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Financial Planning / Foolish 401(k)s


Subject:  Old 401k, Old Question | Keep, Convert? Date:  2/27/2014  10:01 AM
Author:  IslandFoolin Number:  25184 of 26295

I have a 401k in an employer sponsored plan hosted at Vanguard. I am no longer employed at this company nor have been for a while now.

Recently, I began doing some homework on how my money is invested within this plan and found that the 2 funds in which I'm invested:
[VTIVX: Balanced asset target retirement | 1Yr = 15.52% 5Yr = 9.09% | Expense Ratio = 0.18%]
[VWIGX: International Growth Fund | 1Yr = 22.39% 5Yr = 8.34% | Expense Ratio = 0.48%]
are not performing as well as other funds in the Vanguard line up with expense ratios similar to VWIGX.

Unfortunately, the funds I'm interested in are not offered through my old employer's plan, leaving me with a few choices. Here are my choices:

Do I:

Do nothing...

Roth Conversion
Pay taxes now on money going into Roth which is then tax free when withdrawn.
Tax rate now is probably lower than later in life
Can then invest in any Vanguard fund

IRA Conversion
Pay no taxes now when funds are transferred
Pay tax upon withdraw, likely at a higher rate
Can invest in any Vanguard fund

Vanguard Brokerage Option / Keep in 401k
$40/year maintenance fee
Can invest in any Vanguard fund w/ no transaction fee
Can invest in any stock for a $7 commission
Contributions treated as if in a 401k
I currently have a brokerage account at Scottrade at the same commission

I'm leaning toward the Roth conversion, but wanted to see what you all think.

As always, thanks for the knowledge.

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