Joe posted ..

"A few weeks ago, I received a notice from Principal that my 401K contributions needed to be addressed: either distributed to me in cash or rolled over into an IRA. I only have $3,500 in my 401K. After calling Principal, they sent me a heap of forms to fill out to convert my holdings to a Roth IRA. Here is my question: Am I doing the right thing?"

Converting to a Roth IRA, while I think it's a good thing, it will be taxed on next your income tax.

You can roll your 401K into a traditional IRA 1st. I think if you look through the paper Principal sent you that is one of the thing you will have to do. After the funds are in a Traditional IRA, the IRA can be converted to a Roth IRA.

You can do this with any IRA provider. I suggest you give www.Vanguard.com a look. They have all the forms on-line to download that will roll-over your 401K to a regular IRA. You can convert to a Roth using their forms as well.

I also suggest that you look in VFINX, Vanguard's S&P 500 Index Fund. You may have enough in your 401K that they will let you roll it into VFINX.

Compare the expense of the Principal funds to VFINX and I think you'll see quite a difference.

Good Luck.

BGP