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Subject:  Re: Roll old 401(k) and allocate assets Date:  5/8/2013  4:58 PM
Author:  joelcorley Number:  72212 of 88540


You wrote, 1) You are thinking about trading at a discount brokerage. Don't. It's way to easy to end with a shadow of your assets at the end of the day.

Nonsense. A full service broker is much worse. A mutual fund company is no better and usually offers a much smaller selection. And with a broker, you can buy ETFs instead of open-ended funds. ETFs usually have even lower expense ratios than the mutual fund counterparts. Of course open-ended funds are usually available as well; but given that brokers tend to charge a trade commission for those investments, you might as well use ETFs or just move your funds to the mutual fund company instead.

Also he never said anything about trading. That was your own projection. I hold rollover IRAs at both TD Ameritrade and E*Trade. I don't do much "trading" in them and most of my holdings are in core ETFs. My individual stock picks are intended to by more long-term holdings.

Also, 2) You have to be very careful to roll it over into an IRA, not a brokerage account, or you'll be taxed for premature withdrawal.

You're mixing terms. You most certainly can roll into a brokerage account. Best if the account is titled as a rollover IRA to avoid taxes and penalties though.

You can certainly have a rollover IRA at a brokerage though. What you're trying to avoid is him opening an "Individual" brokerage account, which is a taxable account.

Finally, That said, I rolled over my 401k to an IRA, both at Fidelity, w/o selling anything.

I wonder about that too. I've never met a 401(k) plan where you could roll out the holdings without selling. Except for company stock. I've received stock certificates before, so I wouldn't be surprised if you could roll out a self-direct brokerage option as well. But in general, I think you have to cash-out most 401(k)s when you go to roll them over - they usually don't distribute assets.

Most plans contain special versions of the funds offered by the underlying fund family. Very often they are either institutional shares or some class of load-free shares. If you rolled your funds out of a Fidelity 401(k) into a Fidelity IRA, I suspect there is a good chance that they had to sell the funds at the end of one day and buy similar, non-institutional shares with the proceeds. Admittedly they can make that process pretty seamless and frictionless though.

My current 401(k) is with Fidelity. But it's also been with other providers that offered IRA options. Fidelity is probably the first IRA provider I would actually considering rolling my 401(k) plan into. However, I'm hoping to retire with this company so I'm not sure that will ever be necessary.

- Joel
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