Rollover Question

[dunc0029]

I left my old employer and have a pension and 401k to potentially roll over. The pension rollover is a no-brainer for me. My understanding is there is no time limit to roll over the 401k. Is this correct?

At my new employer, I am on probation until November, when I can start contributing to their 401k (on a side note, I'm hoping I can still max out this year, despite missing this 3 month period). So, I don't have many details of my new plan yet. My instinct is that my old plan will have better investment options. In the meantime, I'm thinking I'll roll the pension into my old employer's 401k. Then, I can take my time a little on deciding whether to take the entire 401k and roll it over into an IRA or what.

I'm trying to research this myself, but I figured this is a pretty knowledgeable group. Is there any advantage to leaving the money in a 401k versus an IRA? The only thing I can think of is that my old plan has a special pool index fund which has no fee. Is that worth giving up for the diversity of IRA investment options? Could I roll over everything BUT this one special fund? If I hold closed funds in my 401k, will I lose the ability to invest in those if I roll over?

Thanks in advance.

Jason

[saluki9]

Like most things, it depends

In many cases (depending on state law) your 401(k) might have preferential treatment in case of bankruptcy, divorce , or lawsuit

In addition, depending on the size and quality of your plan you may have access to institutional class index funds with expense ratios as low as 5bps or stable value funds which pay much higher rates of interest than you would be able to get on your own.

Also, in most cases you will lose access to closed funds if you roll your money over

[boutros]

401k
-special investment options
-age 55 rule for distributions
-may have lower cost institutional class funds
-your state may not offer the same bankruptcy protection in IRA as 401k (ex: in OH first 1mm is protected in IRA vs unlimited in 401k)

IRA
-any financial provider
-almost any mainstream financial product

I am not rolling to IRA so that I can make non deductible IRA contributions that I can convert to a Roth once the income limit is lifted, 2010 I think, without having to include pretax amounts in the conversion calc besides gains. So there can be other planning minutia that will dictate where or if you roll.

[dunc0029]

Thanks for the responses! I'm leaning towards leaving the old 401k alone for now, until/unless I can find a good reason to move it out. The priority is rolling over the pension. My old employer already dialed back the pension plan, so I'm happy to take my money and run before they decide not to pay at all.

[crazy connie]

I would suggest getting and reading the SPD's. The options can be unique to the plan and still within the law. I rolled out my pension and am letting my 401K ride. Waiting to see about the 2008 ability to convert 401K funds directly to a ROTH (which is a provision of the newest Pension Reform Bill).

[saluki9]

Quote:

Originally Posted by crazy connie I would suggest getting and reading the SPD's. The options can be unique to the plan and still within the law. I rolled out my pension and am letting my 401K ride. Waiting to see about the 2008 ability to convert 401K funds directly to a ROTH (which is a provision of the newest Pension Reform Bill).

For those who don't speak ERISA, SPD stands for Summary Plan Description. Ask your HR dept, they have to provide you with one if you ask.

[brewer12345]

Quote:

Originally Posted by boutros -almost any mainstream financial product

I've been amazed at the wacky stuff I have been allowed to buy in my IRAs. Options, warrants, foreign individual equities, you name it...

[FinanceDude]

Quote:

Originally Posted by saluki9 For those who don't speak ERISA, SPD stands for Summary Plan Description.* Ask your HR dept, they have to provide you with one if you ask.

And reading one has one of two effects: sheer terror, or puts you to sleep..............