401K question

Beeman · #1 04/22/07, 06:52 AM

I hope i can word this so it makes sense.

When can you roll a 401K to another account? Can you roll it to another 401K while you are still working at the company that you have it at? How do you protect that money with safer less risk investments when you get close to retirement if the company's 401K doesn't offer conservative options?

Sparticle · #2 04/22/07, 07:09 AM

Quote:

Originally Posted by Beeman

I hope i can word this so it makes sense.

When can you roll a 401K to another account? Can you roll it to another 401K while you are still working at the company that you have it at? How do you protect that money with safer less risk investments when you get close to retirement if the company's 401K doesn't offer conservative options?

You roll your 401(k) into another account when you are no longer have the ability to contribute to it through payroll deduct, so when you stop working there or i believe if you hit a certain age. when you quit or get fired, you have so many days to roll the money into another account to avoid penalties and if the check is made out directly to you, your employer has to withhold a certain amount of the funds. If you do figure out a way to transfer the funds perhaps due to your age, have the check made out directly to the new fund.

So you have two jobs and want to roll the money from one account into another?

Most 401(k) funds offer pretty conservative options. If yours truly does not, then perhaps you can just contribute enough to get the company match and then invest the rest your self. Maybe you could get a Roth IRA, bonds or a fund put together specifically for pre and post retirees. Not recommending this one because i'm not a retiree and have no personal knowledge of this fund, but just as an example:

http://www.troweprice.com/common/gcA...es&rfpgid=7561

Here is another tid bit

if you are at least 55 when you retire, you can start tapping your 401(k) funds penalty free -- although you'll still owe income taxes on your withdrawals. If you roll the money over to an IRA, where you will have more investment choices, you must be at least 59½ to avoid early withdrawal penalties when taking money out of the account.

Rollover to a traditional IRA. If you decide to roll over some or all of your 401(k) money to an IRA, you can preserve your tax deferral by transferring the funds directly to the new custodian, such as a discount broker or mutual fund company. Don't make the mistake of having a check made out to you. If you do, your employer will be required to withhold 20% of the balance for taxes even if you plan to complete a rollover to an IRA within 60 days. Any money that's not in an IRA within that time period -- including any part of that 20% withheld from the IRS that you aren't able to come up with elsewhere -- will be treated as a distribution and subject to income taxes plus a 10% penalty if you are younger than 59½. You avoid this potential problem by having the money sent directly to your IRA or having the check written to your IRA account.

I've been in employee health benefits for 17 years NOT in the 401(k) area. So maybe this will just give you some ideas of more questions to ask your employer. You might check with your employee 401(k) rep or a local credit union. they are usually pretty helpful.

(edit to include link:
http://www.kiplinger.com/printstory.php?pid=6648

Selena · #3 04/22/07, 07:17 AM

I have rolled a prior employer 401k into the new employer 401k. Most companies allow 401k rollovers but some don't. You have to ask and if so, get the paperwork from BOTH places (out and in) so there is no chance you get stuck paying tax and penalty or have taxes withheld. If you "mess up" and taxes are withheld, you have to wait until you file next year's federal 1040 to get it back. AND you have to pony up that amount for the new plan otherwise you could get penalized and taxed (for an early withdrawl). Any monies you roll makes you 100% invested in that rollover (will have its own line on your statement) and will be available for a loan if you need it.
I quit rolling 401k to new employers and have a self-directed IRA. I have a stocks and bond/CD instrument as well as cash. You can roll into a mutual fund or an ETF. Up to you to decide how well the new employer 401k plan meets your investing choices/needs. Or if you don't want to actively manage your monies, a mutual fund(s) or an ETF may meet your need.

Beeman · #4 04/22/07, 07:55 AM

Let's try this.

You work at a company and you've got a 401K with auto payroll deduction. You are getting near retirement age and you want to have your money in secure low risk investments and don't like the company you have your 401K in. You are and will continue to work at your current employer. Can you roll or transfer that money into another 401K or IRA with another broker? This is all while you continue to work at the company.

morrowsmowers · #5 04/22/07, 08:08 AM

Under most plans, if you are still working for a company, you choice is to be in the plan or not. You will be able to transfer it if you stop working for the company. Under the situation given you may be better off to stop investing in the plan and put your money into an IRA account. Of course, you will loose employer matching.

Ken in Glassboro, NJ

Beeman · #6 04/22/07, 08:59 AM

Quote:

Originally Posted by morrowsmowers

Under most plans, if you are still working for a company, you choice is to be in the plan or not. You will be able to transfer it if you stop working for the company. Under the situation given you may be better off to stop investing in the plan and put your money into an IRA account. Of course, you will loose employer matching.

