[Advice] 401k to IRA

For me, its all about simplifying. In this day and age where most folks don't stay with one company, people end up with many different 401k's all over the place and any normal person quickly loses track of what is happening.

Open a brokerage or IRA account at somebody like TDWaterhouse or Fideltiy. Then roll-over your 401k to that same company so you can see a unified view of your investment accounts.

I assume you are young. Always have a total balanced portfolio. But put your conservative/moderate investments in your 401k. Then open a traditional IRA (since you aren't currently investing into a 401k anyway) and put your more aggressive investments here. Traditional IRA's grow tax free so any gains in the accounts can be withdrawn at retirements at a dollar for dollar value so you get to keep all of the growth in the IRA. 401k's you have to pay taxes on the amount withdrawn so keep all your conservative investments here.

Just a thought. I'm sure there are millions of ideas. But the best advice I can give you is KEEP IT SIMPLE. Consolidate accounts wherever possible.

 

The money you have in the 401k is still invested in whatever you bought while with the old company isn't it? It's not like it's sitting there doing nothing.

What you're asking about is called a Rollover IRA. Your bank may have rollover IRA's, brokerages like TD Ameritrade have them, etc. It's simple as hell really. Call up institutions like the ones I mentioned and tell them what you're looking for, what kind of fees are associated with trading or keeping money in their rollover IRA plan, etc.

FYI and in case you didn't already know : a rollover IRA isn't the same as a Roth or Traditional IRA, so make sure you know that. Don't go contributing money to it out-of-pocket like you would a Roth or Traditional.

Congrats on trying to get it together.

 

He means ROTH not Traditional IRA. In a ROTH, you are putting in after tax dollars and when you take the funds out at retirement, the entire amount it tax free. A Traditional IRA works just like a 401k.

 

I would not roll it over into a bank either, set up an account with one of the brokers. I use Vanguard and have been happy with their service.

 

Actually it is not that bad an idea to have both a 401k and a Roth so that you're diversified because it is hard to predict what your tax brackets will be compared to now, when the time comes to retire and actually withdraw from the 401k.

 

Yes, sorry. Roth IRA. Suffering from near heat stroke doing yard work when I typed this.

One more peice of advice, don't do yard work in Houston during August.

 

Don't play basketball outside either. I still have a headache from earlier today.

On the subject, I've just been too lazy to roll my old 401k over. If I switch jobs again, I'll roll both.

 

I suggest rolling your 401K into a an IRA, every time you switch jobs. Assuming that your previous employer (and 401K sponser) will be in business 10/20/30/40 years down the road is a long shot bet. Also whenever you move, this 401K plan is yet another address that you will have to update.

IIRC you can not rollover a 401K directly into a ROTH. It is a two step process. Rollover the 401K into a traditional IRA and then covert that into a ROTH IRA. Converting the ROTH will likely mean that you will need to pay income tax on a part of the conversion amount, out of pocket (i.e. not using the IRA monies to pay the taxes).

 

You can roll it to a Traditional IRA and then convert it to a ROTH. However, you have to pay tax on the value of the Traditional IRA at the time you convert it. In the long run it is still a good deal.

 

Don't put it in a ROTH. Put it in a rollover IRA.

Let's say you make 50K this year and your 401K is 50K. If you rollover into a ROTH, you will be taxed at 100K bracket. Your original salary is taxed at a higher bracket, and your 401K is taxed at a higher bracket, so you may have more than doubled your tax liability for that year.

Put it in a rollover IRA for now.

If you really want to put it in a ROTH, wait for a year that you have no income. Wait till you move to a state w/ no state income tax. You will have more than one of those years.

when you transfer then, lets say you rollover 25K, you will not lose any money to tax.

 

For me my old employer used Vanguard I just turned the 401 K account into an IRA account with them and eveything stayed the same, that did not require any work from me. If you like your old broker, you could do the same thing or change to a different broker such as Vanguard.

 

Bunch of idiots...

Roll it over and get a broker. At least you know you're a moron. Just about everyone here thinks they can do it themselves. And most will fail when it comes to retirement.

At least you've learned that it is probably best to hire a professional.

 

I wouldn't call them idiots but the responses are pretty funny.

Yes you can roll it over straight to Vanguard but there may be pitfalls or other considerations, especially when considering a Roth conversion.

 

Oh, I know. It just gets really old to think that any untrained monkey can handle assets.

Crap, according to this website, if you need gall bladder surgery, just read a couple of books, and you'll have no problem.

 

It's true.....I've known plenty of series 6, series 7 types, and I'd definitely prefer my asset handling monkeys to be trained.

 

I don't think a series 6 or 7 qualifies you to do anything. It's the broker's real world experience.

For example, some people who retire with company stock in their 401k may be much better off not rolling over their qualified plan to an IRA.

 

For the record, I brought up the Roth IRA subject and you guys are suffering from lack of comprehension. I never said put the existing 401k into a Roth.

I said:
1. open a brokerage account.
2. Move the 401k into a rollover IRA with the same brokerage account.
3. Set your investments in the new Rollover IRA to be moderate/conservative investments.
4. Open a SEPERATE Roth IRA (since his current employer doesn't offer a 401k).
5. Set the investments in the Roth IRA to be more aggressive than the Rollover since the growth in the Roth will grow tax free.

Since your current employer doesn't offer a 401k, setup automatic depsoits from your bank account into your Roth IRA.

Whoever suggested a Broker, huh? Most brokerage houses require something like $300,000 of liquid assets before they'll accept you as a client. I doubt most average people can afford that. I can't. So if you know somebody that'll accept clients with only a few thousand liquid dollars, please tell.

 

Only big wirehouse advisors have the strict $300,000 and above requirements (typically advisors with over $100 million book). There are very few advisors who would not accept a $50,000 rollover. They won't put you into an managed money program but should select some good mutual funds.

If you have less than $10,000, only bank advisors and some very desperate and/new advisors would take it (former because they have to and the latter because they need to).


In the investment world (not including strictly private client like Goldman Sachs, Mellon, etc, or insurance companies posing as investment advisors- or discount brokerages like Schwab), there are 3 "channels".

1. Wirehouse - Merrill Lynch, Smith Barney, Morgan Stanley, UBS, Wachovia (same company as the bank but operates independently)

A lesser version of the wirehouse channel is the brokerage channel: Formerly AG Edwards (just purchased by Wachovia), Janney Montgomery, and Edward Jones are the biggest players in "brokerage".

2. Banks - Advisor in the bank. Res Ipsa. Many banks like Bank of America and Citibank now hire former wirehouse brokers for the appearance of greater sophistication. Smith Barney advisors are now in the Citibank offices (both are owned by Citigroup)

3. Independent - Biggest independent player is LPL (Linsco Private Ledger). There are literally thousands of independent broker dealers. Big Insurance companies like Lincoln, MetLife, MassMutual, Northwestern Mutual also fall into this category although they have proprietary products (usually insurance).


Finding a good advisor:

1. Someone who will listen. Too many advisors talk way too much.
2. Someone who understands tax strategies even if they don't give tax advice
3. Someone who understands some estate planning even if they don't give legal advice

Designations like CFP are always good but not a requirement.

Having worked with thousands of financial advisors in all three channels and thousands of clients, there are a sh*tload of good advisors and a sh*tload of bad ones.

Most important: It's not what firm they work for, but the advisor themselves.
You can have a brilliant rep and an idiot in the same office in the same firm.