Preserving 401k

[glinka]

I have been retired three years. 401k is split 50%-50% equity to bonds, all in Fidelity plan for General Motor retirees. Contrafund is 30%, Pimco core plus bond and Fid Capital and Income are the two main bond funds. With the limited funds available and wanting to preserve in what might be trouble ahead I was wondering what to do. There is a fund Promark Income that I think is similar to a money fund, seems safe, not sure. Also, even though I'm 60 was wondering if taking out 4% to 6% would be a good idea to preserve.

 

[travelover]

Is this a 401(k) plan and if so, why can't you roll it to Vanguard or elsewhere with more choices?

 

[Animorph]

You should be able to rollover the 401k to an IRA, that would give you more choices. Really easy if you stay at Fidelity. That's what I did. You might want to give us a list of your options if you would like to stay with the 401k.

I'd stay at 4% or below for withdrawals to preserve your portfolio, but even that has some risk. Keep reading the forums and you should get plenty of ideas. If you really need something closer to 5%-6% you may need to consider increasing equities instead of decreasing them.

 

[easysurfer]

When I FIRE'd I had my 401K in Fidelity, but since I have most of my non-retirement funds in Vanguard, I rolled over both my 401K and pension into a Vanguard IRA. Vanguard even opened up some IRA accounts (International, Total Bond, money market) with zero balances as my IRA at the time was Total Stock. That way once rolled over, I was able to reallocate without issues. I found Vanguard very helpful with the process.

 

[chemist]

+1 to rollover to an IRA, you will have many more choices. My vote is for index funds at Vanguard but if you must go with active funds Fido is a good bet.

Personally I believe most of the trouble is behind us. Generational bear markets only come around once in, well, a generation.

 

[glinka]

If I rollover my 401k to Vanguard, do I want it into IRA, Roth IRA or 401k Roth or other? I haven't and don't need to withdraw any money yet. Was wondering if it was a good idea to take some anyway.

 

[Animorph]

Into an IRA retains the 401k character. No taxes due if you let the fund companies do a direct transfer. They are very similar. If you change to a Roth that's a taxable conversion unless you have a Roth 401k. There are minor differences between IRA's and 401k's that you might want to look at.

In general, the longer you can leave the 401k/IRA alone the better. I'll be spending my taxable accounts before touch my IRA's. That maximizes the tax benefits of those accounts.

You can convert to Roth IRA at any time, though there is a 5 year waiting period Roth restriction that might be important to you and favor a Roth conversion in the near future. No need to complicate things now. Especially if this is as far as your research has gone.

 

[travelover]

If I rollover my 401k to Vanguard, do I want it into IRA, Roth IRA or 401k Roth or other? I haven't and don't need to withdraw any money yet. Was wondering if it was a good idea to take some anyway.

Do you have any after tax money in your 401(k)? If so you can roll that to a Roth and roll pretax to a TIRA. Otherwise, roll everything to a TIRA. Vanguard will help you with the details.

 

[travelover]

................You can convert to Roth IRA at any time, though there is a 5 year waiting period Roth restriction that might be important to you and favor a Roth conversion in the near future. No need to complicate things now. Especially if this is as far as your research has gone.

Doesn't this only apply if glinka is younger than 59 1/2?

 

[glinka]

What would the difference be if I rolled to IRA in Fidelity as to Vanguard? I would be out of GM/Fidelity plan and into entire Fidelity field. Wouldn't I have the wider range of funds in Fidelity? Never dealt with Vanguard. Mainly interested in preserving what I have.

 

[Animorph]

Doesn't this only apply if glinka is younger than 59 1/2?

I believe that is the prevailing interpretation.

 

[Animorph]

What would the difference be if I rolled to IRA in Fidelity as to Vanguard? I would be out of GM/Fidelity plan and into entire Fidelity field. Wouldn't I have the wider range of funds in Fidelity? Never dealt with Vanguard. Mainly interested in preserving what I have.

The main difference would be the availability of Vanguard or Fidelity funds, plus each has a slightly different lineup of third-party funds. Vanguard funds are generally cheaper. Both should have good funds for you. The customer service will be a little different. You can transfer any of your current funds that are not specific to only your 401k to a Fidelity account, an "in-kind" transfer. It took me one call to Fidelity to do my transfer.

 

[travelover]

What would the difference be if I rolled to IRA in Fidelity as to Vanguard? I would be out of GM/Fidelity plan and into entire Fidelity field. Wouldn't I have the wider range of funds in Fidelity? Never dealt with Vanguard. Mainly interested in preserving what I have.

Fidelity and Vanguard are both good choices. Vanguard tends to have lower expenses. Fidelity has brick and mortar stores for more personal attention. I moved some of my portfolio to Vanguard because they had a wider range of funds in the area that I was interested in.

 

[Katsmeow]

Depending upon where you live there may be differences in the legal protections given to funds in a 401(k) than in an IRA. You may want to look into that as well.

 

[chemist]

Also if you have any company stock with a low basis you want to roll that into a separate self directed IRA because there are tax benefits to doing so - Google "appreciated company stock in 401(k)"

 

[glinka]

Luckily, no GM stock

 

[clifp]

Also if you have any company stock with a low basis you want to roll that into a separate self directed IRA because there are tax benefits to doing so - Google "appreciated company stock in 401(k)"

It was a GM pension plan... although normally good advice.

Fortunately the OP doesn't have GM stock. Glinka how did you avoid having an GM stoc?. I thought they pushed stock ownership for employees

 

[glinka]

401k has options of funds including(ed) GM common stock. Not required to buy.

 

[roger r]

I've liked Fidelity for their good customer service and they do have a small number of index funds with low management expenses. I've rolled part of my Fidelity 401K into an IRA, but my 401K has a Fidelity stable value fund that has consistently paid more than money markets or shorter term CDs and seems very safe. The stable value fund (fixed fund) isn't availible outside of my 401k and I've left that portion in my 401k. Perhaps your Promark Fund is simiilar to this?

If you choose to rool ever to an IRA, you don't have to roll it all and may choose to leave some in the 401K if you'd like.

 

[glinka]

Are you refering to FDRXX, Fidelity cash reserves, when you mention a stable value fund?

 

[FinanceDude]

What would the difference be if I rolled to IRA in Fidelity as to Vanguard? I would be out of GM/Fidelity plan and into entire Fidelity field. Wouldn't I have the wider range of funds in Fidelity? Never dealt with Vanguard. Mainly interested in preserving what I have.

Either Fidelity or Vanguard are fine. Keep in mind that "loading up" on bond funds isn't going to necessarily preserve capital if when the govt starts raising interest rates. I have seen bond funds take a 10-15% loss in a period of rising interest rates, so be careful..........

 

[yakers]

Fidelity Contrafund and PIMCO are some pretty good choices. I am a VG fan but those funds look OK to me. One advantage of an IRA is that you can hold stocks of interest as well as funds. MY Wells Fargo IRA has allowed me to lose more than if I had just held total market index funds but it is in areas of interest like REITs, Berkshire Hathaway, foreign bonds and the like.