[Whostheboss]

There are plenty of threads on this topic but i need a quick answer, i don't want to scroll through pages and pages.

I left my old company and i have some money saved up in my 401k, i'm fully vested in all the money in there.
Question: Should i roll into IRA? Roth IRA?
or
Should i roll into my new jobs 401K? (this is highly unlikely)

Thanks

[UncleWede]

Most will give you a period of time, after leaving employment, then you must roll it or they will just burn you and send a check.

I couldn't roll into my new company last time, so just started a banking 401K on my own, to give me a repository in the future.

[Whostheboss]

Originally Posted by UncleWede

Most will give you a period of time, after leaving employment, then you must roll it or they will just burn you and send a check.

I couldn't roll into my new company last time, so just started a banking 401K on my own, to give me a repository in the future.

Burn me how? They'll eat some of the money?

Banking 401k? Is that the same as an IRA?

[KingOfJericho]

Originally Posted by Whostheboss

Burn me how? They'll eat some of the money?

They will "disburse" your money (cut you a check) which will then be treated as income and taxed as such.

[rr006rbc]

Originally Posted by KingOfJericho

They will "disburse" your money (cut you a check) which will then be treated as income and taxed as such.

That's what the last company did to me too; that sucked. But I guess it was my fault for not acting quick enough to transfer it out.

[vachss]

Generally you'll want to roll it over into a traditional IRA. That way you don't pay tax on the transfer and you'll have more options (and probably lower costs) than you would leaving your money in the 401K.

One notable exception is if 401K has some advantageous fund options you can't find in an IRA. An example would be a Stable Value Fund with a good rate. Sometimes these are better than the bond funds you'll be able to buy in a conventional IRA. If you're just keeping your money in stock index funds though, your options are likely better in the IRA.

You can transfer some of the money into a Roth IRA if your income level allows it. Any pre-tax money you transfer will be taxed as ordinary income, but future gains are tax free. This is worthwhile if you expect to be in a higher tax bracket in retirement. If you expect your tax rate during retirement will be less than now then it's probably better to go with a traditional IRA.

An exception to this is if you have after-tax money in your 401K. Per a recent IRS ruling (last year) this after-tax 401K money can be rolled over directly into a Roth. Since you've already paid tax on this money this kind of Roth rollover is usually worth doing. Most of us, though, made most of our 401K contributions pre-tax, so this usually isn't a big component.

Caveat: I'm no financial planning expert, so take my recommendations with a grain of salt. I'm just a soon-to-be retiree who has recently been checking out my options.

[tc328]

Ira or roth...just roll it over first

[John 070]

Long story short, before, if it were a good plan, why not leave it? But recently, many employers impose a fee, say $17.50 for mine, per quarter, to leave it. If you have 500k, then the $17.50x4 is not an issue, if it's a good plan. But if you have $1000, then the $17.50 is going to add up and you can always get a IRA. My wife was in this boat for a co. that she only stayed < 1 yr. She did a T Rowe Price target fund, it was not bad and had low fees.

In my case, my current employer pays a high salary, but the 401k is lame. Really high expense ratios, what can I do? So I would not want to roll.

Again, the reason to roll is to get out of fees that you may face, or if the plan is below average.

My wife was briefly employed at the largest mutual fund co. in the US, or at least tied. My last 401k is there. I had better choices in my plan, than she did as an employee. I am also in some closed to new investors funds, so I just grin and bear the $17.50x4 or $70/yr. If I rolled into an IRA, some of those funds are closed already.

[John 070]

Originally Posted by tc328

Ira or roth...just roll it over first

btw ROTH has income phase outs. I would suspect at least 50% on this forum cannot contribute to a ROTH (it is a BMW forum)....

[zx10guy]

I started a Roth before I was phased out in being able to contribute any more to it. This does not mean I cannot roll over money to it. I did look into this option but decided not to take the huge tax hit right now with the amount I would have rolled into it from a previous employer's 401k. I didn't roll that money into my existing employer's 401k because the paper work was such a pain in the rear. I ended up moving that money into the financial arm of my bank as a traditional IRA.

[Whostheboss]

Originally Posted by rr006rbc

That's what the last company did to me too; that sucked. But I guess it was my fault for not acting quick enough to transfer it out.

That sucks, after reading your comment, i quickly called my old company. She said they'll keep the money in there until i make a decision. So i told her to mail me the paper works to get the roll over started asap! Hell no, i'm def not getting burn lol.

Originally Posted by vachss

Generally you'll want to roll it over into a traditional IRA. That way you don't pay tax on the transfer and you'll have more options (and probably lower costs) than you would leaving your money in the 401K.

One notable exception is if 401K has some advantageous fund options you can't find in an IRA. An example would be a Stable Value Fund with a good rate. Sometimes these are better than the bond funds you'll be able to buy in a conventional IRA. If you're just keeping your money in stock index funds though, your options are likely better in the IRA.

