New Company has no 401K - what to do with old 401k?

[farmboy42]

I'm looking at taking a new job and the new employer does not offer a 401k. I have a nice 401k now, but what are my options?

[Martha]

Well that stinks. Does the employer offer any retirement options? If not, you are stuck with an IRA and unfortunately you just can't contribute as much to an IRA as a 401k.

If you have more than $5000 in your 401k you have the option of keeping that 401k with your former employer, but you can no longer contribute to it. You always have the option of rolling over the 401k into a rollover IRA.

[Sarah in SC]

See if they are willing to start something, if not a 401k, then at least a Simple IRA or SEP. How many employees are at the new company? Maybe you can get the owner interested, since retirement plans can be structured to benefit owner's retirement needs in a big way. Like a safe harbor 401k profit sharing plan...won't hurt to start working on them. The Simple IRA is a piece of cake to start--less can be contributed, but it has none of the paperwork headaches of a 401k for a small company.
Sarah

[farmboy42]

I have something like 200K in my current 401K, and the new firm is about 100 people. They are mostly lawyers, so I probably don't have a chance of getting them to do any sort of retirement. I can only put $2k into an IRA so that sucks. So, it looks like my 401k will stall out since they don't offer anything? What happens to my current 401K investments? Can I still manage them?

[Sarah in SC]

You would probably want to roll the existing 401k into an IRA unless the 401k offers some pretty spectacular funds with low expenses.
And if they are lawyers, ask them how they save for retirement without a plan at work? Surely at least a few have thought about it--but maybe this sort of conversation happens after you've been there a while.

[Gumby]

Originally Posted by farmboy42

They are mostly lawyers, so I probably don't have a chance of getting them to do any sort of retirement.

Why would lawyers have any particular aversion to a 401k? While matching contributions are rare, I know many law firms that have 401k plans.

[Martha]

Originally Posted by farmboy42

I have something like 200K in my current 401K, and the new firm is about 100 people. They are mostly lawyers, so I probably don't have a chance of getting them to do any sort of retirement. I can only put $2k into an IRA so that sucks. So, it looks like my 401k will stall out since they don't offer anything? What happens to my current 401K investments? Can I still manage them?

How much can be contributed to IRAs depend somewhat on whether you spouse is working and whether your spouse has a retirement plan at work. Read this IRS publication on IRAs: Publication 590 (2006), Individual Retirement Arrangements (IRAs)

However, you should be able to put at least $4000 in your own IRA, and a $1000 more if you are at least 50, for 2007. Next year it will be $5000 plus a $1000 if 50 or over. You might be able to do a spousal IRA as well, depending on your spouse's work situation.

Ed Slott's IRA Advisor Newsletter

You can continue to manage your current 401k investments, but you might want to rollover into an IRA for increased flexibility.

[chinaco]

Hopefully the other aspects of the job are great. Do they have a pension? If not, consider other employers.

Some thoughts if you take the job.

If you qualify for a tax deferred tradiational IRA, use that vehicle. Otherwise, Do a Roth IRA to the max.

Put the rest in tax efficient (after tax) mutual funds.

Whatever you do, continue the disciplined saving and investing.

[Eyerishgold]

Roll it over. Why would you leave your money with a company you don't work for any longer? You have so many more options available to you when you rollover your 401k into an IRA. With a 401k your investment choices are extremely limited. You're limited to maybe 10-15 options. When you roll it into an IRA you have you have the entire world of investment options open to you.

Sure you may not be able to contribute as much into an IRA as you can into a 401k but if you leave your money where it is, you can't contribute anything.

[farmboy42]

Originally Posted by Eyerishgold

Roll it over. Why would you leave your money with a company you don't work for any longer? You have so many more options available to you when you rollover your 401k into an IRA. With a 401k your investment choices are extremely limited. You're limited to maybe 10-15 options. When you roll it into an IRA you have you have the entire world of investment options open to you.

Sure you may not be able to contribute as much into an IRA as you can into a 401k but if you leave your money where it is, you can't contribute anything.

The only downside to investing outside of your 401K is that some funds might be closed to you unless you have a substantial initial investment. I can't think of the fund I'm in right now, but I read somewhere that the minimum investment was $250,000? You also have to pay broker fees from what I can see when you actively manage your funds? Fidelity had some sort of IRA, but the returns weren't so hot. I'm getting near to 20% a year returns with my current 401K investments.