Roll as much as I can into a Roth IRA, and cash out the rest at 30% loss to taxes
33%
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Total Votes : 3
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NorCal New Member
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401a advice
Hello everyone, I am new to the forum and wanted to say hello.
I recently discovered that I had a 401a account that I never knew existed after I left my city job back in 2008. Its not a whole lot, but it has matured to 12K with interest, and since I never knew it existed, I look at it like "free money."
My current employer offers a 401K and I currently contribute 10% with a 6% match. I also have a Roth IRA through USAA which I just opened. However, I contacted my employer to see if I could roll my 401a over into that account and I was told I could not. Considering I can only contribute $5,400 per year into my Roth IRA, I'm conflicted as to what to.
Do I roll over what I can, and cash out the rest losing 30% to taxes, or do I just let it sit where it's at and let it gain 6% per year?
Any input would be appreciated. I'm only 32 years old so I have a few more moons before I can pull the pin and retire.
Sat May 18, 2013 8:11 am
oldguy Senior Member
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quote: Do I roll over what I can, and cash out the rest losing 30% to taxes, or do I just let it sit where it's at and let it gain 6% per year?
Actually your company did you a favor, it's not such a good idea to roll an old 401 into a new one - instead roll it into a Traditional IRA where you can invest in whatever you like. That is a tax-free 'roll' - use a major fund company such as Vanguard or Fidelity, they will do the 'roll' for you. At your young age, I would would go 100% into a SP500 Index Fund, low costs, average longtern return of about 11%/yr. (The roll doesn't count as part of your $5500/yr contribution so can still fund your Roth.
quote: I look at it like "free money."
OK - but it would be better if you didn't, lol. There is a book about that - 'earned' money vs 'found' money. People direct earned money to sensible things - and they blow the 'found' money to reward themselves. Most lottery winners blow the whole thing in an average of 7 yrs. People who get large tax refunds blow it on a vacation or a new car. Some people sell a house and then blow $100,000 on 'solid' investments, lol.
BTW, $12k sitting at 11%/yr at age 32 is $275,000. When you change companies, retire, etc, your final 401k will probably get added to this account - ie, much of your wealth will end up there.
Sat May 18, 2013 2:32 pm
oldguy Senior Member
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Regarding your poll - 'none of the above', all 3 are bad choices.
Sat May 18, 2013 2:33 pm
coaster Senior Advisor
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Another vote to roll it into a Traditional IRA (technically called a "Rollover IRA" unless and until you commingle funds with new contributions). Any institution that offers IRAs can do that for you. Do it as a direct custodian-to-custodian transfer and all you have to do is fill out and sign a few forms. The receiving custodian does all the rest.
~Tim~
Sat May 18, 2013 2:55 pm
clydewolf Senior Member
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Re: 401a advice
quote:Originally posted by NorCal Hello everyone, I am new to the forum and wanted to say hello.
I recently discovered that I had a 401a account that I never knew existed after I left my city job back in 2008. Its not a whole lot, but it has matured to 12K with interest, and since I never knew it existed, I look at it like "free money."
My current employer offers a 401K and I currently contribute 10% with a 6% match. I also have a Roth IRA through USAA which I just opened. However, I contacted my employer to see if I could roll my 401a over into that account and I was told I could not. Considering I can only contribute $5,400 per year into my Roth IRA, I'm conflicted as to what to.
Do I roll over what I can, and cash out the rest losing 30% to taxes, or do I just let it sit where it's at and let it gain 6% per year?
Any input would be appreciated. I'm only 32 years old so I have a few more moons before I can pull the pin and retire.
Roll to TIRA?
- Many more investment choices.
- Probably lower fees.
- Better options for your beneficiaries.
- Future consolidation of retirement accounts.
It is good that you are contributing to a ROTH IRA now. That gets the 5 year qualifying clock started for qualified distributions after you reach age 59 1/2.
Sat May 18, 2013 8:00 pm
NorCal New Member
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Location: N. California
Thanks for the advice everyone. I was considering rolling my CalPERS account over to a traditional USAA IRA. My family members are telling me to get the money out of CalPERS with all their financial issues before its too late and the money is gone. I'm not 100% that is realistic, but that is why I am looking at other options . . .