Ken in Glassboro, NJ

OK, let's say you decide to stop contributing while still working for the employer. If you stop contributing can you then roll it to another 401K?

Did you ever wonder how or why they came up with so many limitations on what you can do with your money? It is yours after all except for possibly employer match money tied to vesting.
I'm starting to think the only money I can count on is the money in my mayonaise jar.

Jenn · #7 04/22/07, 09:35 AM

Bee the only way you get the tax deferrals (and most crucially the employer matching funds) is in your company plan. If you have a company plan, you can't set up your own plan. You can't even do a tax deductible IRA contribution unless your income is pretty low since you have a company plan.

Unless you see (insider knowledge) that your company plan full of company stock is about to lose money as the company goes down, you get more money in the plan with tax savings and company matching. If the company plan is bad for you because of high fees or what you view as poor management or just poor options, complain to HR about it and ask for improvements. Might also be place to ask they stop being heavy on company stock if that's a bad thing.

Ask for rules for company plan re transfers- probably not allowed until you leave or retire. If the plan was okay for you at 5 and 10 years before retirement it should be okay for up to 5 years after retirement- after all you're going to live for another 30-50 years after retirement, right?

If you call Vanguard (my fave) or other fund they'll do their best to help you do the transfer to them correctly.

Beeman · #8 04/22/07, 11:17 AM

Quote:

Originally Posted by Jenn

Bee the only way you get the tax deferrals (and most crucially the employer matching funds) is in your company plan. If you have a company plan, you can't set up your own plan. You can't even do a tax deductible IRA contribution unless your income is pretty low since you have a company plan.

Unless you see (insider knowledge) that your company plan full of company stock is about to lose money as the company goes down, you get more money in the plan with tax savings and company matching. If the company plan is bad for you because of high fees or what you view as poor management or just poor options, complain to HR about it and ask for improvements. Might also be place to ask they stop being heavy on company stock if that's a bad thing.

Ask for rules for company plan re transfers- probably not allowed until you leave or retire. If the plan was okay for you at 5 and 10 years before retirement it should be okay for up to 5 years after retirement- after all you're going to live for another 30-50 years after retirement, right?

If you call Vanguard (my fave) or other fund they'll do their best to help you do the transfer to them correctly.

I keep looking to see how long I'll live after(if there is one) retirement. What document can I find that on, I've checked everything from my birth certificate foward.

When you say it was OK for 5-10 years before retirement why should it be OK for after retirement when you can no longer contribute and wish to protect your money?

Company stock is my choice in the plan and I don't have much any more. I just don't see enough safe investments in the plan for the future, I'm not there yet but we have this discussion all of the time at work and many who are 62-65yo are concerned with good reason.

How in the world did we ever let them set up a plan like this with limited options and no way to get your own money out while you are still working? This is post Enron and some of the other horror stories!

The more I learn about 401K's the less inclined I am to put any more than the necessary amount to get the match money. I figure by the time I get ready to retire they'll already have changed the tax laws so that part of the advantage will be diminished if not eliminated.

Quinton · #9 04/22/07, 06:52 PM

You cannot roll over the 401k till you leave or retire, or die.

BUT, you can stop investing when the yearly time comes around to stop or add to funds.

So if you want something different, complain to them to offer more, that may get you some other investments to look at through the 401k.

When you stop investing you can start up a Roth - Ira.

OR if you start a business, you can start a Solo Roth and invest your earnings there.

FACT!!
You can withdraw any monies you want from IRA accounts at ANY age with NO penalties, IF (big IF), you use the IRS actuarial tables for your lifespan and take equal withdrawals. You can be 25, 35,45, 55 and do this, but of course the IRS gets its share of taxes , but there will be no penalties on the withdrawal!

ie, if you have $50,000 in an IRA and you are age 49, you can goto the IRS tables and get the $50,000 in equal monthly payments (minus the taxes!) based on your life expectancy.

http://www.montana.edu/wwwpb/pubs/mt9808.html

"Equal Payments Based on Life Expectancy. An eighth exception rule exists for substantially equal withdrawals from an "ordinary" IRA based on life expectancy. The IRS allows a person to receive distributions from an ordinary IRA before age 59 1/2 without the 10% excise tax if the withdrawals are part of a series of substantially equal payments over the person's life (based on life expectancy tables) or over the lives of the person and the beneficiary (joint life expectancies). An IRS-approved distribution method must be used and the person must take at least one distribution annually for this exception to apply."