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PLS Help - Suddenly on my own to roll-over IRA and Pension
Old 09-06-2012, 10:24 PM   #1
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PLS Help - Suddenly on my own to roll-over IRA and Pension

June 15, 2012 was my last day before FI/ER. I now need to decide what to do with this most recent corporate 401k (about $300k) and pension (about $100k lump sum option).

For years past, I have always been able to have an in-law help with this as he is a financial advisor with Waddell & Reed. However, due to some recent changes that I will spare you, it looks like I am suddenly on my own to figure this out.

I want to avoid taxes and penalties so I assume these will need to be rolled into an IRA of some sort. Any recommendations or suggestions? Is this something I can do entirely myself or do I need some sort of broker or other help.

Thanks in advance for your thoughts.

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Old 09-06-2012, 10:27 PM   #2
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Talk to Vanguard or Fidelity. They can open a rollover IRA for you. They should be able to handle all the work for you, free of charge. Not sure if the pension is that simple, but they should know how to handle that also. Vanguard should be a little cheaper, Fidelity should provide a little better service. That's the baseline advice to start out. There are other discount brokers, which is all you really need. You might ask if they can do the transfer "in-kind", which keeps all of your investments in place instead of liquidating them and reinvesting in the IRA. Most likely though, you will want to select some nice cheap index funds that you couldn't get in your 401k.

Don't take the 401k as a check to you, or you do start to risk tax and penalty problems if you don't work it carefully. With direct transfers you shouldn't go too wrong.
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Old 09-06-2012, 11:04 PM   #3
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There could be a big upside to not having your in-law with his/her fingers in your money. Do as Animorph suggests.
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Old 09-07-2012, 05:49 AM   #4
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Talk to Vanguard or Fidelity. They can open a rollover IRA for you. They should be able to handle all the work for you, free of charge. Not sure if the pension is that simple, but they should know how to handle that also. Vanguard should be a little cheaper, Fidelity should provide a little better service. That's the baseline advice to start out. There are other discount brokers, which is all you really need. You might ask if they can do the transfer "in-kind", which keeps all of your investments in place instead of liquidating them and reinvesting in the IRA. Most likely though, you will want to select some nice cheap index funds that you couldn't get in your 401k.

Don't take the 401k as a check to you, or you do start to risk tax and penalty problems if you don't work it carefully. With direct transfers you shouldn't go too wrong.
+1
You can easily do this with the help of a discount broker like Vanguard or Fido. They'll have you complete a new account app for a Rollover IRA, which will ask where the funds are coming from (where you indicate your retirement plans) and at the same time you request a distribution form from your retirement plan where you indicate the new Rollover IRA account number to send the proceeds to. Normally, the funds are sent electronically, trustee to trustee, which makes the tax-free transfer very simple. If you get a check, don't cash it... just walk it over to your new Rollover IRA institution and ask for help.
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Old 09-07-2012, 06:04 AM   #5
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There could be a big upside to not having your in-law with his/her fingers in your money. Do as Animorph suggests.
+1
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Old 09-07-2012, 06:56 AM   #6
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The 401k rollover is easy. Just call Vanguard and they will help you. For now don't worry about how to invest the $300k. Just put it in a money market fund and set about asking questions here and educating yourself. You can move you money into a mix of investments after the rollover is completed and when you are more comfortable managing your own money.

The pension is a bit trickier. If you take the lump sum again Vanguard should be able to help you just like with the 401k, but you need to decide if the lump-sum option is right for you rather than taking a lifetime income. What are they offering as a monthly income? is there any cost of living increase?
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Old 09-07-2012, 07:26 AM   #7
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I was in a similar position when I retired a few years back. I rolled over my 401K and pension lump sum with Fidelity, it was a trustee to trustee transfer, which is the best in my opinion to make sure there were no tax implications.

