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26 year old with a stalled 401K, need advice
Old 08-23-2019, 01:34 PM   #1
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26 year old with a stalled 401K, need advice

Hey friends,

I began the path to early retirement this year, and was maxing out my 401K, when my company fired me. Went to my fall-back job as a swim instructor to keep afloat (yes, that pun was intentional, no regrets). 401K's just been sitting there, don't have the funds to add to it yet.

I'm told that my 401K will self-audit at the end of the year, and I can wait to make a decision until three months after 12/31/19. The contributions from myself and my employer were ~$4,000 last March, with a vested interest ~$2,500.

I'd appreciate advice on how to preserve what I have/ continue growth even with significantly diminished funds. Feel free to ask for details. And yes, I AM job-hunting.
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Old 08-23-2019, 01:38 PM   #2
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If forced to exit the 401k (I don't know what "self-audit" means), I'd put it in a rollover IRA. Odds are your next employer will allow you to then roll it into their 401k, if you should want to... else just invest it yourself from the IRA.
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Old 08-23-2019, 01:56 PM   #3
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Originally Posted by Spock View Post
If forced to exit the 401k (I don't know what "self-audit" means), I'd put it in a rollover IRA. Odds are your next employer will allow you to then roll it into their 401k, if you should want to... else just invest it yourself from the IRA.
+1

You'll have more variety of investment options, too.
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Old 08-23-2019, 01:59 PM   #4
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Thanks for the reply Spock! Self-audit means my account will check to see if it's still corporate-supported, which will be "no" if I don't have a 401k by then.
If I find an employer that pays better but doesn't offer 401K support, should I rollover into an IRA or keep funding the current account?
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Old 08-23-2019, 02:00 PM   #5
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I've never heard of any 401k's that let you keep funding it while working at another company.
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Old 08-23-2019, 02:28 PM   #6
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If you have $2,500 in vested funds...I'd just roll them over into a Fidelity or Vanguard IRA...no taxes, no drama, no penalties, low costs, and complete control. No need to wait...
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Old 08-23-2019, 06:48 PM   #7
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Roll it!

Haha, I had a 401 with a whole $126 in it once, yup, rolled it.
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Old 08-23-2019, 06:58 PM   #8
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Originally Posted by HNL Bill View Post
If you have $2,500 in vested funds...I'd just roll them over into a Fidelity or Vanguard IRA...no taxes, no drama, no penalties, low costs, and complete control. No need to wait...
+1

Yup.
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Old 08-23-2019, 07:04 PM   #9
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Rollover to a Vanguard IRA. You can call there 800 support and they will walk you through the entire process.

The access to the wider assortment of investments will thank you later. ETFs, stocks, index funds.

Drop that money into VTI ETF at Vanguard, or VFINX and don't look back... just keep buying the entire market as often as you can once you get back to a good job with 401k, that is what we do.

I remember when I was 26. I sort of got set back a bit as well. Not the end of the world, but do try very hard to work on finding another company with 401k match and a fair salary, that is THE golden ticket to ER at this point. FREE MONEY!
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Old 08-23-2019, 07:07 PM   #10
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Originally Posted by cicadaman View Post
Thanks for the reply Spock! Self-audit means my account will check to see if it's still corporate-supported, which will be "no" if I don't have a 401k by then.
If I find an employer that pays better but doesn't offer 401K support, should I rollover into an IRA or keep funding the current account?
YES, roll it over. I know there is always a case against this...but it is a small one that only matters if your plan let's you do Early in-service withdrawals, or if it allows you to take money before age 59 1/2.

IF the plan allows one of those two features, its a little harder decision, but I think rolling over still might be the right thing to do since you have at least 20 years of runway before you likely ER?
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AA (Stock/Bond/Cash ): 96.5/0/3.5% MIX (Small/Mid/Large): 25/25/50% BLEND(US/Foreign): 100/0%, REIT (Real Estate Equity): ~50% of Assets

FIRE in 2031 @ 50yrs old (+/- 2yrs) w/ a hypothetical $2.5mil portfolio, 3 appreciated homes worth $1.0mil and rental income to fund my gap years until RMD. Assets will go to an inherited IRA where I plan on watching the investments grow until I die or the trust gets executed.
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Old 08-24-2019, 05:33 AM   #11
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Yes, it looks like the OP will be forced to move the money. In that case, I agree, just roll the 401k money into an IRA.

Quote:
If your balance is $1,000 to $5,000, your employer can move the money into an IRA of the company’s choice.

These mandatory distributions, also called involuntary cash-outs, have different thresholds depending on what your employer has chosen. Your company doesn't have to require cash-outs at all, but if it does, the highest allowable threshold is $5,000. Your summary plan description should spell out the rules, and your plan sponsor must follow them. The plan sponsor must notify you before moving your money, but if you don’t take action, your employer will distribute your balance according to the plan’s rules.

https://www.investopedia.com/retirem...w-your-rights/
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Old 09-11-2019, 05:54 PM   #12
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+1

Wishing you much luck with finding your new job.
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Old 09-19-2019, 01:49 PM   #13
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While out of a job don't succumb to the temptation to spend it instead. You pay crazy penalties. Plus you want to let that kind of stuff ride for a couple of decades or so to get the most out of compound interest.
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