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What should you do with 401K when you switch jobs?

July 31st, 2008 at 02:54 pm

Is it better to roll it over to the new plan? Or, is it better to put it in a roth IRA?

How do you select the best roth IRA for you? Also where to look for one?

Any suggestions would be highly appreciated. Feeling a little overwhelmed right now.
Frown

Posted in Job | 6 Comments »

6 Responses to “What should you do with 401K when you switch jobs?”

  1. Cindy K Says:
    July 31st, 2008 at 02:59 pm 1217516383
    1217516383

    Roth IRA's are for post-tax money. Right now your 401k has all pre-taxed money in it. If you want to remove it from the current 401k, you can roll it over to a personal IRA or to your new company's 401k. You do not want to take it as cash because there are taxes and stiff penalties for doing so.

  2. Broken Arrow Says:
    July 31st, 2008 at 05:13 pm 1217524438
    1217524438

    Do you like your old 401k company? Do they have investments that you like. Are they stable? Same thing with your new 401k.

    All things being equal, I'd rather roll the money into my own IRA. Convert it to Roth if you have the spare change to do it and the tax burden isn't too bad.

  3. monkeymama Says:
    July 31st, 2008 at 08:08 pm 1217534934
    1217534934

    401ks have limited investments so generally aren't the best. You have limited choices where you can invest.

    I'd roll to a regular IRA. You maybe able to roll with the same company. I am partial to T Rowe & Vanguard myself. Though I have a Fidelity account as well because it is where I had my old 401k. I converted it into a regular IRA and eventually into a ROTH once I had the cash to pay the taxes.

    Vanguard you need a minimum of $3k to buy into most funds. I like T Rowe because you can start with as little as $50/month. (Not sure how much you already have in your 401k).

    If you had a very small amount you could generally convert it into an IRA with any bank (cash) until you saved up enough to buy into mutual funds.

    I have done ALL Of the above. Big Grin I even kept my old 401k account for a long while because I was able to invest in some closed funds that way.

  4. baselle Says:
    August 1st, 2008 at 04:46 am 1217565977
    1217565977

    Depends on how much you have in your 401K. If its under a certain amount (5K, I think), you have to move it. Your choice is made for you.

    I'd move the 401K into a regular IRA, even if it has investments that you like. You've mentioned in your post that you are overwhelmed. If there is the slightest possibility that you've changed jobs under a cloud or that your company is hinky, I'd move the 401K and in doing so you can put it in a central, secure, flexible spot with no bad memories. You want streamlining. I love Vanguard for its funds, its low fees and I've gotten straight up good service with them.

    Again converting traditional to Roth means you will be paying taxes on it. And that's the second step if we are talking about the same money.

    I've put as much as I can in one spot - most of the biggies - Vanguard, T Rowe, Fidelity offer traditional, Roth, taxable accounts.

  5. Casey Says:
    August 1st, 2008 at 01:44 pm 1217598263
    1217598263

    I have 20K in my old 401K. The company will no longer exist soon, as we have new "Overlords" already. We can move it to Roth or move it to the new Overlord's 401K. I thought you were not allowed to have both the traditional IRA and 401K at the same time? I thought if you had 401K, you had to have a ROTH IRA? Egad! Any resources I can read up on????
    PS: I am going to make this comment a post as well so that I can get some more feedbacks.

  6. monkeymama Says:
    August 1st, 2008 at 02:07 pm 1217599629
    1217599629

    I don't think you can roll it directly into a ROTH. ?? It's a different kind of tax vehicle. You may have to roll it into a traditional IRA and then roll it into a ROTH. The financial institution would know.

    If you are single and make less than $53k in a year, you can contribute to both a 401k and a tradtional IRA in the same year. Under $63k and you can cotribute some money to a traditional IRA (just not the usual max).

    I am not sure if this is helpful or will confuse you more:

    Text is http://www.investopedia.com/articles/retirement/04/111004.asp and Link is
    http://www.investopedia.com/articles/retirement/04/111004.asp

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