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Market timing and 401K
Old 03-07-2016, 09:43 AM   #1
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Market timing and 401K

If a 401K is a stock fund, does the principle of buy low apply? In other words, is there any difference as to when one rolls money over to a 401k?
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Old 03-07-2016, 09:49 AM   #2
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If you need to make a rollover, then make the rollover! You don't say how old you are but whatever your age you are trying to split hairs on this. You probably have many years before you will ever make withdrawals from the 401(k). Don't be tripping over dollars to pick up pennies!

By the way, in 1987 I made my $2000 IRA contribution (that was the limit for the year) two days before the October crash. It hurt in the short term, now over twenty-eight years later it is a non-issue.
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Old 03-07-2016, 09:52 AM   #3
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Plan on starting to take out in about 5 years. I don't have to make the rollover, and the amount is approx. $50,000.
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Old 03-07-2016, 10:57 AM   #4
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Roll money over to a 401(k)? Where is the money coming from? What is the money invested in now?

If the money is in cash, then buying equities (stocks) now is not a bad idea.

If the money is in stocks, then transferring into stocks is a very good idea.

If the money is in stocks, then selling to cash is a very bad idea I would think.

Basically, figure out an asset allocation and stick to it.
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Old 03-07-2016, 11:53 AM   #5
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Money is currently in an IRA earning no interest to speak of.
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Old 03-07-2016, 12:09 PM   #6
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So you have a 401(k) that you want to roll it into? Any particular reason why? Are the funds in the 401(k) really so good that you cannot get them in your IRA?

The stock market has gone up quite a bit in the past two weeks, so you missed out on some great gains, but it is not too late to implement an asset allocation plan and follow it.

I don't think it really matters whether you do this in an IRA or a 401(k).

Oh, does the 401(k) allow IRA money to be rolled into it? Many 401(k) plans do not allow this.
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Old 03-07-2016, 12:27 PM   #7
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If a 401K is a stock fund, does the principle of buy low apply? In other words, is there any difference as to when one rolls money over to a 401k?
Your 401k is an account that can hold several different types funds, stock, bond, and sometimes cash. You can rollover your IRA into the 401k and should be able to select whichever investment you want. So the rollover decision should be independent of market timing decisions.

But yes, if you are simply invested automatically into a target date retirement fund, it might be nice to wait until the fund price is low. Good luck with that. If you have the option, and you think prices are high, you might consider periodic partial rollovers, say once a month or once a quarter. Otherwise just dump it all in and be done with it.

If your IRA is at a bank that is offering only CD's you might also consider transferring your IRA to Vanguard or Fidelity in order to increase your investment choices. They both have retirement date funds that should be appropriate for you.
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Old 03-07-2016, 12:31 PM   #8
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Plan allows rollover. The IRA is a stock account where one of my stocks was sold without a choice and they put the money in a "savings" account portion of the same IRA.

I like the 401k because it is like a mutual fund account. I don't want to invest the money in individual stocks which is the only option i have in the IRA.

But I was wondering if when you put money into a mutual funds account you are buying units, and the worse the market the more units you get for your money?
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Old 03-07-2016, 12:45 PM   #9
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Can you even roll an IRA to a 401K?

I know you can go from a 401K to an IRA, but then you can make after tax contributions to it.

Check to make sure you can do that.

Otherwise, just make the move and invest right away.
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Old 03-07-2016, 12:49 PM   #10
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Lots of people try to time the market, results vary. From my own experience I would say the sooner someone invests in the stock market, the better. If you are concerned about big moves in the market, you could move the IRA money (cash) into your 401K and then DCA into stocks. If that would make you sleep better.
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Old 03-07-2016, 01:56 PM   #11
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I like the 401k because it is like a mutual fund account. I don't want to invest the money in individual stocks which is the only option i have in the IRA.
That's very strange, but possible I suppose. All my IRAs allow me to invest in stocks, ETFs, mutual funds, CDs, and whatever. You can switch your IRA to a different custodian.

I have several IRAs at different custodian like Vanguard, Fidelity, TDAmeritrade, Schwab, and so on. I chose my IRA custodian(s) based on cost (no cost to me) and investments available (low-expense ratio mutual funds and ETFs).

Something just doesn't smell right about your IRA to me.

A 401(k) only allows one to invest in the funds already chosen by the plan provider. This limits one's choices while an IRA does not have those limits (OK, except for the weird IRA that you have).
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Old 03-07-2016, 02:09 PM   #12
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Since this is the same question you asked in November and again last month:
Stock IRA Rollover?

I get the feeling you're just sitting on the fence. Not a very comfortable position IMHO.

Maybe some greater level of detail would get you better responses here?
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Old 03-07-2016, 02:14 PM   #13
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Since this is the same question you asked in November and again last month:
Stock IRA Rollover?

I get the feeling you're just sitting on the fence. Not a very comfortable position IMHO.

Maybe some greater level of detail would get you better responses here?
Same IRA account; different question. Yes, the sitting on the fence is painful, and I need to get off the fence sooner than later.

What kind of detail are you looking for other than what has already been provided?