I'm not completely current on the tax laws but I believe you can take possession and as long as you roll it over in a six month time frame you'll be OK and no tax event. The big problem I have seen is when the company makes the pay out for the 401K, they usually withhold 20% or some amount. If you don't put into the new IRA what the full amount of the 401K had in it, you will have a tax implication. Trustee to trustee transfer is the safest way to go.
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Old 09-07-2012, 07:50 AM   #8
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IIRC your options on the 401K might also be affected by your age when you left the company. If you were over 55 you probably have some additional options that may determine whether or not you want to roll over to IRA to avoid a pre-59.5 penalty.
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Old 09-07-2012, 08:20 AM   #9
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Thanks everyone. Looking forward to the DIY approach now.

I am 42 now so planning on lump sum roll over on pension. Monthly pay out was pretty low and I understand they just set up an annuity so it is interest dependent. Rates are obviously low now and I understand I could do my own similar annuity later when rates are higher if I choose to.

Guesss all I need to do now is figure out the asset allocation for the new roll over account. I will start that research on here today but also appreciate any opinions.
I have enough non-retirement funds to get me to the age to withdraw from IRA without penalty so I won't need this money for a while. Would like it to be there at 55 or 62.5 though so I assume I might want similar risk as any retired individual. ??

Thanks again. I will start studying!
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Old 09-07-2012, 10:34 AM   #10
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Guesss all I need to do now is figure out the asset allocation for the new roll over account. I will start that research on here today but also appreciate any opinions.
Don't worry about asset allocation right now! You can do that after the rollover is complete. Just get all you 401k and pension account information together and call Vanguard or Fidelity and start the trustee to trustee rollover process. Put all the money into a money market account, there is no hurry come up with an AA. Do that at your leisure after the rollover is complete.

You also might consider keeping the 401k and pension money in separate IRAs just in case there are any issues with co-mingling of funds or you want to track some basis back for future tax reasons.
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Old 09-07-2012, 07:37 PM   #11
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On Asset Allocation, when I FIRE'd and similarly moved my penison and 401K lump sums to Vanguard, before the rollover/transfer, I had Vanguard open up funds with zero balances as holding places. That way, once after the pension and 401K money was in my existing IRA, I could easily reallocate to my target percentages.

To be more specific, at the time of FIRE, my IRA was 100% in The Total US Stock index, but had Vanguard set up IRA funds with zero balances in Tot Intl Stock, Tot Bond Fund and Prime MM. I still use all these funds anytime I need to do a rebalance. Since within IRA, no tax implications.
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Old 09-07-2012, 08:41 PM   #12
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...I have enough non-retirement funds to get me to the age to withdraw from IRA without penalty so I won't need this money for a while. Would like it to be there at 55 or 62.5 though so I assume I might want similar risk as any retired individual. ??....
An easy solution would be to buy a 2030 target date fund (the same year as when you turn 60). Or you could buy the Vanguard Total Stock, Total International Stock and Total Bond Admiral funds in similar proportions (currently roughly, 55%, 25% and 20% respectively)
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Old 09-08-2012, 07:31 AM   #13
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On Asset Allocation, when I FIRE'd and similarly moved my penison and 401K lump sums to Vanguard, before the rollover/transfer, I had Vanguard open up funds with zero balances as holding places. That way, once after the pension and 401K money was in my existing IRA, I could easily reallocate to my target percentages.

To be more specific, at the time of FIRE, my IRA was 100% in The Total US Stock index, but had Vanguard set up IRA funds with zero balances in Tot Intl Stock, Tot Bond Fund and Prime MM. I still use all these funds anytime I need to do a rebalance. Since within IRA, no tax implications.
There's no need to set up funds with zero balances! After the rollover you can transfer money to any fund you like. There's no reason to buy anything in haste or without taking a few months to read this board and the various investment wikis like the one at Bogleheads. The suggestion for target date funds etc are just fine, but until you understand what they contain, why you are buying them and the fees I'd hold off. Get your rollover complete, I'd probably open up separate IRAs for the 401k and the pension lump sum (as that seems to be the option you have decided on). In each just put the money into a money market account and start your research. There is no hurry to decide on an AA.
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Old 09-08-2012, 03:53 PM   #14
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There's no need to set up funds with zero balances! After the rollover you can transfer money to any fund you like. There's no reason to buy anything in haste or without taking a few months to read this board and the various investment wikis like the one at Bogleheads. The suggestion for target date funds etc are just fine, but until you understand what they contain, why you are buying them and the fees I'd hold off. Get your rollover complete, I'd probably open up separate IRAs for the 401k and the pension lump sum (as that seems to be the option you have decided on). In each just put the money into a money market account and start your research. There is no hurry to decide on an AA.
I agree with most of what's said. First and foremost, get the process of the transfer/rollover done.

