401K v IRA roll over or not?
I haven't gotten the info yet, but now that I'm unemployed I think I should roll my 401K into an IRA? Anyway know the pros, cons and other implications or 401K and being dumped out of a job?
I don't think I had enough in there for it to be kept as a 401K anyway so it could be a moot point but as I'm not really up on all the pension shenanigans and have other things on my mind right now I thought I'd ask rather than have to google what all the options might mean once I get them...and speak in thicky terms :) |
Re: 401K v IRA roll over or not?
Originally Posted by Bob
(Post 6063748)
I haven't gotten the info yet, but now that I'm unemployed I think I should roll my 401K into an IRA? Anyway know the pros, cons and other implications or 401K and being dumped out of a job?
I don't think I had enough in there for it to be kept as a 401K anyway so it could be a moot point but as I'm not really up on all the pension shenanigans and have other things on my mind right now I thought I'd ask rather than have to google what all the options might mean once I get them...and speak in thicky terms :) I'm not sure but I guess you can leave it there for a short time. If so I would do that and hopefully you get another job soon and roll it into that. That way it will be easier to manage in one place. Opening up a separate IRA would mean when you get another job and another 401k you have to manage them separately. However not sure if there are any other implications and as the missus has just changed jobs would be interested in the answers. |
Re: 401K v IRA roll over or not?
Originally Posted by Bob
(Post 6063748)
I haven't gotten the info yet, but now that I'm unemployed I think I should roll my 401K into an IRA? Anyway know the pros, cons and other implications or 401K and being dumped out of a job?
I don't think I had enough in there for it to be kept as a 401K anyway so it could be a moot point but as I'm not really up on all the pension shenanigans and have other things on my mind right now I thought I'd ask rather than have to google what all the options might mean once I get them...and speak in thicky terms :) Even if you do get another job with a 401K plan, the new plan doesn't have to accept rollovers from other plans and even if it does you will still be limited to the investment options provided by that plan, which may be more restrictive than you would like. even if you have no option but to put new 401K money into that plan, why rollover your existing 401K to a plan with limited options when you could have complete control over it? |
Re: 401K v IRA roll over or not?
Originally Posted by md95065
(Post 6064767)
Even if you do get another job with a 401K plan, the new plan doesn't have to accept rollovers from other plans and even if it does you will still be limited to the investment options provided by that plan, which may be more restrictive than you would like. even if you have no option but to put new 401K money into that plan, why rollover your existing 401K to a plan with limited options when you could have complete control over it?
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Re: 401K v IRA roll over or not?
I know that Fidelity has a system where they arrange the transfer to an IRA.
The biggies, and lowest cost are Vanguard, Fidelity and Schwab. You said it wasn't a large amount so check for administrative fees. You would want to use a fund account not a brokerage account. |
Re: 401K v IRA roll over or not?
Originally Posted by Bob
(Post 6063748)
I haven't gotten the info yet, but now that I'm unemployed I think I should roll my 401K into an IRA? Anyway know the pros, cons and other implications or 401K and being dumped out of a job?
I don't think I had enough in there for it to be kept as a 401K anyway so it could be a moot point but as I'm not really up on all the pension shenanigans and have other things on my mind right now I thought I'd ask rather than have to google what all the options might mean once I get them...and speak in thicky terms :) |
Re: 401K v IRA roll over or not?
The fund can just be rolled over into your next companies 401K. Cashing it in before ages 591/2 will lead to considerable withdrawal penalties ( 40%). You need to decide;
a) How much you have in it, and any potential penalties for early withdrawal. b) How much you need the money now Usually it only fully vests to include any total company contributions after 5 years. Maybe you need the cash now, maybe you don't want to incur the early withdrawal penalties and invest for your retirement. |
Re: 401K v IRA roll over or not?
