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Subject:  Re: Rollover IRA Date:  1/22/2002  1:43 AM
Author:  ratsauce Number:  33413 of 88775

You can roll a 401K over into any other sort of "qualified" retirement plan. You absolutely want to set up the destination account and perform a "DIRECT" rollover. Otherwise the feds will require your current 401k manager to withold 20% for taxes. You can still put the full original amount into the new account but you'll have to come up with 20% out of your own pocket until you get your tax refund check around April 2003.

Here's another minor point. If you roll your 401k into a new account AND you keep the funds in this new account seperate from your other retirement account, then you will preserve certain small advantages in the future. If you mix the 401k funds and other retirement funds then these options are lost. Basically the seperate account could be rolled into a new employers 401k plan. Also the seperate account is eligible (other conditions apply) for 10 year averaging of taxes due if you take a lump sum distribution. You can under special circumstances borrow against your 401k and 10yr average, but never an IRA - so 401K dollars are slightly more valuable than IRA dollars.

As for investments - first decide if you are a mutual fund or stock investor. There are many retirement plans that offer self direct brokerage services. Fidelity is IMO a good choice for this, but there a re certainly others. If it's mutual funds you are after then choose a family with a very wide range of funds with low fees and costs. The AAII publishes an annual review of such funds ( I'm an AAII member, no other affiliation. It's a good organization for small investors looking for good analytical thought. It doesn't push any particular investments. The two broadest fund families are Vanguard and Fidelity and Vanguard wins the fee+cost issue hands down. OTOH Vanguard funds lack some of the stellar performers of Fidelity, but seems to make up for this with better long term performance. That's my opinion of course.

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