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Should I move the money into an IRA?

Yes. You can move this money into a 'self directed ira'. That is what I recommend. It is important to do a trustee to trustee transfer. Let's say you decide to open a self directed IRA at Vanguard, then whoever is your 401k provider (Let's say for example Fidelity) should write a check to Vanguard. Do not have Fidelity write a check made out to you.


What about "cashing out," despite the penalties, and investing in an S&P Index fund?

Bad idea. If your goal is to put it in an index fund anyway you should open a self directed IRA with the mutual fund company of your choice. (I recommend Vanguard) and have Fidelity write a check made out to Vangaurd.


I plan to contribute 5-10% of my salary monthly to whatever strategy I end up going with. Salary is right at $60,000/year


Well that is good. However w/o a 401k plan or some similar plan offered by your employer, I believe your only choice is to open an IRA. Even if you have a 401k it is advisable to contribute $2000 a year to a Roth IRA. So I would recommend opening two accounts at Vanguard. One being the self directed IRA which you won't be able to contribute to. One being a Roth IRA with $2000 of after tax money. If you want to save more than $2000 a year I think you should look into a discount broker, or even opening a third account at Vangaurd. This third account will be a taxable account but will allow you to buy even more shares of their S&P 500 index fund.
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