What to do with a 401k from previous employer?

[RyansDad]

I was wondering what some options are with a 401k when changing employers?
I know i can roll it over to my new employer but are there any other options that are worth exploring? I dont have an IRA but plan to start one soon... can funds from the 401k be put into an IRA without penalties? Any other ideas?

 

[CF34-3B1]

I cashed mine out and went to Vegas.

 

[Whataburger]

Since you're starting a new job, your tax bracket will hopefully the lowest it will ever be again. Consider rolling part of it into a Roth IRA. You'll pay taxes now on the low % vs the retirement %. The rest can go into a traditional IRA, or you can just wait til next year to roll what's left over into the Roth you maxed this year.

 

[Hair-on-Fire]

I was wondering what some options are with a 401k when changing employers?
I know i can roll it over to my new employer but are there any other options that are worth exploring? I dont have an IRA but plan to start one soon... can funds from the 401k be put into an IRA without penalties? Any other ideas?

You can roll your 401K over into an IRA with any company. They're more than willing the help you with the paperwork, and you'll usually get lower fee's and more investment choices from one of the big investment companies (Vanguard, TRowePrice, Fidelity) than you will with your new employers plan.

You can also roll it over to your new employer's plan, but be sure to take a look at the investment choices and fees. I rolled over my 401k to my new employers plan mainly because I liked the idea of being able to take a loan from the 401k if an emergency came up. Although, once your 401k exceeds 100K, you're at the max loan you can take (50% or $50,000). You can't really take a loan from a IRA.

You also have the option of leaving it in your previous employers plan if you have more than $5,000 invested.

 

[sweptback]

Roll it over to an IRA, and then convert it to a Roth IRA in 2010 I believe when the exemption happens.

If you have more than $5,000 in it you should be able to keep it with your old employer if you like the fund options.

 

[jetjock6]

I left mine in my previous employers plan.

 

[Indy refugee]

Be very careful about leaving in any employer plan. When Indy went BK, the 401k was frozen for over 6 months. Because the employer is responsible for ensuring compliance with IRS rules. Once the employer ceases to exist, the IRS must evaluate the plan for compliance. During this time all investments stay where they are. Imagine if you were in tech during the crash and you couldn't get out. An IRA is your money. I rolled mine into an IRA before Indy went BK.

Of course, if your previous employer is stable and not at risk of BK, like ACA in 2000, you have nothing to worry about. We are talking about an airline, right?!?

 

[cactusboy53]

:laugh: Buy airline stock. You'll be rich before you know it!!

 

[RyansDad]

Thanks for the info...I only have about 10k in it now but prefer the flexibility of choosing my own investments over some of the other plans out there. I also didnt know i could leave it at my present company if i chose to do so....not that i will. Thanks for the insight.

 

[Swaayze]

Sounds like the Rollover IRA would be best for you. You will have unlimited choices if you do it with a brokerage firm (mine's with TD Ameritrade) so you can do stocks/bonds/mutual funds/options/cash/etc. But, be sure you have the brokerage/fund company help you do a direct transfer so that they don't send you the money and withhold any for taxes; if they do this then you'll need to fund the Rollover with extra funds from another source to avoid paying an early distribution penalty. If you have the money to pay the taxes on it I would then consider converting the Rollover IRA to a Roth (you don't have to wait 'til 2010 unless you are ineligible to convert now due to a high income, in the neighboorhood of 6 figures for married filing jointly). This assumes you expect to be in an equal or higher tax bracket in retirement.

 

[StaySeated]

I agree with some of the above points. Do not leave it with your previous employer and do not transfer it to your current employer. Your best bet would be to roll it over into your own IRA or a ROTH. You can spread the taxes out over five years as well, but the tax on 10k will not be that high anyway. Depending on your new airline, you might be able to get yourself into the 15% tax bracket, and as someone above mentioned, your never going to be in that again until the next wave of furloughs happen.

