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Financial Planning / Foolish 401(k)s


Subject:  Re: 401K rollover? Date:  3/17/2005  10:43 PM
Author:  GumNaam Number:  18718 of 26080

Here's what strikes me.

1. Vanguard is a good fund company but a 401(k) is always limited in the options it gives you for investment; a Rollover IRA is the most flexible. One reason people rollover into a new 401(k) is to allow them to take loans against it in the future. A 401(k) loan is a bad idea in most cases but is the only option for some people in some cases. If you foresee such a need, transfer to new 401(k), otherwise you're better off with a Rollover IRA.

2. Your second option was "to meet with a private Financial Planner & open an IRA." There's no need of a planner for setting up an IRA. I rolled over a 401(k) 3 days ago to a Fidelity brokerage account Rollover IRA over the net; was a piece of cake. Should be easy with any Fin. Inst. (The phone reps will be eager to walk you through the process as you fill in the form on the web. If you prefer the paper application to the web, be prepared to be a little intimidated, though.)

3. $30 membership to the Fool boards is far more value than what that $500 will buy you.

4. You said "I know very little about what to invest in. That is why I do 401K." which is a problem; you can't do a good job of investing in a 401(k) -- or anything else -- if you don't educate yourself about investing. It's your retirement, so the effort is worth it.

5. Your choices:

a) Keep it where it is.
b) Roll over to new employer's 401(k)
c) Roll over into an IRA.

If you go with (c) above, you need to pick one of the following:

i) Mutual Fund Account: Say with Vanguard. You'll only be able to buy Vanguard funds in such an account. Usually no annual fees, no commissions on buying the funds. Very limited choices. Here, your choice of Fin. Inst. depends on the funds you want to hold.

ii) Brokerage Account: Most flexible. Can buy and sell almost anything. Fees start at none/year for ScotTrade, Fidelity etc. Trade commisions are $7 for ScotTrade (very popular on this board), ~$11 or more for Fidelity etc. Read and make a choice of Fin. Inst

6. Once you make the above choices, you can come back and read past posts (or ask new questions) on how to rollover. Not doing it right can have nasty tax implications.

7. After that, the whole question of what to invest in comes up. For help with that, people will want to know about your other investments/savings, your goals etc.

Welcome and good luck.
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