You can transfer some of the money into a Roth IRA if your income level allows it. Any pre-tax money you transfer will be taxed as ordinary income, but future gains are tax free. This is worthwhile if you expect to be in a higher tax bracket in retirement. If you expect your tax rate during retirement will be less than now then it's probably better to go with a traditional IRA.

An exception to this is if you have after-tax money in your 401K. Per a recent IRS ruling (last year) this after-tax 401K money can be rolled over directly into a Roth. Since you've already paid tax on this money this kind of Roth rollover is usually worth doing. Most of us, though, made most of our 401K contributions pre-tax, so this usually isn't a big component.

Caveat: I'm no financial planning expert, so take my recommendations with a grain of salt. I'm just a soon-to-be retiree who has recently been checking out my options.

I greatly appreciate your expert comment although you say you're no expect lol. I think i'll go the traditional IRA

Originally Posted by zx10guy

I started a Roth before I was phased out in being able to contribute any more to it. This does not mean I cannot roll over money to it. I did look into this option but decided not to take the huge tax hit right now with the amount I would have rolled into it from a previous employer's 401k. I didn't roll that money into my existing employer's 401k because the paper work was such a pain in the rear. I ended up moving that money into the financial arm of my bank as a traditional IRA.

lol, traditional IRA most likely.

[John 070]

Originally Posted by zx10guy

I started a Roth before I was phased out in being able to contribute any more to it. This does not mean I cannot roll over money to it. I did look into this option but decided not to take the huge tax hit right now with the amount I would have rolled into it from a previous employer's 401k. I didn't roll that money into my existing employer's 401k because the paper work was such a pain in the rear. I ended up moving that money into the financial arm of my bank as a traditional IRA.

Roth is after tax, 401k is pre-tax (usually, 2 plans ago I had both)

I would think that an IRA could mimic any ROTH out there

[John 070]

Originally Posted by vachss

Generally you'll want to roll it over into a traditional IRA. That way you don't pay tax on the transfer and you'll have more options (and probably lower costs) than you would leaving your money in the 401K.

One notable exception is if 401K has some advantageous fund options you can't find in an IRA. An example would be a Stable Value Fund with a good rate. Sometimes these are better than the bond funds you'll be able to buy in a conventional IRA. If you're just keeping your money in stock index funds though, your options are likely better in the IRA.

You can transfer some of the money into a Roth IRA if your income level allows it. Any pre-tax money you transfer will be taxed as ordinary income, but future gains are tax free. This is worthwhile if you expect to be in a higher tax bracket in retirement. If you expect your tax rate during retirement will be less than now then it's probably better to go with a traditional IRA.

An exception to this is if you have after-tax money in your 401K. Per a recent IRS ruling (last year) this after-tax 401K money can be rolled over directly into a Roth. Since you've already paid tax on this money this kind of Roth rollover is usually worth doing. Most of us, though, made most of our 401K contributions pre-tax, so this usually isn't a big component.

Caveat: I'm no financial planning expert, so take my recommendations with a grain of salt. I'm just a soon-to-be retiree who has recently been checking out my options.

I have a ways to go but I managed to get 2 pensions along the way as my last job, I started 6 mos. before they stopped. They just tried to buy me out with a lump sum, and imho the number was pathetic. Meaning, I could not take that lump sum, and buy an annuity of equal value. If you are getting ready to retire, I bet you have a pension (defined benefit). Before I could care less, but when I see that I can get a just under 2k/mo. (sure not worth that much but better than nothing) for the rest of my life, why not? I plan on making my < 2 yr. old son the survivor. I feel we've got a shot in beating the actuaries. I need to live 82.3 yrs. and my son 88.

[wdb]

Originally Posted by John 070

I plan on making my < 2 yr. old son the survivor.

You can do that? The plans I've been part of specify 'spouse'. (Maybe I could marry someone very, very young )

[shadow191]

If you're married, spouse has to be primary unless they waive that right. But that waiver has to be notarized.

And OP, if your account balance is over $5K, they won't "force" it out and issue you a check. The force outs are done to make the plan easier to administer so small balances are kicked out. If it's under $1K, they'll issue you a check after taxes are taken out. If it's under $5K, most plans will roll the money into an IRA on your behalf and no tax consequences. But you get several notification letters, it's not immediate, usually after 30 days or 60 days.

Originally Posted by wdb

You can do that? The plans I've been part of specify 'spouse'. (Maybe I could marry someone very, very young )

[vachss]

Originally Posted by John 070

I have a ways to go but I managed to get 2 pensions along the way as my last job, I started 6 mos. before they stopped. They just tried to buy me out with a lump sum, and imho the number was pathetic. Meaning, I could not take that lump sum, and buy an annuity of equal value. If you are getting ready to retire, I bet you have a pension (defined benefit). Before I could care less, but when I see that I can get a just under 2k/mo. (sure not worth that much but better than nothing) for the rest of my life, why not? I plan on making my < 2 yr. old son the survivor. I feel we've got a shot in beating the actuaries. I need to live 82.3 yrs. and my son 88.

