I'm changing jobs, and trying to decide what to do. Do I leave it in place?Do I roll this over into the new company's plan?Do I go to a self-directed IRA and invest in (gasp) Mutual Funds?Or do I do the Foolish thing and go self-directed in stocks?Any and all suggestions are welcomeFool On!Jonathan
Greetings, Jonathan, and welcome. You wrote:<<I'm changing jobs, and trying to decide what to do. Do I leave it in place?Do I roll this over into the new company's plan?Do I go to a self-directed IRA and invest in (gasp) Mutual Funds?Or do I do the Foolish thing and go self-directed in stocks?>>The rock bottom line is you must make the decision with which you are most comfortable. As food for thought, though, consider:If the amount is less than $5K, you will be forced to move the 401k money.You may transfer old plan money into a new employer's plan only if the new plan accepts rollover money from a prior plan. The new plan does not have to take it, and not all do.Most Fools would prefer the transfer to an IRA because of the greater freedom of investment choices as compared with the usually mediocre selection of funds available in a company's plan.Regards..Pixy
Pixy,Thanks for your help. You told me a few things I didn't know. Luckily, it's worth more than $5K. My new company uses Merril Lynch (read: $$$ Fees)since the owner is a long time friend of the broker. I don't know whether they accept rollovers or not at this point. I think I'll go Self-Directed. It's easier that way and I get control.Thanks again.Fool On!Jonathan
<<Thanks for your help. You told me a few things I didn't know. Luckily, it's worth more than $5K. My new company uses Merril Lynch (read: $$$ Fees)since the owner is a long time friend of the broker. I don't know whether they accept rollovers or not at this point. I think I'll go Self-Directed. It's easier that way and I get control.>>I set up a self-directed IRA with my online broker (DLJdirect). They don't charge the $35/yr IRA fee if I trade 3 times per year. I've been happy with my other accounts with them, and this one is working out nicely. BTW, boo hiss Merrill Lynch. My father's trust fund was with them. Big fees, but they didn't keep an eye on what was happening.
Jonathan -- You may want to check out your state's law on whether creditors can reach your IRA in the event (unlikely, I hope) that you ever were in bankruptcy. It's my understanding that creditors cannot reach your account under an employer's qualified plan, but in some states, IRAs are not exempt, so they can be raided to pay off your creditors. To add insult to injury, if your creditors were to get your IRA, YOU'd be liable for the income tax on the amount taken (including the 10% penalty excise tax if you had not yet reached age 59-1/2 or become disabled). Fool on!Barbara
when I changed jobs, I looked at my 401 K and I was earning aprox. 18%...and that's not bad...however I wanted to control my own investments so I rolled it over into an IRA with Etrade. You can roll it into an existing one or a new one. This way you still pay NO taxes.Hope that helps.Sandra
Jonathan, look at your options available at your old company. Do they work for you? Is the new plan better/have more or better options? I assume you are in some mut. funds.Do you want to be more aggressive and are you finacially astute? If so, you may want to do an IRA rollover like I am doing, right now. I am going with Vanguard (very low expense factors and index funds) and Janus (<1% expenses and excellent performance, 3 spyders (spy, xlk, qqq)and 2 or 3 individual stocks (looking at Msft, Lu, Nok, Csco,and Sunw)...the funds give me diversification and stocks are solid blue chip techs...expecting to see the most growth in the stocks. Be sure to do the IRA to shield the account from taxes vs. an open account which has annual tax liability. This is of utmost importance.Secondly, save as much as possible in your 401, the deferred option, as a tax shield. Real estate is another tax shield like individual stocks, if you hold onto them.Much of your decision is based on your risk tolerance, how much time you can devote to research stocks, how old you are. JIM
Recently experienced similar question. Much depends on each employer's plan. What I believe important is to maintain tax deferral status. I actually split my 401K ; sent half to new employer and half rolled into self directed IRA - that allows for stock purchasing -FOOLish, I guess? The new employer does not allow stocks and limited to 8 mutual funds, - this is before I started foolish reading about this investment stuff. Also, most 401K loans are available as a benefit from current employers only.
Without hesitation, roll the money into an IRA at an online broker. E*Trade, Schwab, Fidelity, Suretrade, Quick & Reilly, Vanguard, take your pick. In my opinion, there's no reason to move it into your new employer's plan. It's not going to be as flexible as an account with one of the above. Yeah, you won't be able to borrow from yourself, but you shouldn't anyway. Pick a mix of mutual funds and stocks you feel comfortable with. If you plan to trade a lot, pick a broker with lower commissions. All of the above have an extensive list of no-load mutual funds from which to pick (Two of my favorites are RSEGX and RSDGX). If you have sizable funds and your plan allows, roll over your funds in a series of payments. Move some, wait for it to arrive, then invest it and start the next move the same day. This is the only way you'll be able to avoid volatility in the market. Also, one very important point: if you have company stock, you may be eligible to transfer it to a non-IRA account and pay income tax only on the cost basis. The tax on the gain would not be due until you sell the shares and then it will only be at the long term capital gains rate instead of income rate. To be eligible however, the series of distributions must be made within one calandar year (ie a lump sum distribution).I just did this last year and had lots of fun. Hey, I even bought some QCOM at 143 in August. Wouldn't have been able to do that in my previous employers plan. Good luck.
Once you get it into an IRA, you MAY want to convert it into a Roth IRA. Pay taxes now on the amount of conversion, buy aggressive growth stocks and never pay taxes on the gains. What a sweet deal.
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