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  1. I'm leaving my full-time job for one that does not offer a 401k.
    What should I do with the 401k I have? Where does it need to go, Financial planner? Bank?

    And Do I have to pay for the service, or does it come out of the 401k funds?
  2. micropolitan guy

    micropolitan guy Well-Known Member

    I saw my financial planner and rolled my old 401K into an annuity and an IRA. I can't remember how I paid for it but dumping the 401 K is the first thing you need to do.
  3. The Big Ragu

    The Big Ragu Moderator Staff Member

    You can leave the money in the 401(K). You can't keep contributing, though.

    Alternatively (and what I'd recommend), you can roll it over into an IRA.

    The benefits of doing that are that an IRA offers infinite investment choices at your discretion. The 401(K) plan offered a limited number of investments based on the deal your employer made with one investment company.

    You can work with a financial planner, but they are going to charge you. If you do that, I'd work with one that is fee only. Commission-based agents have a conflict of interest. They earn their money by steering you toward specific products, and even if they aren't steering you to things that make them the most money, they have incentive to overtrade to earn commissions. Someone who is fee only, theoretically at least, will make investment choices that are in your best interest.

    All of that said -- and I don't know how much you have in your 401(k), but if you are not very wealthy and not going to stay on top of your investments actively, you should consider finding a low-cost mutual fund company (read: Vanguard, but Fidelity and a few others would be OK too) and passively invest in low-cost index funds that track broad indexes (the S&P 500, the Wilshire 5000, or as they call it "the total stock market index", the MSCI International Index, a total bond index fund, etc.). Figure out an asset allocation that makes sense for your age -- a split of equities and fixed income investments, and within the equities, domestic vs. foreign and just put your money in index funds.

    Then don't try to time the market. If your time horizon is appropriate for your asset allocation mix, just keep adding to the IRA (you are allowed $5500 a year). Dollar cost averaging in, you buy sometimes when the markets are expensive. You buy sometimes when they are cheap. Some years things will be down. Others, they will be up. The S&P 500 has never had a losing return over any 20 year period, though, and historically has averaged annualized returns in the 8 to 9 percent range. That doesn't guarantee the future, but it has historically been an approach that if most people had followed it, they would have done better than they do.

    There are two reasons why index fund investing makes sense for the vast majority of people. 1) Most active money managers don't outperform those benchmark indexes, which they are comparing themselves to, for any length of time. A stock growth fund manager might outperform the S&P 500 in any given year, but over 10 or 15 year periods, you'd be hard pressed to find very many funds that have consistently done so. 2) More importantly, the expenses on those index funds are low. That is their ace in the hole. If you work with a financial planner, the starting point is usually 1 percent of your assets as their fee. And they really don't do anything all that magical to earn that. Then the actively managed funds or ETFs they will likely put you in might have expenses in the 1 to 2 percent range that go to the companies that manage those funds. So they are starting you out with a return of negative 1.5 to 4 percent. Even if you choose actively managed funds on your own, cutting out the planner, they often will have expenses in excess of 1 percent. Again, you are starting out with a negative 1 + percent return, before your money is even invested. By contrast, Vanguard's index mutual funds' expenses average .15 percent. If you qualify for their admiral shares (based on how much you have), expenses can be as low as .05 percent.

    That was the long answer -- did you expect anything less from me? (Really, just trying to be helpful). The short answer is you don't have to do a thing. You can leave the money in your old company's 401(K). But it makes sense to roll it into an IRA and self-manage that IRA using a passive approach for most people.
  4. I do NOT want to leave it in the 401K. The return is shit.
    Can a bank do the IRA or annuity, or should I shop around for a financial planner?
  5. TigerVols

    TigerVols Well-Known Member

    Outside of, oh, I dunno, sex...I can't imagine a worse question to ask on this board.

    Go get some professional advice please!
  6. Joe Williams

    Joe Williams Well-Known Member

    Solid advice throughout, Ragu.

    When I left a longtime job with a decent-sized 401(K), I rolled it into a Fidelity annuity. They eventually gave me some options for having active management of my holdings or more of a self-directed approach. I've got a guy there assigned to me with whom I consult maybe twice a year, though I can contact him when needed. But I passed on the active management thing because it was going to be several thousand dollars a year (a flat %, rather than fee only) off the top. In a better world, the managers would have a sliding scale for their compensation, earning more as the return they produce for you increases. Better still, it would be tied to the positive gap between their particular return and comparable returns in similar sectors of investing.

    So I'm doing the self-directed thing and sticking mostly to the lower cost, broader index funds. This year of course has been strong, but you need to have the stomach for the downturns. I'm far enough away from tapping into the IRA (I hope) that I refuse to let the dips bother me. At some point, though, I'll want to take some gains off the table into more of a fixed, low-risk investment and hopefully just be "playing" only with the house's money.

    At some point I'll have to look at annuitizing some of the nest egg to provide an income stream that will supplement Social Security and the piddly pension that my previous employer froze even before I left. My current employer doesn't have any pension. I stick enough in this one's 401(K) to get their company match. It's also Fidelity, separate from my IRA, with a decent selection of investment options.

    Proud that we convinced our kid to stick money aside for retirement as soon as full-time employment came along. That whole compounding thing can be dazzling, if you start young enough. I didn't get going till my 30s.
  7. Sam Mills 51

    Sam Mills 51 Well-Known Member

    Roll the 401K into an IRA. More options.

    Also, find a fee-only financial sort. Some are probably sharp enough to do it themselves, but I remain convinced that the financial sorts have ins and know a lot more than many of us think we do.

    Joe Williams, preach. Solid advice to the kids.
  8. BTExpress

    BTExpress Well-Known Member

    The return is . . . what you make of it based on your investment choices. Unless your fund is such that you have no choices.
  9. Inky_Wretch

    Inky_Wretch Well-Known Member

    I used to work as a 401(k) plan administrator helping manage accounts for a portion of the 40,000 employees. One of my main jobs was helping former employees move their money out of the 401(k) to wherever they wanted.

    So I'm pretty qualified to answer this ... follow TigerVols' advice and go see a professional advisor. Don't wing it. Don't Google for advice and cobble together a plan on your own. Get professional help.
  10. TheSportsPredictor

    TheSportsPredictor Well-Known Member

    C'mon, Ragu, we all know that's the short answer. And this is the greatest sentence ever written.
  11. Respectfully disagree. I think Big Ragu offers good advice. And it was free.

    This is only rocket science to those who want to make it such. Retirement investing is fairly idiot proof. Choose an index fund with your target retirement date. It will automatically get more conservative (i.e., more bonds, fewer equities) as your retirement approaches.

    To the OP, if your return has been "shit" in the 401k, I'm curious what kind of fund(s) you have it invested in....If you're under, say, 40, and were investing in the most basic retirement target fund (that I would be willing to bet every 401k offers), you would be doing extremely well over the last few years as the stock market has soared.

    You can roll over your 401k to an IRA (which is what I did eventually), but there's no urgency to do so. They're not going to take your money away. And assuming you have it invested in a smart plan, it will continue to grow.
  12. trifectarich

    trifectarich Well-Known Member

    Everyone should go check on their retirement account(s) right now. If you haven't had a double-digit gain so far this year, you're throwing away money and you need to fix that pronto.
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