I've been offered pension lump sum buyouts before and in my experience while say "annuity of equal value" that's not what they really offer. Try using an online calculator like they have at immediateannuities.com and get a dollar figure on what it would cost to buy an annuity equal to your pension. I'll bet the company is offering significantly less - in my case the offer was a 30% haircut below the true value, so I declined.

I think the main reason to take a lump sum buyout is potential uncertainty about the company's future. If they go under the PBGC will generally still guarantee you some part of the pension payout, but it may also be a pretty big haircut. In my case I work for a huge corporation that I'm pretty sure will be around longer than I will, so I'm willing to take that risk.

[SunnyD]

Either roll it over into a Rollover IRA or transfer it to your new company's 401k.

[John 070]

Originally Posted by vachss

I've been offered pension lump sum buyouts before and in my experience while say "annuity of equal value" that's not what they really offer. Try using an online calculator like they have at immediateannuities.com and get a dollar figure on what it would cost to buy an annuity equal to your pension. I'll bet the company is offering significantly less - in my case the offer was a 30% haircut below the true value, so I declined.

I think the main reason to take a lump sum buyout is potential uncertainty about the company's future. If they go under the PBGC will generally still guarantee you some part of the pension payout, but it may also be a pretty big haircut. In my case I work for a huge corporation that I'm pretty sure will be around longer than I will, so I'm willing to take that risk.

I thought that one factor about PBGC was that as long as your monthly is < something like $5000, which I am curious if anybody really gets such a large amount, you are good to go. My neighbor gets over 3k, but again, they retired 10+ yrs. ago. So my lay understanding is that if your pension is not over $5k/mo. (if it's single, not if you do a survivor like I want to), you should not take a lump sum....

But if it is, your plan is underfunded, and your co. may go under, then it is likely good to take it....

But if you're still working and the plan fails, PBGC does not help you....

[zx10guy]

Originally Posted by John 070

Roth is after tax, 401k is pre-tax (usually, 2 plans ago I had both)

I would think that an IRA could mimic any ROTH out there

Yes, I know the difference between the two. The IRS allows you to do a pre tax conversion regardless of income level to an after tax retirement vehicle (ie Roth IRA). You just have to pay the tax in the current year as I have indicated in my post. I chose not too as having to come up with 5 figures to pay the tax bill was more than I want to swallow at the time.

I also consulted with my CPA/accountant at the time to discuss the various financial scenarios which went into my thought process.

[shadow191]

When a company offers a lump sum payout for the pension, the amount is typically based on 10 year Treasuries so depending on what the rate is when the window is offered, it can vary wildly. It's not the company screwing you, it's basically the rules determining how these things are calculated. A private insurance company can use a different rate in their calculations so their number may be more or less than what the company is offering.

A lot of companies are offering lump sums now; many have frozen their pensions and even the ones that haven't are looking to lower their risk. Nobody wants these somewhat variable liabilities hanging out there for decades to come. Plus the PBGC raised their per person premiums a lot this year so that caused quite a few companies to offer lump sums. The savings in just premiums can be tens of millions of dollars over time since many of these pensions have tens of thousands of people in them.

Originally Posted by John 070

I have a ways to go but I managed to get 2 pensions along the way as my last job, I started 6 mos. before they stopped. They just tried to buy me out with a lump sum, and imho the number was pathetic. Meaning, I could not take that lump sum, and buy an annuity of equal value. If you are getting ready to retire, I bet you have a pension (defined benefit). Before I could care less, but when I see that I can get a just under 2k/mo. (sure not worth that much but better than nothing) for the rest of my life, why not? I plan on making my < 2 yr. old son the survivor. I feel we've got a shot in beating the actuaries. I need to live 82.3 yrs. and my son 88.

[shadow191]

As others have said, however you put the money into the account - pretax or Roth is going to determine your rollover options.

Look into fees and investment options before doing anything unless you have to due to a force out rule. Rolling into an IRA makes sense if you want more investment options as you can buy pretty much anything. But fees can be higher depending on where you get your IRA from and what investments you pick.

Rolling into your new company's 401(k) can actually make sense if their plan is well run, has good investment options and low fees. Keep in mind that rollover money is always separated from your regular contributions so it's not subject to the same vesting rules and if you change your mind down the line, you typically can roll it back out into an IRA. Sometimes a large company's 401(k) plan can have much lower fees on funds than an IRA due to the plan's size. Where we are, the expense ratios are in the single digit basis points (under .1%). That's hard to get even with low cost funds like Vanguard.

Just don't let anyone talk you into anything, especially if they have a financial incentive. There are lots of stories lately showing how people would have been better off leaving their money in a 401k vs. rolling it over to an IRA.

Originally Posted by Whostheboss

There are plenty of threads on this topic but i need a quick answer, i don't want to scroll through pages and pages.

I left my old company and i have some money saved up in my 401k, i'm fully vested in all the money in there.
Question: Should i roll into IRA? Roth IRA?
or
Should i roll into my new jobs 401K? (this is highly unlikely)

Thanks

[1MOREMOD]

I've found storing it in my mattress generally beats the market