What you don't want to do is take possession of the money yourself at all even for a minute. If you do, they have to take out withholding taxes. You can still roll the whole amount, but now your making up the taxes from your own pocket... which is hard! So you want the old plan to cut a check payable to a new plan (with no taxes because it's going to an IRA), or to a direct transfer. To get the check written correctly, you really need to get the new account started, so they can tell you exactly how to phrase the check. It will probably include the phrase "FBO Fred14"; FBO stands for For Benefit Of... which means they're supposed to put it into your account. If you can, get the new account number on it too. My old 401(k) trustee said they had to mail me the check, but I could have it paid the way I wanted, except that there wasn't room in the computer for the new account number. While it passed through my house, I wrote the account number on it. Saves the kind of trouble you read about here, right?


zgriner: "Regarding splitting your 401k, I would advise you put all your money into one fund, then transfer part of it to another fund."

My 401(k) would have been happy to cut multiple checks... but Zev's suggestion might make things simpler. It's up to you.

But whatever you do, open the account you're sending money to first. Saves much trouble.


fred14: "Do I have to deal with a broker for this?"

Obviously not... most of the big funds will be happy to set up IRA accounts. But maybe you should consider opening a brokerage account anyway... it will give you more flexibility, and you might, after reading some of the investment discussion on the Motley Fool's web site, reconsider letting fund managers make decisions for you.

Since you like the Vanguard fund, you might consider getting brokerage service from them... they offer it, at least to people who also have money in one of their funds. Otherwise, many discount brokers would be happy to open a "self-directed IRA" which would allow you to invest your money as you preferred... several of the medium-priced ones, say Discover (my broker) and Waterhouse, have no fee for IRAs, offer a lot of mutual funds at various ranges of fees, as well as stock trading. Your IRA can't buy on margin (that it, it can't borrow money) or trade options, but it can invest in just about any kind of stock, or even bonds (Discover carries them, anyway).


Happy Investing... Fool On!

Dick Smith

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Author: joelwilliams One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10127 of 50191
Subject: Re: 401(k) rollover -- broker? Date: 2/10/1999 1:31 PM
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I'd tell you to read the FAQ (hint, hint, TMF people), but their isn't any, so here's the answer.

There is a link to the Discount Brokers FAQ at the bottom of each message on this board, however, another place to post and receive information on 401(k) and IRA questions is the retirement investing message board.

Joel


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