Stock IRA Rollover?

[Youngster]

I have an IRA that has stocks as well as a savings type portion. The dividends and profits go into the savings portion.

Just made a killing on a stock (bought out and cashed out) and the savings portion of the IRA now has around $50,000.00 in it earning interest (last i looked) of around .01%.

I know I need to do something with the savings. I cannot withdraw without penalty because I am under 59 1/2. In any event, I want it to stay in a tax deferred account, and earn a lot more that the paltry intrest it is now earning. I am seriouly considering rolling over that savings portion of the IRA (not the stock portion) into my 401k.

Any information and considerations with reagrd to what to do with would be greatly appreciated. By the way, I don't plan on withdrawing from my 401k for a few years.

 

[jazz4cash]

Check to see if your 401k will accept a rollover from an IRA. Some plans allow this and others do not. It just depends on the plan details that your employer and plan administrator have set up. If the institution that has your IRA does not have a better savings option, you could roll a portion to anyplace that offers IRA options with higher rates. Not sure if a CD would fit your situation, but you could get 1% in a 1yr CD or online savings account (within an IRA). 5yr CD are around 2.2%.

Edit: Your title made me think you wanted to do a rollover of the stocks from your IRA into some other plan. Overall, you should consider maintaining whatever ratio of stocks/bonds/cash that you are comfortable with based on your situation.

 

[RunningBum]

Does your 401K have better funds than you can get on your own? Sometimes they do, but often you'll pay higher fees in a 401K. If your current IRA somehow limits what you can invest in, consider moving it to to Vanguard, Fidelity, Schwab, or other low cost place where you can invest in anything. You should be able to invest in whatever you want in an IRA.

 

[Youngster]

Thanks for the responses. The 401k does permit the IRA transfer. The 401k has done well over the last few years. I will however look into Vanguard, Fidelity, or Schwab as you have referenced, RunningBum.

 

[scrabbler1]

Youngster, my best friend inherited an IRA 3 years ago after his mother died. She hadn't done much to maintain the IRA after her husband (my friend's dad) died 3 years earlier. This IRA had accumulated a lot of cash from the individual stocks and bonds spinning off dividends every few months and from bonds and CDs maturing with the proceeds also going into the IRA's cash account.


With my help, we cleaned up his IRA. First, I had him take all that cash and put it into a bond fund to balance out his IRA's AA while being mindful of his overall AA (he has his own Roth IRA and a 457b savings plan). Second, I set up his IRA so it would generate slightly more in cash every year than his RMD will be, at least for the next several years. This is an inherited IRA, so he has to take RMDs right away (he is 52 now) using his own life expectancy. He doesn't need the cash from these RMDs to cover his own expenses (he works full-time) so we use the RMD to pay some of the income taxes the rest of his inheritance (a large brokerage account) generates from its mostly taxable investments.


I monitor both the brokerage account and the inherited IRA, the latter of which is mainly on autopilot except for the RMD because its proceeds has to be allocated among federal and state income taxes, and cash (if any leftover). He has no need to sell any stocks in his IRA.

 

[Youngster]

Thanks for the advice, Scrambler. I will look into bond funds. I really don't want to buy more stocks.

 

[Youngster]

Update: funds still sitting in the IRA earning .01%. Need to do something fast. I do have a 401k that will take the rollover. That 401k has a fund contained within it to which I can allocate the 50k. It is a guaranteed interest fund at around 3.5 %.

Probably a no-brained to put in that fund. However, would it be better to put it in one of the stock funds (various choices) in light of the current stock market condition? Kind of like the buy low principle.

 

[jazz4cash]

That's a great guaranteed rate. You should invest it according to your asset allocation. If you have not picked an asset allocation look through this forum or elsewhere to determine an asset allocation consistent with your appetite for risk and time till the funds are needed.


Sent from my iPhone using Early Retirement Forum

 

[Youngster]

Thanks.