Yet, I'd say for the OP to go ahead and learn about AA and have a target AA in mind with a self-made deadline of when to have the allocations in place (1 month? 6 months? in a year?). Without a decided deadline, it's too easy to put things off until a better day.
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Old 09-08-2012, 04:06 PM   #15
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I agree with most of what's said. First and foremost, get the process of the transfer/rollover done.

Yet, I'd say for the OP to go ahead and learn about AA and have a target AA in mind with a self-made deadline of when to have the allocations in place (1 month? 6 months? in a year?). Without a decided deadline, it's too easy to put things off until a better day.
Sure, you don't want to be in a MM forever, but a few months of education before any AA is made will be worth it. Maybe just decide to get everything in place before Christmas.
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Old 09-10-2012, 09:32 AM   #16
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I would take some time also. I don't think we will get a decent read on the stock market short-term until this pesky election is over. The market has had a nice run but some signals point to a potential mini-recession. There is an old adage that says the time to invest is when you have money to invest but it was no doubt penned before we had the crazy volaility we have today. Good luck..........
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Old 09-10-2012, 09:20 PM   #17
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I would take some time also. I don't think we will get a decent read on the stock market short-term until this pesky election is over. The market has had a nice run but some signals point to a potential mini-recession. There is an old adage that says the time to invest is when you have money to invest but it was no doubt penned before we had the crazy volaility we have today. Good luck..........
My recommendation to take some time in deciding on an AA after the rollover has nothing to do with the stock market or economic forecasts. I just think that the OP has some learning to do and once the rollover is complete it would be good to sit down and take a breath or two. Let the money sit in a MM for a couple of months, do some reading and learning and then start to buy some funds that you understand. By that I mean you know the costs, the investments, their turn over rate and understand what ones to have in tax advantages accounts and why. Take the time to understand what you are buying and why!
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Old 09-10-2012, 09:36 PM   #18
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Normally, the funds are sent electronically, trustee to trustee, which makes the tax-free transfer very simple. If you get a check, don't cash it... just walk it over to your new Rollover IRA institution and ask for help.
Not sure how normal that is, my megacorp sent me a check which was written out to VG, which I then remailed to VG. Took over 8 weeks to get the check.
I had to go through a multi-step process (probably designed to delay giving me my $ ).
Call them, they send me value of pension
After I get it and call them that I agree with the value (yes, I had to wait for it), then they send me forms to sign.
They sent me the check many weeks later.
TJ
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Solo 401k option
Old 09-24-2012, 01:59 PM   #19
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Solo 401k option

In my opinion, a Solo 401(k) where the same person serves all roles involved is the simplest, most effective and direct way for that person to self direct their retirement plan investments. It opens doors to the most flexible options possible. This allows for investment into foreign assets, investment clubs, tax liens, precious metals, and many other investments that some custodians optionally refuse.

So if you’re self employed (through your own Corporation, LLC, or even Sole Proprietorship) and you have no full time employees, the rules are bent in your favor with a Solo 401(k) – arranging and utilizing checkbook control is easy.
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Old 09-25-2012, 03:00 PM   #20
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Definitely go with opening the IRA rollover, just pick a custodian you like, Vanguard, Fido, Schwab, etc and then contact HR and get the forms to send the stuff directly there.
You might can keep some of what you are already invested in, if the 401k is in mutual funds or equities that you like.
Most custodians have CSR folks that are happy to help walk you through the process, and that aren't selling you stuff.
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