(Closed) NWR: 401K or IRA?

posted 8 years ago in Money
Post # 3
Member
14494 posts
Honey Beekeeper
  • Wedding: June 2011

Personally, I would roll it over into your IRA.

Post # 4
Member
6998 posts
Busy Beekeeper
  • Wedding: February 2011

oo im looking into this for you! i am not savvy in the financial services industry but my husband is! he works for a 401k rollover compnay – just sent him an email…ill be back!

Post # 5
Member
1667 posts
Bumble bee
  • Wedding: May 2011

@Bostongrl25: It kind of depends on what your returns are going to be. If you can get a better return by rolling into the new 401(k) I would do that. For example, is the new company going to be matching contributions? Do they have a cap on matching amounts?

If they’re matching rules aren’t that great, then I would roll it over into an IRA with an indpendent advisor, otherwise known as RIA’s. You could choose a growth model for your portfolio to get more aggressive returns

Post # 7
Member
1667 posts
Bumble bee
  • Wedding: May 2011

@Bostongrl25: if they only match 6%, then perhaps you could roll over your old 401(k) into a separate IRA. Then start over with the new 401(k) but only contributing 6%. Then add money to the IRA when you are eligable for contributions?

 

Post # 8
Member
4480 posts
Honey bee
  • Wedding: March 2010 - Calamigos Ranch

Do rollovers count as contributions for matching purposes? I’d probably decide based on the funds available in your new company’s 401K.

Post # 9
Member
1667 posts
Bumble bee
  • Wedding: May 2011

@spaniel: ahh very good, point, I didn’t think about that. I think with most rollovers they don’t count as contributions, but perhaps it is a company by company basis?

Post # 10
Member
2392 posts
Buzzing bee
  • Wedding: September 2011

It’ll depend in part on your 401k plan – check the investment options as well as whether or not they offer loans.  Usually IRAs will give you more options, but some 401k plans have a really good lineup of funds at lower expenses than you’ll be able to get on your own.

The other issue is that you lose accessibility to the funds when they’re in your current employer’s 401k.  There’s very few reasons you can take money out, but many plans offer loans which are often a better deal than taking an early distribution and paying taxes + a 10% IRS penalty.  If you can’t take a loan or hardship in case of emergency, then you may want to use the IRA – that way you can take money out early, which is totally not recommended due to IRS penalties, but good to know in case of emergencies.

Disclaimer – this is not investment or tax advice.  Just a basic probably non-comprehensible rundown of the rule differences

Post # 11
Member
1667 posts
Bumble bee
  • Wedding: May 2011

I just double checked with my boss (work at an investment advisory firm). It would count as a rollover not a contribution

Post # 12
Member
10366 posts
Sugar Beekeeper
  • Wedding: September 2010

I’d look at your investment opportunities with both plans. Some companies’ 401Ks have really limited options, and an IRA could give you more diversity to choose from for the investments. I’m lucky in that I work for a huge company that has over 45 funds to choose from, but I know other people that are quite limited. Definitely something to consider!

Post # 13
Member
6998 posts
Busy Beekeeper
  • Wedding: February 2011

here is what my husband had to say:

I would say it’s all about consolidation. If this is long term employment I would roll the money into the new 401k plan. If she has other 401k balances existing outside of this, it would probably make sense to roll those (lets say 3 balances) into an IRA. This way when she retires from the current company she can roll that money into the existing IRA and all the retirement money will be in one location. IRA’s generally give you more freedom in choosing investments (ie: real estate, gold etc.)

Post # 14
Hostess
18637 posts
Honey Beekeeper
  • Wedding: June 2009

I would probably roll it over into an IRA since the investment options in 401ks are pretty limited.

Post # 15
Member
14658 posts
Honey Beekeeper
  • Wedding: June 2011

They are the same from the financial stand point, but the IRA would have more investment options like PPs said.  I’d go owith that.  Do you have the option and would it be beneficial to turn it into a Roth IRA?

Post # 16
Member
2392 posts
Buzzing bee
  • Wedding: September 2011

Oh, one more thing!  Check your current employer’s plan for what are called “surrender charges”  It’s unlikely it would have them, but some older plans exist that have a back-end charge when you take the money out (say there’s 6 years before the charges expire, and you leave the company and want to roll over the account in 3 years).  Even when plans do have these, they’re often waived if you leave the company, so it’s unlikely, but it’s a good thing to check on.

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