401k rollover to IRA what to invest? New Job

[weester]

After 25 years of her corporate job, my wife decided to change her career which pays less than half of her current salary as a local school district staff .* She has about $500k in her 401k. My question is should we rollover her 401K to IRA ? if so what to invest after she rollovered* to her IRA?*She has Fido as her 401k acct. Thank you

 

[Spock]

If working, and the new job has a 401K, it might be better to roll it to the new employer. Check to see if the new 401k allows the rule of 55 to allow withdrawals at age 55. The other (minor) consideration is 401Ks supposedly have better liability protection if sued... it depends on your state.
Otherwise I'd roll it to a Rollover IRA. As far as what to invest in... everybody's risk tolerance is unique. Some go 100% equities/stocks, others go 100% bonds/CDs, and then there is every increment in between.

 

[qwerty3656]

As Spock said everybody's risk tolerance is unique. Below is a link to Bogleheads lazy portfolios - not a bad place to start.

https://www.bogleheads.org/wiki/Lazy_portfolios

 

[weester]

She is 50 years young and her new job does not have any retirement plan. Her risk tolerance is medium. She is planning to use that 410k when she turns 59 1/2.

 

[Surewhitey]

Maybe look at what she currently in invested in & set up the rollover IRA with Fidelity too. You can likely just stay in the same or ask them for an equivalent mutual fund(s).

 

[pb4uski]

What is the current 401k invested in? Does your overall AA align with your target AA?

Unless her current 401k offers some interesting ETFs then would be inclined to rollover to a tIRA which typically offers a wide variety of good investment choices.

In the past, some posters might consider if the 401k has a good stable value fund as a thing to consider, but perhaps not so much today, but maybe in the future. Who knows?

 

[SnowballCamper]

I'll mention here the reasons for picking an Asset Allocation and sticking with it. In some recent threads I've seen, people change their asset allocation based on their predictions for the future securities market...it's much more likely you'll loose with market timing.

Stocks and Bonds serve as the prototypical categories for uncorrelated assets, meaning that changes in the market price for one category do not influence the price in a different category. History tells us that stock prices change much more (and more often) than bond prices. In those times when stocks drop dramatically, bonds might also drop, but a much smaller percentage.

One can spend considerable time to decide on the optimal asset allocation for oneself. One place where you can read about a thorough model to choose an asset allocation is here: https://www.aacalc.com/about

The reality is that getting the best asset allocation is not important. It is most important to choose one that is good enough. What is good enough? One that you will not change based on what you see or read in the news, or most any other information you come across. It can be prudent for pre-planned changes with age, or based on big changes in overall financial situation (not just from market price changes).

It's a good idea to look at several online AA calculators, and then pick one. I've picked the following AA for my Thrift Savings Plan (TSP--the 401k for federal govt employees)
25% G fund (govt securities)
25% S fund (small cap index fund)
25% I fund (international fund)
25% C fund (large cap stock fund)

The impetus to do something when Mr. Market seems to go crazy is very strong. I admit I still can barely resist, but by having a good enough AA I always have something to to that is certain to be prudent--Rebalance.

If stocks tank, and I can't wait to do something, I rebalance. That is, I sell G fund (which doesn't go down--but grows very slowly) and buy the stock funds that are at a lower price relative to what they were the last time I bought them. My overall balance has gone down---but I got some depressed assets at lower prices. Let some months or years go by and then the stock funds have likely appreciated, they might grow to be 78-80% of the total. Then it's prudent to rebalance, sell some appreciated stocks and lock in those gains by buying some G fund.

Notice that whatever the market does, by doing only one thing, rebalancing, I always buy low and sell high, relative to the average price.

EDIT to add: with this approach, the particulars of which funds to use come down to being lowest cost, a small collection that are uncorrelated, and having an easy & low cost way to rebalance.

 

[mrfeh]

She is 50 years young and her new job does not have any retirement plan. Her risk tolerance is medium. She is planning to use that 410k when she turns 59 1/2.

I suggest you both do some reading, instead of asking strangers on the internet what to invest in.

https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

 

[target2019]

After 25 years of her corporate job, my wife decided to change her career which pays less than half of her current salary as a local school district staff .* She has about $500k in her 401k. My question is should we rollover her 401K to IRA ? if so what to invest after she rollovered* to her IRA?*She has Fido as her 401k acct. Thank you

It's a good time to search out the differences between 401(k) and IRA accounts.

No one here can read minds, so telling you what to do, while knowing nothing about your situation (how invested, current AA, etc.), would be senseless.

Here is a template that one well-know discussion board asks posters to conform to. I'm not this rigid, but you can tell by examining what to fill in, that there are some very good questions you should be able to answer about your investments (both of you).

Asking portfolio questions https://www.bogleheads.org/wiki/Asking_portfolio_questions

 

[Koolau]

I suggest you both do some reading, instead of asking strangers on the internet what to invest in.

https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

It seems to me that we stranger on the internet are giving some good advice - and if not, at least we're presenting some good places to do research. What better place to ask strangers-on-the-internet than on a site which touts itself as "THE PLACE" for Early Retirement.

And thanks for your advice to OP. Bogleheads is a great place to learn.

 

[PlayinwithFIRE]

One odd thing I noticed doing this just last week (401K at Fidelity to IRA at Fidelity) is that the transferred funds which were Fidelity funds are now labelled as "short" term in the IRA. Even though these positions existed and were being added to for like the last 9 years.

Is this normal, is there a waiting period for this to change back to "long" term ? Will this designation affect taxes if I choose to now sell them and repurchase something likme a bogleheads 3 fund Fidelity ?

thanks in advance,

PWF

 

[weester]

totally agree. thank you . it is just so many funds in Fidelity to choose.

 

[mrfeh]

One odd thing I noticed doing this just last week (401K at Fidelity to IRA at Fidelity) is that the transferred funds which were Fidelity funds are now labelled as "short" term in the IRA. Even though these positions existed and were being added to for like the last 9 years.

Is this normal, is there a waiting period for this to change back to "long" term ? Will this designation affect taxes if I choose to now sell them and repurchase something likme a bogleheads 3 fund Fidelity ?

thanks in advance,

PWF

If the assets were "transferred in kind", and I don't know why they wouldn't be, the purchase dates should not have changed (long would still be long).

I suggest you contact Fidelity.

 

[Out-to-Lunch]

One odd thing I noticed doing this just last week (401K at Fidelity to IRA at Fidelity) is that the transferred funds which were Fidelity funds are now labelled as "short" term in the IRA. Even though these positions existed and were being added to for like the last 9 years.

Is this normal, is there a waiting period for this to change back to "long" term ? Will this designation affect taxes if I choose to now sell them and repurchase something likme a bogleheads 3 fund Fidelity ?

thanks in advance,

PWF

AFAIK, it makes no difference for taxes! Distributions from tIRAs are treated as ordinary income. There is no long-term or short-term designations to worry about.