401k Rollover to IRA

[harry7447]

I guess these questions have been asked earlier, here we go again

1) Which Rollover 401k IRA is the best option for ~$18k? Also what are some of the best MFs that can be bought now (retiring in ~20 yrs) for moderate returns?

2) I keep reading about no-fee mutual funds with different expense ratios. Can i buy stocks after the rollover? What are the advantages of buying the MFs over stocks?



Sorry again for asking the same. Appreciate a lot.


Thanks

Harry

 

[RunningBum]

1. I hesitate to make any recommendation without knowing what other investments you have and what your risk tolerance is. You might want to start with something in the Vanguard or Fidelity families because of the low fees.

2. Yes, you can transfer your funds to an IRA in a brokerage and buy individual stocks. A mutual fund gives you more diversification. If you buy more than 2 or 3 stocks with 18K you'll probably be spending too much in transaction fees, and with a small number of stocks bad news on just one of them will pull your portfolio down. Of course if you pick the right stocks you could do better than most mutual funds, but which stocks are those?

 

[bUU]

We're about to make the decision, as my spouse has changed jobs. My financial adviser keeps harping on the idea of rollover to IRA (probably because he has dreams that perhaps someday it'll mean more money for him to directly manage for us - never gonna happen). However, my spouse's new 401k has excellent choices, almost a dozen Vanguard funds of various colors, with institutional fund classes (i.e., institutional ERs). I cannot buy (for example) VIIIX in my IRA. So I'm inclined to rollover my spouse's old 401k into my spouse's new 401k. It's rare for a small company's 401k to be decent, especially these days, but it does happen.

 

[padlin00]

If the new plan has good vanguard funds I'd rollover into that as opposed to an IRA.

As far as the OP goes, you need to post more info to get detailed answers.

 

[Which Roger]

We're about to make the decision, as my spouse has changed jobs. My financial adviser keeps harping on the idea of rollover to IRA (probably because he has dreams that perhaps someday it'll mean more money for him to directly manage for us - never gonna happen). However, my spouse's new 401k has excellent choices, almost a dozen Vanguard funds of various colors, with institutional fund classes (i.e., institutional ERs). I cannot buy (for example) VIIIX in my IRA. So I'm inclined to rollover my spouse's old 401k into my spouse's new 401k. It's rare for a small company's 401k to be decent, especially these days, but it does happen.

If you want to buy VIIIX, you can just go to vanguard.com, open a rollover IRA, and move your 401k there. No need to roll the money into an existing account, or to involve the financial advisor.

 

[bUU]

That's not the way it reads to me...

 

[Which Roger]

That's not the way it reads to me...

My bad. I didn't see the minimum. Sorry.

 

[bUU]

That's really the magic of 401ks that financial planners won't tell you about (if they're hoping to get their mitts on your money eh? ) Institutional funds: You're not going to have access to them in your personal investment accounts or IRAs. They might be available to you in (better) 401ks.

 

[Willers]

Also, keep in mind that rolling into an IRA can sabotage your ability to do tax free back door IRAs if you are ever in a position to do one. That has happened to me.

 

[Willers]

Typed too fast. Back door traditional IRA to Roth IRA conversions that is...

 

[rodi]

We're about to make the decision, as my spouse has changed jobs. My financial adviser keeps harping on the idea of rollover to IRA (probably because he has dreams that perhaps someday it'll mean more money for him to directly manage for us - never gonna happen). However, my spouse's new 401k has excellent choices, almost a dozen Vanguard funds of various colors, with institutional fund classes (i.e., institutional ERs). I cannot buy (for example) VIIIX in my IRA. So I'm inclined to rollover my spouse's old 401k into my spouse's new 401k. It's rare for a small company's 401k to be decent, especially these days, but it does happen.

One unlikely scenario, that happened to a coworker of mine.

He had a 401k from his previous employer. He saw that his new employer had great vanguard funds. He rolled it into the mega corp's 401k.
2 years later that employer was bought by a mega-mega-corp - and the 401k plan was converted over to the new company's plan. No more vanguard. The new funds were low ER - but also lacked transparency and choice (Less than 10 funds total.)

If he'd rolled to a vanguard IRA - he would have stayed in vanguard. his preference.

Doesn't matter now - our mega-mega corp was acquired by a SUPER mega corp who spun us off and sold us to a mini-corp. At that point we were able to roll out our 401ks. Which is good because mini-corp's 401k has high ER funds. New money goes in there - but old money is now self directed.

My point is - those institutional vanguard funds are not guaranteed to be there indefinitely and you often can't roll out of a 401k without quitting.

 

[rodi]

For the OP. I suggest reading up about the lazy portfolio. Lazy Portfolios - Bogleheads
That would give you diversification.

The bogleheads wiki is geared towards vanguard but you can replicate it with low ER index funds from any of the big players. (Vanguard, Fidelity, Schwab, TD-Ameritrade, etc.) The key is to figure out your risk tolerance and set your asset allocation.

 

[siamond]

A safe answer to your MF question is clearly Vanguard index funds. And yes, they are characterized by very low fees, which is so crucially important for your long-term financial future. Much more money in your pocket instead of somebody else as many academic studies demonstrated so convincingly.

May I answer at another level though? No disrespect, but you seem to have relatively limited experience with investing. Before making any sudden move, do take the time to read some good solid literature, and think about it.

For me, reading The Four Pillars of Investing by William Bernstein has been the most seminal event I could think of... Totally changed my perceptions, set me up on a much better path, oh dear, I so wish I would have done it when I was your age... There are other good books on the general theme of passive investing, just try to pick one suitable for you, and do it justice...

Do take the time to read and understand, then think to your own situation AS A WHOLE, make a SIMPLE plan, and... stick to it! This might be the most important decision of your financial life... I mean it!

 

[harry7447]

OP here. Sorry for my late reply.

1. I hesitate to make any recommendation without knowing what other investments you have and what your risk tolerance is. You might want to start with something in the Vanguard or Fidelity families because of the low fees.

2. Yes, you can transfer your funds to an IRA in a brokerage and buy individual stocks. A mutual fund gives you more diversification. If you buy more than 2 or 3 stocks with 18K you'll probably be spending too much in transaction fees, and with a small number of stocks bad news on just one of them will pull your portfolio down. Of course if you pick the right stocks you could do better than most mutual funds, but which stocks are those?

No other investments. Risk tolerance : Medium

As far as the OP goes, you need to post more info to get detailed answers.

What more info. Please let me know

A safe answer to your MF question is clearly Vanguard index funds. And yes, they are characterized by very low fees, which is so crucially important for your long-term financial future. Much more money in your pocket instead of somebody else as many academic studies demonstrated so convincingly.

May I answer at another level though? No disrespect, but you seem to have relatively limited experience with investing. Before making any sudden move, do take the time to read some good solid literature, and think about it.

For me, reading The Four Pillars of Investing by William Bernstein has been the most seminal event I could think of... Totally changed my perceptions, set me up on a much better path, oh dear, I so wish I would have done it when I was your age... There are other good books on the general theme of passive investing, just try to pick one suitable for you, and do it justice...

Do take the time to read and understand, then think to your own situation AS A WHOLE, make a SIMPLE plan, and... stick to it! This might be the most important decision of your financial life... I mean it!

Ok sure thanks. Will do some reading. Please share some advise based on your experience.


Thanks so much for all your replies and also to the person who hijacked this thread