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Subject:  Re: 401(k) handling Date:  1/18/1998  9:51 PM
Author:  JeanDavid Number:  1372 of 88775

<A good friend got laid off from a job at about the time the boss sent all of the employee 401(k) funds to be managed by a money manager who was a friend of his.>

I am neither an attorney nor a tax advisor, but it is my understanding that if you are no longer an employee, you can roll over the contents of your 401k to an IRA.

<My friend wanted to manage her money herself, perhaps by converting to an IRA, but he said she could not do that -- her funds had to go with all of the other funds to be managed by his friend the money manager.>

IMAO, this is either ignorance, misunderstanding, or fraud. The more they tell you you cannot roll over your money, the more you should insist on doing so. If they mean that you would be foolish to take the money, they are right. You should never touch the money nor have it pass through your hands or checking account (government will snatch your current income tax level + 10% if you are not extremely careful). You should arrange to have a custodian-to-custodian transfer into the new IRA that you should start at a deep-discount broker.

<We were skeptical at the time and we remain skeptical, but we know next to nothing about this. We wonder if anybody knows if she can take control of her funds and move them to an IRA account with something like VG Index 500, under her control from then on, from a collection of load funds they were put into.>

She can definately take that control. Whether she should invest in a mutual fund is another matter that can be dealt with at another time. If she insists on a mutual fund, the Vanguard S&P500 Index fund seems to be a good choice.

<We realize that she has already paid commissions through the loads and may have to pay more, but it is the concept we are asking about. What rules govern this sort of thing, and where do we find them? Thanks for any help.>
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