Sun May 19, 2013 7:50 am
Anton Martin Full Member
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Location: Florida, USA
Agree with you
quote:Originally posted by oldguy
quote: Do I roll over what I can, and cash out the rest losing 30% to taxes, or do I just let it sit where it's at and let it gain 6% per year?
Actually your company did you a favor, it's not such a good idea to roll an old 401 into a new one - instead roll it into a Traditional IRA where you can invest in whatever you like. That is a tax-free 'roll' - use a major fund company such as Vanguard or Fidelity, they will do the 'roll' for you. At your young age, I would would go 100% into a SP500 Index Fund, low costs, average longtern return of about 11%/yr. (The roll doesn't count as part of your $5500/yr contribution so can still fund your Roth.
quote: I look at it like "free money."
OK - but it would be better if you didn't, lol. There is a book about that - 'earned' money vs 'found' money. People direct earned money to sensible things - and they blow the 'found' money to reward themselves. Most lottery winners blow the whole thing in an average of 7 yrs. People who get large tax refunds blow it on a vacation or a new car. Some people sell a house and then blow $100,000 on 'solid' investments, lol.
BTW, $12k sitting at 11%/yr at age 32 is $275,000. When you change companies, retire, etc, your final 401k will probably get added to this account - ie, much of your wealth will end up there.
I am completely agree with you, Roll it over to Traditional IRA may be good idea.
Tue May 21, 2013 1:43 pm
littleroc02us Moderator
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How about this, if you don't want the 30% you'd pay in taxes, give it to me. I would roll it over as others have said into a traditional Roth IRA. Don't give up anymore money then ya need, we already pay enough in taxes as it is.
Risk comes from not knowing what you're doing. (Warren Buffet)
Tue May 21, 2013 4:02 pm
NorCal New Member
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To avoid excess taxes, I rolled the entire amount into a USAA mutual fund (USAA Cornerstone Moderately Aggressive Fund). I hope I made the right choice . . .
Wed May 22, 2013 8:56 am
clydewolf Senior Member
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quote:Originally posted by NorCal To avoid excess taxes, I rolled the entire amount into a USAA mutual fund (USAA Cornerstone Moderately Aggressive Fund). I hope I made the right choice . . .
I hope you told USAA you wanted that in a Traditional IRA.
Wed May 22, 2013 5:46 pm
coaster Senior Advisor
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quote:Originally posted by NorCal I hope I made the right choice . . .
USAA is an outstanding investment company; your fund choice, USCRX, however is rated only two stars by Morningstar. You may wish to do some more research and move that into a different choice within their family of funds.
Morningstar's summary on USCRX:
quote: A hefty price tag, above-average volatility, and continual manager turnover dim this fund's appeal.
~Tim~
Thu May 23, 2013 5:15 am
NorCal New Member
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Location: N. California
Thanks for the advice. Unfortunately, I jumped the gun and rolled it into the traditional USAA IRA discussed earlier.
As it stands, I rolled a little over $12K into a traditional IRA with USAA. I also have a USAA ROTH IRA and a 401K with my company contributing 10% with a 6% company match.
This retirement venture is a little unnerving considering I've always been a government employee. (6 years federal and 2 years state) I have never looked into civilian retirement accounts, so I feel like I'm in second grade learning my ABC's all over again. . .
Mon May 27, 2013 5:53 am
coaster Senior Advisor
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An IRA is a tax entity, it's not the investment you put into it. You're not locked into the fund you picked. You should be able to transfer into any of USAA's other mutual funds at any time without losing anything, but if there is a short-hold redemption fee just ask for a one-time waiver.
~Tim~
Mon May 27, 2013 3:01 pm
Brownsfan2k5 Full Member
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I used to invest in USAA until I studied up on the expense ratio. I believe it was like 1.15% compared to the S&P 500 through Vanguard for only 0.05%. Needless to say, I switched over pretty fast.
Sun Jun 02, 2013 10:50 pm
Brownsfan2k5 Full Member
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Correction: I used to invest in mutual fund through USAA
I would roll it over as others have said into a traditional Roth IRA. Don't give up anymore money then ya need, we already pay enough in taxes as it is.