Thanks.
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Old 03-07-2016, 02:25 PM   #14
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Out of curiosity--why are you rolling money over from your IRA to a 401K? Most people move their money the other way to save on costs and get more investment flexibility. Only a very few 401Ks (e.g. the federal TSP) offer lower-cost options than you can get for yourself easily in an IRA. The only reasons I can think of to go IRA-> 401K are:
- You want to start withdrawals between age 55 and 59 using the provisions for withdrawal from a 401K if you are terminated from employment. Not all 401K programs allow this, BTW.
- There's an investment option in the 401K that you can't get in an IRA (typically, a "Stable Value Fund")
- You want the legal protections a 401K gets that an IRA does not (in some states--bankruptcy, etc)

- As far as timing: Investing it as a lump sum does best, statistically, over the majority of historical cases. But if you want to ease-in for emotional reasons (e.g. you can't take the pain of perhaps buying in when the market is about to drop), then you can "dollar cost average" over a longer period--maybe split the purchase into four equal tranches three months apart. Since you seem to be hesitant to plunge in, maybe this would be best.
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Old 03-07-2016, 02:33 PM   #15
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Thank you for all the responses thus far. I really need to get off the fence.

Samclem, I really like my 401k (actually have 2) in that over the long term, they have increased significantly in value. I would be interested in another IRA that has a great rate of return. any suggestions? Thanks.
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Old 03-07-2016, 02:39 PM   #16
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You are confusing IRA with the investments in an IRA. A 401(k) or an IRA is just a bucket or container for investments. You could probably buy in your IRA the exact same investments that are found in your 401(k).

So more details:

1. What are the possible investments allowed in your 401(k)?
2. Where do you have your IRA at right now? What financial institution?
3. What is your asset allocation plan?
4. What does your Investment Policy Statement say?
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Old 03-07-2016, 02:50 PM   #17
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Samclem, I really like my 401k (actually have 2) in that over the long term, they have increased significantly in value. I would be interested in another IRA that has a great rate of return. any suggestions? Thanks.
Just to clear things up, an IRA is not a thing you can invest in. It's just a type of account that has special treatment under our tax code. You can have an IRA account in your local bank that has CDs in it that earn 1% per year guaranteed interest, you could have an IRA account at a stock broker that invested in very risky Tunisian stocks, etc.

If a stranger on an elevator asked me for advice on setting up an IRA and I had 30 seconds to talk, I'd tell them to call/get online with Vanguard and establish an IRA account. I'd suggest that they use their money to buy a Vanguard Target Date Fund for the year closest to the year they intended to retire (e.g. Target Date 2045), and then leave it alone.

It's hard to explain, but the investment results of your company 401K may not be a good indicator that it's really a good 401K, and that the investments you're in are really a good fit for you. You'd need to know how well it has done compared to other alternatives, how high the costs are within that 401K, and what type of risks they were taking in order to get those results. I would >strongly< suggest that you find out a little more about that before putting >any< of your IRA money into your 401K, because you may not be able to get it back out again until you leave that job (it depends on the wording of your 401K agreements, but it;s usually the case that you cannot get it back out unless you terminate employment with that company). Don't jump into this move--folks here can help you understand if it is a good idea. But we'd need more information on your 401K plan.
Trust me--most people who have looked at this want to get their money >out< of their 401K plan and into an IRA once they understand the situation.
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Old 03-07-2016, 05:30 PM   #18
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You are confusing IRA with the investments in an IRA. A 401(k) or an IRA is just a bucket or container for investments. You could probably buy in your IRA the exact same investments that are found in your 401(k).

So more details:

1. What are the possible investments allowed in your 401(k)?
2. Where do you have your IRA at right now? What financial institution?
3. What is your asset allocation plan?
4. What does your Investment Policy Statement say?
This will take some research. Thanks.
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Old 03-07-2016, 05:32 PM   #19
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Just to clear things up, an IRA is not a thing you can invest in. It's just a type of account that has special treatment under our tax code. You can have an IRA account in your local bank that has CDs in it that earn 1% per year guaranteed interest, you could have an IRA account at a stock broker that invested in very risky Tunisian stocks, etc.

If a stranger on an elevator asked me for advice on setting up an IRA and I had 30 seconds to talk, I'd tell them to call/get online with Vanguard and establish an IRA account. I'd suggest that they use their money to buy a Vanguard Target Date Fund for the year closest to the year they intended to retire (e.g. Target Date 2045), and then leave it alone.

It's hard to explain, but the investment results of your company 401K may not be a good indicator that it's really a good 401K, and that the investments you're in are really a good fit for you. You'd need to know how well it has done compared to other alternatives, how high the costs are within that 401K, and what type of risks they were taking in order to get those results. I would >strongly< suggest that you find out a little more about that before putting >any< of your IRA money into your 401K, because you may not be able to get it back out again until you leave that job (it depends on the wording of your 401K agreements, but it;s usually the case that you cannot get it back out unless you terminate employment with that company). Don't jump into this move--folks here can help you understand if it is a good idea. But we'd need more information on your 401K plan.
Trust me--most people who have looked at this want to get their money >out< of their 401K plan and into an IRA once they understand the situation.
The IRA account is a vessel for individual stocks purchased many years ago. If I understood the representive correctly, i can only invest in other stocks in that account, and no mutual fund or CD available. I like your idea of contacting Vanguard and will do so tomorrow. Thanks.
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Old 03-08-2016, 09:02 AM   #20
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Roll money over to a 401(k)? Where is the money coming from? What is the money invested in now?

If the money is in cash, then buying equities (stocks) now is not a bad idea.

If the money is in stocks, then transferring into stocks is a very good idea.

If the money is in stocks, then selling to cash is a very bad idea I would think.

Basically, figure out an asset allocation and stick to it.
+1
the decision should be about asset allocation, not the timing of the rollover.
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