Originally Posted by Lord Lionheart
(Post 6065544)
The fund can just be rolled over into your next companies 401K. Cashing it in before ages 591/2 will lead to considerable withdrawal penalties ( 40%). You need to decide;
a) How much you have in it, and any potential penalties for early withdrawal. b) How much you need the money now Usually it only fully vests to include any total company contributions after 5 years. Maybe you need the cash now, maybe you don't want to incur the early withdrawal penalties and invest for your retirement. There is no "usually" when it comes to vesting of employer's matching contributions in a 401K plan - you have to look at the rules of the individual plan to find out. To the best of my knowledge none of the four 401K plans that I have been in over the last 20 years had a 5 year "vesting period" - even if such a period does exist it is almost certainly based on length of employment, not the time that the money has been in the plan, in which case "it is what it is" and whether or not you roll the money over into another plan won't make any difference. Finally, while I would still recommend rolling the money over into an IRA sooner rather than later just to get the whole thing done and out of the way, there is no time limit on thie. You can leave the money in the 401K for as long as you like and still decide next week, next month, next year or in 10 years time that you want to roll it over to another account. So, if this is something that you don't want to deal with right now you don't have to. |
Re: 401K v IRA roll over or not?
I've got a similar thing going on with my last job Bob, I'm about to roll my 401k into my Vanguard Roth IRA, which you can now do direct as of Jan this year. As I understand it, you pay the tax now (because 401k is pretax, Roth IRA's are post tax), but not when you are 60+ and start withdrawing. And you don't have to pay a penalty, just the tax you would've paid if it'd been a Roth from the get-go.
I'm about to start the process rolling on this, you might want to have a read here: https://personal.vanguard.com/us/Van...122008_ALL.jsp Not that you have to use Vanguard, but the link explains it a bit. |
Re: 401K v IRA roll over or not?
Originally Posted by md95065
(Post 6066843)
Yes, "cashing in" a 401K plan - ie making an early withdrawal - will incur both income tax and a 10% penalty and should be avoided at all costs. Rolling the money over into an IRA does not incur either tax or a penalty and gives you much more freedom over the way the money is invested.
There is no "usually" when it comes to vesting of employer's matching contributions in a 401K plan - you have to look at the rules of the individual plan to find out. To the best of my knowledge none of the four 401K plans that I have been in over the last 20 years had a 5 year "vesting period" - even if such a period does exist it is almost certainly based on length of employment, not the time that the money has been in the plan, in which case "it is what it is" and whether or not you roll the money over into another plan won't make any difference. Finally, while I would still recommend rolling the money over into an IRA sooner rather than later just to get the whole thing done and out of the way, there is no time limit on thie. You can leave the money in the 401K for as long as you like and still decide next week, next month, next year or in 10 years time that you want to roll it over to another account. So, if this is something that you don't want to deal with right now you don't have to. |
Re: 401K v IRA roll over or not?
Bob wasn't talking about cashing in.
If you cash in, they are required to withhold 20% for tax. If you then want to put the whole amount into an IRA, you have to find that 20% until you get your refund next year. Avoid that with a direct rollover that the receiving company will handle for you. |
Re: 401K v IRA roll over or not?
Originally Posted by md95065
(Post 6064767)
...why rollover your existing 401K to a plan with limited options when you could have complete control over it?
thanks for the info, will have to give this a bit more thought I think once I get the info in :) |
Re: 401K v IRA roll over or not?
Originally Posted by paddingtongreen
(Post 6067080)
Bob wasn't talking about cashing in.
If you cash in, they are required to withhold 20% for tax. If you then want to put the whole amount into an IRA, you have to find that 20% until you get your refund next year. Avoid that with a direct rollover that the receiving company will handle for you. If I've got time and won't incur any fee's etc from keeping it in the 401K if I'm able, I'd probably prefer to do that for the short term, at least till I get another job and then re-evaluate the situation to either roll over into a new 401K or into an IRA or some sort. I certainly got want to cash out what meager pension I've got as I've got to start building that up as it is :) All the help is much appreciated, cheers guys :) |
Re: 401K v IRA roll over or not?
Originally Posted by Bob
(Post 6070982)
If I've got time and won't incur any fee's etc from keeping it in the 401K if I'm able, I'd probably prefer to do that for the short term, at least till I get another job and then re-evaluate the situation to either roll over into a new 401K or into an IRA or some sort.
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Re: 401K v IRA roll over or not?
Originally Posted by sunflwrgrl13
(Post 6074391)
Don't count on having all the time in the world to do something with the account. At my last company, I was told I had 90 days to decide what to do (rollover to IRA, or other 401k) or they were going to simply cut me a check. This was because the amount of money in there was below a certain threshhold. You may want to call and find out if there are any time limits before the decision is taken out of your hands.
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