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Author: taxprof Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75797  
Subject: Rollover IRA Date: 1/20/2002 5:30 PM
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Hi Board!

I am getting a distribution from my 401k plan, because it is terminating. I want to roll it over into an IRA, but I am clueless about who offers good rollover IRAs and what to look for to know if it is good or not. Any suggestions? Thanks in advance.

TaxProf
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Author: gopete One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33397 of 75797
Subject: Re: Rollover IRA Date: 1/20/2002 7:32 PM
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Take a look at a "self directed" IRA at Vanguard (WWW.vanguard.com). They offer good funds at low cost. If you have any stock in your 401k, you might want to consider a partial rollover option.
Good luck, gopete

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Author: ratsauce Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33413 of 75797
Subject: Re: Rollover IRA Date: 1/22/2002 1:43 AM
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You can roll a 401K over into any other sort of "qualified" retirement plan. You absolutely want to set up the destination account and perform a "DIRECT" rollover. Otherwise the feds will require your current 401k manager to withold 20% for taxes. You can still put the full original amount into the new account but you'll have to come up with 20% out of your own pocket until you get your tax refund check around April 2003.

Here's another minor point. If you roll your 401k into a new account AND you keep the funds in this new account seperate from your other retirement account, then you will preserve certain small advantages in the future. If you mix the 401k funds and other retirement funds then these options are lost. Basically the seperate account could be rolled into a new employers 401k plan. Also the seperate account is eligible (other conditions apply) for 10 year averaging of taxes due if you take a lump sum distribution. You can under special circumstances borrow against your 401k and 10yr average, but never an IRA - so 401K dollars are slightly more valuable than IRA dollars.

As for investments - first decide if you are a mutual fund or stock investor. There are many retirement plans that offer self direct brokerage services. Fidelity is IMO a good choice for this, but there a re certainly others. If it's mutual funds you are after then choose a family with a very wide range of funds with low fees and costs. The AAII publishes an annual review of such funds (http://www.aaii.com/). I'm an AAII member, no other affiliation. It's a good organization for small investors looking for good analytical thought. It doesn't push any particular investments. The two broadest fund families are Vanguard and Fidelity and Vanguard wins the fee+cost issue hands down. OTOH Vanguard funds lack some of the stellar performers of Fidelity, but seems to make up for this with better long term performance. That's my opinion of course.






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Author: ratsauce Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33415 of 75797
Subject: Re: Rollover IRA Date: 1/22/2002 2:43 AM
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Whoops - it *appears* that the 2001 changes to the tax laws will now allow rollovers from IRAs into other accounts (like 403s) so the value of keeping the 401k account seprate is probably less that I estimated. I'll have to do some more research, but there still appears to be some advantage in the separate roll-over account.


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