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Greetings Fools. I am 28, I got the boot five months ago from my former employer, and am now re-employed. I have $10,000+ in the old 401(k). What do I do with it? I cannot participate in the new employer's 401(k) until June 2000. My thoughts are (and I am sure I am missing options, etc. below):
1) LEAVE IT: I am bitter about leaving it with my former employer so they can get $$. Any advantages?
2) ROLLOVER TO IRA: I think I can roll it over into a traditional IRA. Any advantages?
3) CONVERT TO ROTH: I already have a Roth IRA with Schwab. I know that I must first roll it over to a traditional IRA, then consider the benefit of converting that traditional IRA to a Roth IRA. Suggestions? Thanks in advance.
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The usual answer is consider leaving it in the 401K if the investment options are performing well, costs are attractive, and the rules meet your needs. If any of these are not met, transfer to a roll over IRA. It is probably worth converting to the Roth, but all of these are personal choices. You seem to be on the right track.
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You are smart enough to be reading the Fool site and asking investment questions, so investing in a self-directed account should be a snap. By all means roll to an IRA. Pick a custodian, the custodian (brokerage firm or maybe a mutual fund company--you have more options with a brokerage for buying stocks of your own choosing with suggestions on this site) will send you forms, which you send to the custodian of the 401K plan. The 401K custodian should make the check out to the new custodian of your IRA, NOT to you. This is important and has a bunch of tax implications. The 401K custodian may send the check, made out to the new custodian, to you, and that is ok--you forward the check to the new custodian, and you know it was sent.
In general, you can do a whole lot better managing your money yourself than someone else will do in managing it for you. Buy good stocks and the market will serve you well. Good luck!
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