 

[roughneck]

Be careful of rolling it over into your new carriers 401K without knowing much about it. We have exceptional funds to choose from here at SWA, but some of my previous employers weren't so good.

If you roll it into your new companies plan, you can only invest in the funds they have available. Just make sure they have good funds before you roll it in. If they don't, you would be money ahead if you put it in an IRA so you can invest in whichever funds you want.

 

[Lear70]

You need to speak to a tax specialist first.

There are many tax implications of all of the above-mentioned examples, most of which can be good advice, depending on what boat you're in.

Vegas being the main example of "Oh God, what was I thinking" kind of stupidity.

"That's easy for you to say. I owe the mob $100,000 I blew on a stripper named Molly Mounds".

 

[Truckdriver]

You will most likely pay less fees, expenses, and taxes by rolling it into your new employers plan. Doing the Roth IRA thing will generate a tax bill along with some fees and sales charges depending on where you go. Doing a standard IRA will probably cost you in fees and charges. You also won't be able to put all of it into an IRA at once since you have 10K. If your current employer has some good investment options, you will be better off rolling it into your new plan. Most charge no fees or sales charges and there will be no tax bill. It just depends on what kind of plan you now have. I rolled 100K from my last employer into my new employers plan because we have good funds available. Saved me a ton in fees, plus my money is all in one place.

 

[Swaayze]

You can spread the taxes out over five years as well, but the tax on 10k will not be that high anyway.

Not true for current conversions. All taxes would be due 4/08 if converted this year.

You also won't be able to put all of it into an IRA at once since you have 10K

Also not true for a rollover.

 

[Truckdriver]

You also won't be able to put all of it into an IRA at once since you have 10K.

I guess I should have said a ROTH IRA. You can't rollover more than the annual amount allowed into a ROTH IRA. You can rollover more into a traditional IRA. If you rolled it all into a traditional IRA, you shouldn't generate any tax bills.

 

[AZ Typed]

I was wondering what some options are with a 401k when changing employers?
I know i can roll it over to my new employer but are there any other options that are worth exploring? I dont have an IRA but plan to start one soon... can funds from the 401k be put into an IRA without penalties? Any other ideas?

With all respect, it's embarrassing that our school systems don't teach this BASIC financial information. Find a financial advisor you TRUST for help. It's your hard earned money, get educated and make decisions based on FACTS, all the FACTS.

AZT

 

[Swaayze]

I guess I should have said a ROTH IRA. You can't rollover more than the annual amount allowed into a ROTH IRA. You can rollover more into a traditional IRA. If you rolled it all into a traditional IRA, you shouldn't generate any tax bills.

You cannot rollover directly to a ROTH IRA from a 401k. You can do a traditional Rollover IRA for the full amount and then convert (up to) the full amount to a ROTH. Don't confuse annual contribution limits with rollover and conversion amounts which are unlimited to the best of my knowledge (assuming of course you meet the AGI requirements to be eligible to convert to a ROTH). Taxes would be owed on the amount converted to the Roth.

 

[Swaayze]

With all respect, it's embarrassing that our school systems don't teach this BASIC financial information. Find a financial advisor you TRUST for help. It's your hard earned money, get educated and make decisions based on FACTS, all the FACTS.

AZT

That's true and great advice.

 

[AV80R]

Consider rolling part of it into a Roth IRA.

Ditto, that's what I did. (and yes, I know it's 2 separate steps, 1st you open an IRA and roll it over, then you convert it to a ROTH IRA - those 2 events are separated by the amount of time it'll take you to sign two forms. In other words, you can do it all at once.)

 

[TheBaron]

$10k is about right for a high quality breast implant. Treat yourself, after all, social security will be there to take care of you in your golden years.

 

[Porch]

Get your information from a professional... Just as your passengers hire you to fly them from a to b. Don't be the weekend doctor flying his/her bonanza to appointments, you'll end up in trouble.