401K rollover to 1 or multiple IRAs?

[jpeter1093]

Retiring soon, about $1M in a 401k at my employer. Should I roll it all to one IRA fund or multiples? What kind of expenses should I look to be under in a fund? Looking at Vanguard's Targe 2020 fund, been paying over 6% since inception and low fees of .13% expense ratio.

Thanks for this newby!

 

[MI-Roger]

What will you be using the money for? Retirement income or long term growth?

If long term growth, then why invest in a Target Fund with only a two-year horizon?

With nearly $1M to play with, why only one fund? This amount gives you the ability to diversify your holdings.

If you are investing for steady retirement income, then you can still split the amount into thirds and invest in Target Date funds for 2020, 2030, and 2040 so that the funds for distant future years have greater opportunity to grow before you need them for income.

 

[jpeter1093]

Thanks. Do target funds 'mature'; ie, do I have to move the funds out in 2020, 2030, etc? I'm looking for retirement income and protection of principal

 

[GrayHare]

Check first the expense ratios of your existing 401k fund possibilities. Depending on what your employer negotiated, they can be quite low.

 

[USGrant1962]

Check first the expense ratios of your existing 401k fund possibilities. Depending on what your employer negotiated, they can be quite low.

Yes, do this. Also check into your state's liability protections for retirement funds. In some states 401(k)s are protected better than IRAs. Lastly, if you are an early retiree, 401(k) Rule of 55 withdrawals may be easier to execute than IRA 72(t) withdrawals.

Rolling a 401(k) to an IRA is not always the best choice. On the other hand, if your company investment choices are limited and fees are high, then it probably is the best choice.

 

[MI-Roger]

Thanks. Do target funds 'mature'; ie, do I have to move the funds out in 2020, 2030, etc? I'm looking for retirement income and protection of principal

I have not investigated the Vanguard Target Date Funds, but those offered by Fidelity and others change their investment goals as the Target Date approaches. The funds gradually change from growth orientation to steady income orientation. Some fund families may dissolve a 'matured' Target Date fund by placing all the assets in an associated fund designed for income only. T Rowe Price appears to do this based strictly on fund names and the absence of many Target Date funds with matured dates as their name.


My employer's 401(k) Plan currently offers T Rowe Price Target Date funds with dates of 2005 to 2060 in five year increments, and a non year specific Target Date fund titled Balanced Income. My assumption is that the Balanced Income Fund has swallowed up the year 2000 and previous Target Date Fund Balances.

You will not be required to move your balance from one fund to another, but you may want to move a portion of the money to stay on the growth train.

 

[Lawrencewendall]

My game plan is to convert a portion my 401(k) into Fido's no fee total market fund (FZROX) on an annual basis up to the top of the 12% bracket. 10% annual return including the 37% drop in 2008 and with total market, can't get much more diversified than that. That's my plan for now at least.

 

[MRG]

I rolled mine into two different providers. Both have hacker guarantees.

There are many considerations as pointed out above. Rule of 55 was part of my choice in when I rolled over. Sadly my employer directed a private fund manager to gamble on biotech, thanks pharmabro, and they lost a pile of money.

I wouldn't get too cute and outsmart yourself.