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401k after retirement
Old 07-04-2009, 08:02 PM   #1
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401k after retirement

I retired in 2007 and I have not done anything with my 401k from my previous employer. I have it invested in American Funds and there is no charge to leave it at this time. There are also no transaction fees. I have it in American Balanced, New Perspective, and Small Cap world fund. In uneven amounts. It is up 6.25% for the year as of Friday.

I am 52 and don't plan on needing the money anytime soon, no early withdrawls or 72t plans. Is there any reason not to just leave it there? Or should I cash out and have the money transfered to My Vanguard IRA?
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Old 07-04-2009, 09:43 PM   #2
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Cash out- NO --- rollover- maybe

Consider not only the investments available to you now but also the fees, which are generally higher in 401k's than IRA's.

If it is not a lot of money, you might consider rolling to a Roth and taking advantage of the 2 years coming up in which to pay the taxes on the gains. This may or may not make the most sense for you-you'll need to run the numbers.
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Old 07-04-2009, 10:07 PM   #3
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You will need to balance the generally touted advantages of transfer/rollover to an IRA(possible lower costs, greater selection, etc) vs the possible greater creditor protection of the 401K in non-bankruptcy situations(very dependent on state you live in).
Bogleheads :: View topic - Rollover IRA Judgement Protection
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Old 07-05-2009, 07:52 AM   #4
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One possible benefit of staying in the 401(k) is the availability of a guaranteed return fund that is paying more than pathetic CD rates. I am making an assumption every plan has one. On July 1, mine reset to 3.15% from 3.5%. I will leave my 401(k) monies with my employer when I leave soon to take advantage of the rate and flexibility to move/withdraw the money at any time. If rates start going up in the "real world" I can move my money out with no restrictions.

We have 5% CD's maturing in September. It will probably make sense to rejigger the portfolio to make the 401(k) assets part of the fixed income portion of our portfolio and do other things with the CD money.
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Old 07-05-2009, 08:08 AM   #5
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I retired in 2007 and I have not done anything with my 401k from my previous employer. I have it invested in American Funds and there is no charge to leave it at this time. There are also no transaction fees.
From what I have read, there likely are hidden fees that you may not be aware of. My plan also claims to be fee-free. Not ambitious or smart enough to have discovered what they are yet though. Those advocating the
transfer to IRA are more likely to be able to steer you to how to find info.
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Old 07-05-2009, 08:14 AM   #6
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From what I have read, there likely are hidden fees that you may not be aware of. My plan also claims to be fee-free. Not ambitious or smart enough to have discovered what they are yet though. Those advocating the
transfer to IRA are more likely to be able to steer you to how to find info.
I've tried and tried and I can't see where these fees are in my case. My 401K is with Fidelity and it uses many of the lowest-fee institutional classes with their own valid ticker symbols with prices you can look up. Nothing is ever taken out monthly, quarterly or yearly. It's possible my employer is eating the fees and maybe they're just getting the fees from the fund expenses.

In my HSA, for example, I know what the fees are: a $2.50 monthly account fee (which my employer eats as long as I'm still w*rking there). Of course, the other way the custodian makes money is by paying 0.2% on cash deposits and, if I wanted to invest in mutual funds, another $10 account fee per quarter (which I'd have to pay).
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Old 07-05-2009, 09:10 AM   #7
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If your 401(k) funds have ticker symbols, then you can compare your results with the results given for the ticker symbols. To work, you have to select a fund of yours that you neither add to nor subtract from over the course of a month or quarter. The was advocated by TheFinanceBuff.

For example, if the published return over 3 months is 4.32% and you get 4.17%, that is an extra fee of 0.15% per quarter or 0.60% per year.
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Old 07-05-2009, 10:55 AM   #8
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I have a Keogh which in some ways is similar to a 401K. I retired nine months ago and got a call from my former employer who politely asked me to roll it over into an IRA. The Keogh was set up so that I could buy and sell anything I wanted within the Schwab system. Apparently, it is an annual accounting/IRS hassle for a small business. They always had to get an end of year statement from me, and get information such as: did I pay any fees, did I withdraw or borrow from the account. Once their company name is off my account, they won’t have to deal with it anymore.

