I've cruised all the FAQs and can't find the advice I want... any ideas?I've just gotten a wonderful new job, and I've got a 401k to carry over from Old Co., but here's the rub: New Co. only accepts new sign-ons once a year - because of the timing of my hire and 6-mo. eligibility requirements, it's going to be 17 months before I can join. What do I do with this money? My current account is doing well, I wouldn't mind leaving it there, but I've heard varying answers as to how long I can leave it sitting with Old Co. Not to mention, I can't contribute via Old Co., so I have 17 mos to float... nice extra cash but I'd kinda like to be doing some saving...all advice welcome!
>>> What do I do with this money? <<<Check with your nre employer again. Many plans will allow rollovers to the plan even if you haven't met the eligibility requirements. If you don't want to / can't do this, then the best option is to roll it over to an IRA. Any investment company can help you establish this IRA.>>> I've heard varying answers as to how long I can leave it sitting with Old Co. Not to mention, I can't contribute via Old Co. <<<If your vested account balance is $5,000 or more, Old CO. cannot make you take the money out of the plan. If it is under this amount, they can "force" your distribution. If they notify you that they are going to do this, roll the money over as soon as possibl eto avoid taxes and penalties. IF, as you say, the accounts are doing ok, it may be ok to leave the acct balance in the Old Co. Plan until you are sure what you want to do.As far as not being able to contribute to Old Co. Plan. That doesn't matter because you can't contribute to the New Co Plan either. Your only real option is to open an IRA and put the $2000/yr in until eligible for the 401(k)Hope this helps!JEhmig
You can leave the balance at Old Co. as long as your vested balance is more than $5,000. If its less, Old Co. can tell you to take a hike with your money. Otherwise, you can stay as long as you want.Since you are not eligible to make a 401k contribution this year, you can make the $2,000 contribution to an IRA and take a full deduction for it. If you already do not have an IRA, you can open one at any discount brokerage such as Schwab, Fidelity, Vanguard, E*Trade, etc. Then you can buy individual Stocks, Bonds and choose from thousands of mutual funds.Then, when you are eligible for the new Plan, you can either move the money from the old Plan to the new plan, move the money from the old Plan to the IRA, (You can do that once you open the IRA), or leave the old money where it is.Bill
This is a fairly routine decision - if you have more than $5000 in your account you cannot be forced to take a distribution - so, if you are happy where it is you can wait and roll it into the new plan later, or continue to leave it where it is currently.A somewhat better option is to set up an IRA account somewhere and roll these funds into that account. As long as you don't also put in non-rollover funds into the same account you can later roll it into your new employer's plan. However, you'll probably find that you'll like the freedom of having full control over your IRA better than the restrictions in a 401(k) plan. You'll have more investment choices and fewer restrictions on when you can get the funds (although you cannot really borrow them). Either way, unless the fees in the IRA are outrageous you'll probably want to use the IRA now rather than be tied back to your old employer.
As the other responses have indicated, the IRA rollover is a good solution. You may even be able to start one for your spouse (if one is available) so you can contribute up to $2000 in each one. In addition, if you have any kids, you might want to consider Education IRA for them. You are allowed to contribute up to $500 for each EdIRA AND the normal $2000 for your IRA. The Fool has a pretty good description of all these IRA options in the "All About IRAs section".Good Luck!
First rule. Before you take new job, try to negoitate these type of things. Nothing wrong with saying Hi I love your company but here is what I want. Promise you they will respect you more.Ok my rule is simple on.When I move companies my 401k goes to IRA simple as that. Here is why.401k that was moved to IRAIRa account onDec 1998 Value 8800Dec 1999 value 20100No money was added to the account.401ks stick as far a investments go. You are a prisoner to companies selections and company does not have your interest at heart when they make selections.If you move it to IRA you can at least add 2000 to it.Hey take the time to start Roth IRA. Set aside money that normally would go into 401k. You'll be happier in the long run. But that rule of waiting is old one. I would just comment a little bit. That new company might not be all that great if they don't let you invest now.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates, Analyst Rat