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Author: YellowHammer Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75641  
Subject: 401k to IRA - Liquidate First?? Date: 9/5/1999 12:30 AM
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Howdy All,

My wife has about $20K parked in a 401-k with her previous employer. Although I know we could leave the money in that account, we'd both feel a lot better if we had the money somewhere else. Her new employer's 401-k choice of investment options is pretty poor, so we've decided to transfer her old 401-k into a self directed IRA.

I've done the leg work and selected an on-line broker that we want to transfer the 401-k to. Now my question (finally! I hear you say), when you transfer a 401-k into an IRA with another broker do they simply transfer "ownership" of the mutual funds or do they liquidate the funds and just transfer the cash?

I ask because the on-line broker we've selected does carry the same mutual funds that my wife currently has in her 401-k. We are interested in foolishly getting rid of the two non-index mutual funds and investing in stocks. If the mutual funds are transferred to the new broker then we'll have to pay a $29 commission to cash out of each of 'em.

So will the funds be liquidated automatically in the transfer, or should we direct the current 401-k custodian to switch the mutual funds into a money market account before we transfer into the IRA?

Thanks,
Yellow
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Author: FoolishLikeaFox Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13669 of 75641
Subject: Re: 401k to IRA - Liquidate First?? Date: 9/5/1999 8:39 PM
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So will the funds be liquidated automatically in the transfer, or should we direct the current 401-k custodian to switch the mutual funds into a money market account before we transfer into the IRA?

I've done it both ways this year so I'll give you my experience. The form you fill out with the new broker should have a check box for whether you want the assets liquidated before the account is transfered.

Which to do? Well, liquidating first will save the brokerage fee as you said, but the money will be inaccessible, out of the market, and making money for the custodian for several weeks, while the transfer is in process. Very agravating if the funds in question pick that period to have a big surge.

Also check with the new broker about commissions on trading mutual funds. They may be considerably higher than for stocks.

Fox

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Author: Bobbcat Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13783 of 75641
Subject: Re: 401k to IRA - Liquidate First?? Date: 9/7/1999 6:46 PM
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<<I've done the leg work and selected an on-line broker that we want to transfer the 401-k to. Now my question (finally! I hear you say), when you transfer a 401-k into an IRA with another broker do they simply transfer "ownership" of the mutual funds or do they liquidate the funds and just transfer the cash?>>

All plans are similar but different.

It depends on your 401(k) plan, your Trustee/custodian, and the asset.

If your plan is a daily valued plan (you have a 1-800 number and the market value changes on a daily basis), you MAY be able to transfer the shares.

There should not be a problem if the 401(k) plan is valued on a daily basis and owns "A" class or "B" class shares.

However, if the trustee/custodian has purchased "institutional" shares for your 401(k) account, they may not be able to convert those shares to "A" class for transfer to your IRA custodian. Institutional shares are a preferred class of mutual funds with lower fees due to guaranteed cash flowing in from your employer using it as a plan option. IRAs do not own Institutional shares.

If your plan is not daily valued, you will most likely (99% chance), be moving cash not mutual funds.


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Author: YellowHammer Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13831 of 75641
Subject: Re: 401k to IRA - Liquidate First?? Date: 9/9/1999 10:19 PM
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My thanks to Fox and Bobbcat for the feedback.

Fox,

You make the good point that if I liquidate I will be out of the market until the IRA is established and I'm clear to trade. Any info you can give me from your experiences as to how long it may take for the transfer to happen?

Bobbcat,

All three funds that we currently hold in the 401(k) are "A" shares, which is why I was curious about them possibly being transferred instead of automatically cashed out.

I'm waiting for the forms to arrive from my prospective new broker. I'll be sure to look for the option of cash vs share transfer on the paperwork.

Thanks again to you both!

Yellow sends ...

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