A little googling gave me the impression that there are tax advantages in inheriting an IRA over a Keogh or 401k.
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Old 07-05-2009, 12:43 PM   #9
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A little googling gave me the impression that there are tax advantages in inheriting an IRA over a ...... 401k.
CJ-------could you share what those might be? I had the impression they are similar or were supposed to be or will be soon......but that flaws in execution had delayed progress a bit
for non-spouse beneficiaries.
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Old 07-05-2009, 05:54 PM   #10
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CJ-------could you share what those might be? I had the impression they are similar or were supposed to be or will be soon......but that flaws in execution had delayed progress a bit
for non-spouse beneficiaries.
Until 2007, this was true. That's because IRAs could be tapped using RMDs over the life expectancy of the non-spousal beneficiary, but 401Ks had to be cashed out within the first five years.

Starting in 2007, non-spousal beneficiaries have been able to roll over an inherited 401K to an IRA where they can use the same RMD-style method over their life expectancy.

There are a fair number of potential pitfalls that can snare non-spousal beneficiaries if they don't dot all the I's and cross the T's in the right way, so much caution and perhaps professional help can be called for if you are in a position to inherit a substantial non-spousal 401K.
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Old 07-05-2009, 06:18 PM   #11
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Interesting thread. We rolled DW's 401(k) into an IRA when she ESR'ed 5 years ago - much better choice of funds available outside of the 401(k).

I'll be facing the same choice myself and again next year and I plan to roll over into an IRA for the same reason.
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Old 07-05-2009, 07:45 PM   #12
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I probably should just go ahead and sell the american funds within the 401k and then rollover the cash to my Vanguard IRA and replace with funds from there. If nothing else it would be one less account to keep up with.

Since it appears that there is no real benefit with keeping the 401k anyway. The only drawback is Im sure there is more paperwork to fill out and there will be a week or too of float untill it showes up in the new account. And I'll be sure that it has been lost.
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Old 07-05-2009, 07:57 PM   #13
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Since it appears that there is no real benefit with keeping the 401k anyway. The only drawback is Im sure there is more paperwork to fill out and there will be a week or too of float untill it showes up in the new account. And I'll be sure that it has been lost.
When DW rolled over her 401(k) it was incredibly easy - the receiving company did all the work (in her case it was Fidelity, in my case it will be Vanguard). We actually talked about how easy it had been at the coffee shop this morning (before I'd seen this thread).
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Old 07-05-2009, 08:38 PM   #14
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Thanks Alan, thats good to know. I already have a IRA at Vanguard so I assume I can just put everything there. I'll give them a call next week.

Since there are no transaction cost within my 401k I guess I'll sell the funds and just rollover cash. Then buy new funds at Vanguard.
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Old 07-05-2009, 09:22 PM   #15
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Thanks Alan, thats good to know. I already have a IRA at Vanguard so I assume I can just put everything there. I'll give them a call next week.

Since there are no transaction cost within my 401k I guess I'll sell the funds and just rollover cash. Then buy new funds at Vanguard.
With DW's rollover we already had researched and knew pretty well what we wanted, but the first thing we did was just what you suggested - rolled it over into a Money Market Fund then bought funds afterwards.
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Old 07-05-2009, 09:43 PM   #16
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I already have a IRA at Vanguard so I assume I can just put everything there. .
Depending on what that IRA at Vanguard consists of.....you may want to consider having the 401K rollover kept separate. For creditor protection,
the 401K is generally considered the best. If you opt not to take advantage of that, an IRA consisting only of transfers/rollovers from ERISA plans like the 401K is considered next best in terms of the level of protection (unlimited $$$, I think). A contributory IRA from annual personal contributions has a ?1M
limit in federal creditor protection in bankruptcy.
Depending on the size of your IRAs and what protection your IRAs get from the state, you may or may not get a benefit from keeping the ERISA rollovers separate.
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