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URL:  http://boards.fool.com/i-have-approximately-90-days-to-rollover-my-401k-20408829.aspx

Subject:  Re: 401K rollover questions Date:  2/29/2004  4:18 PM
Author:  Mark0Young Number:  39531 of 75797

I have approximately 90 days to rollover my 401K to something else. I'm THINKING of putting it into an IRA, just not sure what.

Unless your current employer has a plan that you can roll your former employer's 401(k) money into, rolling it over to a "Rollover IRA" (a Traditional IRA funded by qualified funds) is the way to get control without the tax and penalty hits.

The amount of money in your former employer's 401(k) may limit where you can roll your money because many financial institutions don't want to deal with small accounts, so they usually have a minimum amount that they will deal with, and sometimes charge a maintenance fee if the balance is below a certain amount.

Generally, the best place to have the "Rollover IRA" depends on what you would like to invest in:

Individual stocks: a discount broker. Since discount brokers get their money from commissions, often one will have to pay a certain maintenance fee and/or conduct a certain number of trades a year.

Mutual funds possibly from multiple mutual fund families: a broker that carries a variety of mutual funds, preferably with low or no transaction costs. (I often see Scottrade mentioned as a good place to buy a variety of no-load funds without transaction costs.)

Mutual funds from a single fund family: sometimes it is easiest to just have the Rollover IRA at that fund family--no middle man to get a cut or add confusion, and usually with the largest assortment of funds from that family to buy instead of just the select assortment of funds from that family offered by a broker.

If you have no other investments, if stock market volatility doesn't spook you, if the investment horizon (the time you need the money) is at least 5 years out and hopefully 10 years or more, and if you have the minimum amount needed for it ($1,000.00), I would probably suggest opening your "Rollover IRA" at Vanguard and have the money put in their Vanguard Total Stock Markt Index Fund, which would give you instant exposure to 3650 US stocks, and have Vanguard arrange for the transfer. You can do some reading at http://www.vanguard.com Vanguard also offers a variety of other funds, including target retirement funds and balanced funds that may serve a good way to get exposure to both stocks and bonds at a ratio you might be more comfortable with.

However, that is just one of several reasonable alternatives, depending on how much attention you want to pay to your investments, your investment time horizon, ability, willingness, and need to take on market risks (volatility). If, on the other hand, you are going to use the money for a "first time home purchase" in the next year or two, you might even be better served by using a credit union or a bank to put your money in a money market deposit account inside a Rollover IRA.

I don't know what you have in the rest of your investments, or your plans for the Rollover IRA, so your specifics may make all of the above advice inappropriate for your specific situation.

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