The job he just left had a retirment savings plan that he has to cash out in a lump sum. We'll get taxed as well as pay a 10% penalty. Why can't you roll the lump sum into an IRA and save yourself the 40% hit (taxes and penalty)? The money will stay there tax-deferred, until you withdraw it at retirement.If you need the money to pay off credit card bills, go to the Credit Card board for information. Your new cash flow will make it that much easier to pay the debt off.The new job offers a 401(k) but does not match funds. Are we better off investing in the 401(k) or in a separate IRA where we can use the Foolish 4 and perhaps get a better return? They plan to start matching funds in the future, obviously then it's the better option.I would suggest contributing the minimum allowable amount into the 401k, so that you can vest in any matching funds as soon as possible.One advantage to contributing to a 401k, is that the money comes off the top, making the salary look less than it is. This can lower the AGI enough to make a deductible IRA feasible.If you work for a company that has no retirement plan, 401k, SIMPLE-IRA, or SEP-IRA, you can contribute to a deductible IRA, on your own merit.we will be opening the education IRAs with the max yearly contribution of $500 each. Thats too little to Foolish 4 with and too little to put in a Vanguard 500 (which I seem to read as the next best option) Does anyone recommend a decent index fund that we could put the money into until it's big enough to withstand the Foolish 4?We will be opening the accounts with either Seibert or Waterhouse, probably WaterhouseI know that Waterhouse will let you open an Education IRA. Since it is so late in the year, why not put the $500 into the MMF and wait until the end of the year. Then, in late December, buy the highest ranking RP stock, and in early January, contribute another $500 and buy the then highest ranking RP stock that you don't own. You will have, effectively, created an RP2 portfolio. I realize that at $12/trade, you are talking about a 2.4% hit. But this is temporary, and in the long-term, inconsequential.Zev
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