rolling over a 401(k) from ex employer into an IRA...

[IcyPeas]

ugh! my brain goes to mush when I start reading all the information. Explain it to me like a 5 year old.... as they say.

so I'm trying to do this but how the heck to choose where to put it. I look at fees and all that. I am not a person who actively follows the stock market, nor do I really want to. So what should I look for in choosing a financial institution?

It's currently sitting in a T.Rowe Price retirement account from my last job.

I just want, low fees

ability to withdraw at my convenience (I am over the 59½ yrs of age)

something easy to understand

any tips or hints?

thank you

[gab13by13]

1. Simple suggestion,

I went through my local bank who works with Ameriprise, I am not suggesting anyone deal with them I am not promoting them.

You can have a Rep. come to your bank and sit down with you to discuss your situation and your options.

I also have a daughter who is a senior VP of finance at her corporation who put me on to a couple fine stocks.

Just a suggestion. Maybe your bank doesn't work that way.

[Thunderbeast]

2. Roll it over into a brokerage IRA account at Fidelity or another low-cost broker.

Once there, sit down with one of their folks to assess your situation.

Pick a balanced fund for long-term, and a cash equivalent account for your short term (5-7 year) needs.

Fidelity has an excellent online retirement planning tool to help you make informed choices. I am sure other investment firms do as well.

Hey...If you are smart enough to hang out at DU, you can handle this!

[IcyPeas]

9. thank you for your reply. Fidelity gets good marks from what I have been comparing online

people seem to like their service. They are owned by Wells Fargo. Wells Fargo has a pretty bad name doesn't it? Whereas Vanguard is owned by its customers.

the more you read the more confusing it gets. LOL

Thank you

[Thunderbeast]

15. Fidelity Bank (Trust) and Fidelity Investments are different companies.

Different ownership completely.

The Johnson family of Boston owns 49%. Employees own 51%.

[wryter2000]

16. I like Fidelity a lot

Very easy to deal with Good customer service

[IcyPeas]

17. I spoke with one of their fiduciaries last week for an hour... and

I am having another in- office meeting with him in 2 weeks. I think I am going to go with them. He was very thorough and patient with my questions, no pressure. He explained the "bucket strategy" to me which I had never heard of before. I've since done more research on this.

It's funny, before our phonecall I reread this entire thread. Such helpful and knowledgeable people we have here.

Thank you for your opinion too.

[progree]

3. The safest way is an institution to institution direct transfer -- the reason I say that

Last edited Fri Feb 10, 2023, 08:27 PM - Edit history (1)

besides it being virtually a unaminous opinion from innumerable articles I've read over the decades -- it is the most assured way that you don't inadvertently take possession of it which makes it taxable in full, unless you get it rolled over in a proper manner in 60 days or less into an IRA or another 401k account. And if you do it that way, there are other pitfalls to be aware of in making these 60 day rollovers.

If you fuck up, you can end up with it all in a taxable account, and paying taxes on the entire account balance next year.

It's currently sitting in a T.Rowe Price retirement account from my last job.

Is it a 401k account there? Or an IRA account there? If a 401k account, is that controlled by your ex-employer?

I rolled over a 401k to a Vanguard IRA in the late 90's, so that's been my only experience with doing that. In which case, discuss with Vanguard and follow their instructions. Discuss with your employer or T Rowe Price or whoever is the current custodian.

I've also had inherited IRAs transferred to me at Fidelity, in 2005, and that went smoothly too. Again, in that case, contact Fidelity and follow their instructions. Discuss with your employer or T Rowe Price or whoever is the current custodian

Or whatever institution you want it to end up at -- contact them and follow their instructions.

My experience with both transfers was that it went smoothly. I am happy with both Vanguard and Fidelity.

Both Vanguard and Fidelity offer various levels of investment management, e.g. the full traditional financial advisor route, or one that cost less and uses Robo-asset allocation with occasional human contact, or full Robo, or none of the above. (That's my impression anyway, I haven't done a deep dive into either one). I use none of the above because I've been reading AAII Journal (American Association of Individual Investors) and investment newsletters for decades. My tax preparer gave me tax help with these decisions (and thankfully recommended I convert some of my traditional IRA to a Roth IRA in multiple increments over the years).

There's also the option sometimes of transferring it to a new employer -- if that's what you want to do, ask the new employer how to proceed.

In both of my cases, stock funds and bond funds were involved, and assets were directly transferred without having to sell them first.

Anyway, Job One is getting it into another 401k or into an IRA via direct institution to institution transfer. After that, there is plenty of time later to worry about stocks vs bonds vs balanced funds or ETFs and indexed fund and blah blah blah.

Good luck

[IcyPeas]

10. thank you. good info and things to consider.

yes. I will be doing that institution to institution direct transfer.

no new employer. retired.

"My tax preparer gave me tax help with these decisions (and thankfully recommended I convert some of my traditional IRA to a Roth IRA in multiple increments over the years"

I read something about this. I will look into it more.

[Pobeka]

4. As just stated above, do a direct institution to institution transfer if at all possible.

1) You probably don't want check of that size floating around the mail system.
2) If you get a check, you can only do this type of transaction once a year
3) Institution to institutions can be done as many times a year as you want.
4) Institutions do this all the time -- and you have do it as a wire transfer (I think), which will be free. I may have that backwards.

Whichever you choose, they will help you do the transfer.
---

I use Vanguard, it's be extremely easy to work with them. They have a money managed side of their business now too, which I don't use so I can't comment on it. Their online system is easy to navigate.

If you are going to let someone else manage your money, you'll need to do some research. Check their fees very carefully. Some may want high fees (1.75% or more), 1.5% or less is a competitive fee for money management. It'll take some research if they do a good job with money management.

[Phoenix61]

5. When my parents passed I was faced with the same type

of questions. I found Fidelity incredibly difficult to deal with so I wouldn’t recommend them. I went with a management company and have been very happy with them. Trying to figure out which stocks, funds, bonds etc to invest in is a full-time job that I am not qualified for nor have any interest in doing.

[Tomconroy]

6. Vanguard is famous for low fees. My wife is with them. But

lately she feels every time she calls they are trying to upsell services she doesn't need.
I've been a T Rowe Price customer my entire adult life. Their managed funds are highly regarded. Higher fees than Vanguard but less than most in the managed funds industry.
Their customer service is top drawer. When I transfered my work account they handled it all seamlessly. I did very well with them over 45 years. Just my 2 cents.

[IcyPeas]

11. I agree, T.Rowe Price has good customer service

the few times I have called them they have been more than helpful.

That's where my 401k currently is sitting. It's interesting though, as I am researching the best places to do a rollover their name doesn't come up at the top of any lists.

thanks for replying.

[Tomconroy]

14. I just called t Rowe price up and said I wanted to get

My retirement account transfered to them. While I was on the phone they got the right person on the phone and got them to commit to sending the money overnight. They did say it can take weeks for some companies to transfer the money. Good luck.
Withdrawals are easy with t Rowe price. Just call them on the phone. You can set up a direct transfer to your checking account.

[Wonder Why]

7. Three places you are likely to get hit by fees:

1) If you don't properly rollover the money to an IRA (as multiple people have mentioned)

2) paying "management fees" (often 1-2% of your assets each year to have someone at the IRA company provide professional management

3) Getting involved with Annuities

1) To avoid this, go to the company you pick and have them handle the paperwork to rollover the fund. They will insure you have done everything right. Pick a big company first - you can always move some or all later elsewhere (I have made 5 moves of my money) and big companies are "big pockets", i.e. they must be very careful with newbies or a good lawyer will make them squeal. Some big places will give you bonuses up to a couple of thousand dollars depending on how much you move into them. Ask, and sit down with someone local at the company you are thinking about and ask lots of questions. Not a good idea for your first company to be online as you should be talking face to face and have the opportunity to sit down with them to do newbie explanations and they often have free local talks on investing for newbies.

2) If you can't manage your own money i.e. pick your own stocks, bonds, ETFs, Mutual Funds, or just find a good "Target Date Fund", then either wait to move your money and pay a "fiduciary" for ideas on what to pick but go elsewhere to implement it or pay the fees until you learn then move your money or tell the company you want to self-manage. One way to save is to have the company set up two IRAs - one they manage with the money you don't need for 5-10 years and the other for the cash you want to withdraw which you self-manage by keeping it in money-market funds (cash). Then you won't be paying them their fee to manage your cash.

3) I'm not saying annuities are bad but there are a lot of "less then interested in your interest" people who push them because they get big fees. Keep away from them until you become well versed about their limitations and issues.

Online, you can find lots of sites that allow you to put in your 401K numbers, your age, your expected lifespan, other income expected like S.S., your important expenses, the inflation you expect, etc and the software will tell you how much you can safely withdraw to avoid running out.

Also, talk to friends who have already retired and see how they handled it. Read up a lot about retirement so you know the kinds of questions to ask.

One big thing you should learn quickly - I didn't. ROTH IRAs can be great. When most people retire, their income drops, especially before social security kicks in. That is a great time to move chunks of money from your IRA to a ROTH. Once a ROTH has been open for 5 years, all the money it earns plus all the money you put in can be removed without being taxed. The downside is that the money you move is taxed when you move it from IRA to ROTH IRA. However, if your income is low, your taxes are low or zilch and so the moved money is not taxed or taxed little because your income is so small. When I retired, we lived on saved money for a couple of years before I could get SS and before withdrawing from my IRA. I thought it was so neat that I had to pay no taxes. But I could have moved thousands from my IRA to a ROTH and paid no taxes or tens of thousands and paid little in taxes. Note,whatever you do - even if you decide to wait before doing anything, open a ROTH IRA somewhere and minimally fund it ASAP. Above I mentioned that 5 year rule on ROTHS. It doesn't matter if it has $100 in it for those 5 years then you suddenly put in $500,000. It meets the 5 year rule as I understand it.

Note, I'm just another poster who has successfully managed to live comfortably on my retirement by careful investing and taking in lots of info from online experts, local management company experts, friends who are fiduciaries or have a lot of knowledge about finances, going to free classes and asking lots of questions. I never paid much attention to my 401K but with an IRA, I'm very careful and self manage with the big companies, keeping away from anyone that promises better returns than the big guys' experts say is a "good return".

[IcyPeas]

12. you gave me 2 great things to consider which I was not aware of.

One way to save is to have the company set up two IRAs - one they manage with the money you don't need for 5-10 years and the other for the cash you want to withdraw which you self-manage by keeping it in money-market funds (cash). Then you won't be paying them their fee to manage your cash.

and

One big thing you should learn quickly - I didn't. ROTH IRAs can be great. When most people retire, their income drops, especially before social security kicks in. That is a great time to move chunks of money from your IRA to a ROTH. Once a ROTH has been open for 5 years, all the money it earns plus all the money you put in can be removed without being taxed. The downside is that the money you move is taxed when you move it from IRA to ROTH IRA. However, if your income is low, your taxes are low or zilch and so the moved money is not taxed or taxed little because your income is so small. When I retired, we lived on saved money for a couple of years before I could get SS and before withdrawing from my IRA. I thought it was so neat that I had to pay no taxes. But I could have moved thousands from my IRA to a ROTH and paid no taxes or tens of thousands and paid little in taxes. Note,whatever you do - even if you decide to wait before doing anything, open a ROTH IRA somewhere and minimally fund it ASAP. Above I mentioned that 5 year rule on ROTHS. It doesn't matter if it has $100 in it for those 5 years then you suddenly put in $500,000. It meets the 5 year rule as I understand it.

thank you very much

[progree]

8. Investing in equities doesn't have to be hard or time consuming - just put it in an S&P 500

index fund like Warren Buffett, generally considered the greatest market investor of all time, recommended for people who don't want to spend time learning and following the stock market.

This was advice many years ago. My preference is a Total U.S. Stock Market Index fund, which has averaged slightly better over the long run because it has midcaps and small caps that on average have done better than the S&P 500 (which is large cap), and is somewhat more diversified.

(This post is prompted by some posts upthread that make it sound like it is difficult and time consuming and that you might need some kind of expert for that)

I strongly advise against hiring someone to pick stocks or funds. Most professional active fund managers do worse than their benchmarks and ditto against the S&P 500 and Total U.S. Stock Market indices. So your chances with a rando broker or financial advisor type will more likely than not be even less.

"I am not a person who actively follows the stock market, nor do I really want to"

Ironically, that's a HUGE positive -- it's people who fret about its daily and weekly moves that do the worst, as they are more likely to panic sell when the market dips. Just buy and hold a widely diversified U.S. stock market index fund, and you will do better than the vast majority of the "smartest people in the room" types.

And you definitely don't want to leave out equities



Over the past 20 years, it has grown 6.3710 fold, an average annual increase of 9.7%/year

Over the past 50 years, it has grown 131 fold, an average annual increase of 10.2%/year

and so on.

This is from the below link, which also has similar for bonds, Treasury bills, and gold. These don't come close to matching the increase in equities.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

Simulation after simulation by countless authors and organizations show one is more likely to exhaust their nest egg if it is all in fixed income like bonds and CDs than if it is majority equity. Nothing holds up as well in the face of withdrawals and inflation than does equities, except perhaps real estate. In other words, it's an even bigger gamble to not have a sizable proportion in equities.

That said, being an old person, I hedge by having about 40% of my easily re-investible assets in bonds and other fixed income. On top of that, I have an annuity, Social Security income, my house -- all non-equity investments or sources of income. So I'm far from being an "all equities" fanatic.

[IcyPeas]

13. thank you

wasn't that Bogle's recommendation too -- index funds (Vanguard)

you sound like you know what you're doing.

appreciate your response.

my brain wasn't programmed to understand all this. LOL.