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Thread: Going from a 401 to an IRA

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    Veteran Member TarynJolie's Avatar
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    Default Going from a 401 to an IRA

    I would love to read some thoughts on going from a company 401 to an IRA and or other personal investments .

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    God/dess Emily's Avatar
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    Default Re: Going from a 401 to an IRA

    there was an article about this in my Fidelity magazine today

    it's online at fidelity.com

    What do you want to know? I did it when I moved from my traditional job to dance full-time. I had to or I'd have to keep my company match in the company fund, which I didn't want to do.

    it was painless and easy

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    Veteran Member TarynJolie's Avatar
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    Default Re: Going from a 401 to an IRA

    Thankyou for the link , Emily

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    Banned Melonie's Avatar
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    Default Re: Going from a 401 to an IRA

    yup this is a no-brainer ... transfer from 401k to SEP IRA.

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    Default Re: Going from a 401 to an IRA

    Ok I resemble that remark lol . But what if your 401 is before tax and you want to roll it will you have to pay the tax even though you are not actually getting money in hand ?

    Quote Originally Posted by Melonie
    yup this is a no-brainer ... transfer from 401k to SEP IRA.

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    Default Re: Going from a 401 to an IRA

    not with a SEP (conventional) IRA ... which is structured in a very similar fashion to employer 401k's. In both cases contributions were/are made pre-tax, earnings accrue tax free, withdrawls after retirement age count as taxable income in the year the withdrawl is made, and early withdrawl penalties apply. In this case only a transfer of pre-tax money is involved.

    Attempting to roll a 401k balance into a Roth IRA, where contributions are made after tax, earnings accrue tax free, and withdrawls after retirement age do not count as taxable income (under current law at least), and where early withdrawl penalties are minimal, is a whole different story. I've never heard of anybody doing this although I'm sure it's possible. However, I am certain that some sort of penalties will apply to the transferred 401k balance, as a 'conversion' from pre-tax money to after tax money will be necessary on the way to the Roth IRA.

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    God/dess montythegeek's Avatar
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    Default Re: Going from a 401 to an IRA

    I have moved 401K money to an IRA 3 times and each took about 10 minutes at Charles Schwab. Both were to a pre-existing account ( I think the hardest part of 2 and 3 was finding a parking space). The easiest way is if you take the original distribution check and deposit it after making a copy.

    Be very careful about the time you have to do the transfer and unless you are starving, do not comingle the funds with your own. If you should do it for a day or so make damn sure there is a clear paper trail, and if you move 10,000 and want to add 2,000, make it in a separate check. You want no one to think you moved less than 100% of the money you had to.

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    Default Re: Going from a 401 to an IRA

    Ok I think I get it - lets say its around 170k in moneys does this make any diff in the rollover transition - I know the Roths are limited - what is best for me to roll into . I am not actually sure I want to move this money, the stocks performance is not that bad ( 8%) I just want to be prepared if I need some cash quick down the line . I am probably just overeacting with my investment decisions I have been in the same contribution for at least 15yrs . I am getting older now so I must think more or less risk - Im confussed ...

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    God/dess montythegeek's Avatar
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    Default Re: Going from a 401 to an IRA

    Quote Originally Posted by CuriousJ
    Ok I think I get it - lets say its around 170k in moneys does this make any diff in the rollover transition - I know the Roths are limited - what is best for me to roll into . I am not actually sure I want to move this money, the stocks performance is not that bad ( 8%) I just want to be prepared if I need some cash quick down the line . I am probably just overeacting with my investment decisions I have been in the same contribution for at least 15yrs . I am getting older now so I must think more or less risk - Im confussed ...
    The amount is irrelevant--same for $500 as $500K. Where the money goes once in the IRA is a different decision altogether. you would now have the options of before plus many more--the differencee is you now pay transaction fees on moving money around.

    Do not think of an IRA or a 401K as a source of ready cash. If you withdraw a dime before 59 1/2 you pay taxes and penalties and the dime turns into a nickel. If you like the funds you are in now, reinvest in them after moving it.

    If you need to move the money soon move it now THEN decide where to put it after parking it 1/3rd in an S&P index fund, 1/3 in an income fund, and 1/3 in cash for 60-90 days while you plan.

    Sounds like you need a porfolio plan which you can get help with from a Fidelity or Schwab. For a $170K account, they will be drooling to advise you, but move the $$$ first. Sounds like a prime time for a re-think you put off for years, but there are penalties for being slow in moving to a IRA so move the damn dollars now, then rethink over the holidays.

    Do not get carried away by all the new options you have open --keep a balance between safety and gain and do not put too many eggs in one basket and do not chase the year-to-date winners. Limit your company risk by keeping less than $7K in any one company and most of the $$$ (more than half) in broad-based investments. For a fund go up to $15-20K exposure unless its is an S&P500 index fund where it could go to 65-70% because it is so broad.

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    God/dess doc-catfish's Avatar
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    Default Re: Going from a 401 to an IRA

    Quote Originally Posted by CuriousJ
    Ok I think I get it - lets say its around 170k in moneys does this make any diff in the rollover transition - I know the Roths are limited - what is best for me to roll into .
    I believe you have to rollover your funds into a traditional IRA since that money is technically "pre-tax". If you want to then move that money (or at least some of it) into a Roth, then you need to have a conversion done (yes there are limitations).

    http://www.roth-ira-conversion.com/

    If you do a conversion, you will owe taxes on the amount you convert since a Roth contains "post-tax" money, but after that the earnings are tax free.
    Former SCJ now in rehab.

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    Banned Katrine's Avatar
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    Default Re: Going from a 401 to an IRA

    Quote Originally Posted by montythegeek
    . If you like the funds you are in now, reinvest in them after moving it.
    You only have 60 days to roll it over without penalty, keep that in mind.

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    God/dess montythegeek's Avatar
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    Default Re: Going from a 401 to an IRA

    Quote Originally Posted by Katrine
    You only have 60 days to roll it over without penalty, keep that in mind.
    Kat, as always, said it clearer than I.

    My version
    Be very careful about the time you have to do the transfer and unless you are starving, do not comingle the funds with your own.

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    Default Re: Going from a 401 to an IRA

    Well I am not starving yet so this is good . All the advice is really helpfull you guys are great I am thinking about leaving this where it is atm . I do have a few other stocks and such Janus funds but you know if you ride these things out from my own personal experience they come back around and make money for you . I guess I just dont like moving my investments around its like the flavor of the month for me it comes and goes then it makes you money . I have lost a few bucks but I find if I stick it out it comes back around what do you guys experience with yours ? I am not by any means investor savvy I do a little research listen to people and play my gut, it works I guess .

  14. #14
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    Default Re: Going from a 401 to an IRA

    I do like the word commingle lol .

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