I am 43 and getting ready to leave corporate life for greener pastures, and do not anticipate returning to the high stress/high income life. I will be shifting my 401(k) out of the company in about 6 months' time, stripping out highly appreciated company shares (paying the required 10% penalty and 40% ordinary income tax on their cost basis) and converting the remainder to a self-directed IRA. The shares will be taken out to hold, eventually to be whittled down to a fixed dollar level of exposure going forwards, and to avoid having to pay ordinary tax on all the gain when IRA distribution hits. The residual amount in the 401(k) is currently invested 60% in S&P500 index, 35% in 2-3 year Treasuries and 5% in company stock....due to somewhat limited alternatives in my employer's 401(k) program.I'm looking for suggestions on what to do with the residual to prepare for the IRA roll-over. Should I think of this as a short-term investment decision and convert it all to cash, or could I leave as is? What actually is physically transferred to the banker, cash or the current actual allocations? I am likely to allocate the future IRA in various indexes, S&P500, QQQ, Russell, etc.Thanks for any suggestions..........
Rather than paying penalties, you may want to consider an SEPP distribution from your 401K plan. This would minimize income taxes and penalties by taking out only a fraction of the balance each year. I would guess you would be able to repurchase those stocks for commissions less than than the 10% penalty and 40% income taxes (depending on your tax rate).Talk to your plan administrator about rolling over the 401K plan. Some plans will make the transfer without causing you to sell the assets (especially if you have a mutual fund company as the plan administrator). But it depends. If you change adminstrators, you probably will have to make the transfer in cash. But this is not a problem if you buy no load mutual funds.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |