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11-19-2008, 03:11 PM
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703 posts, read 2,867,967 times
Reputation: 674
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In all likelihood I will be changing employer in January. My question is whether I should continue to contribute to my 401K at my current employer until the change? I'm guessing the prevailing answers will be "Yes" since I get matching funds (at various percentages) up to 8% of my salary contribution. However, what should I do with my 401K account once I leave this employer? Should I just leave the account alone and wait for it to be eventually out of the red sometime in the future? Is this a possible and viable option (the company that I would be leaving is a Fortune 100 company)? Alternatively, should I go ahead and try to roll-over to an IRA then into a Roth IRA and pay the associated taxes for the rollover process as soon as I leave?
The 401K is currently invested in a 2040 targeted fund managed by Hewitt.
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11-19-2008, 07:33 PM
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Location: Apple Valley Calif
7,473 posts, read 22,299,337 times
Reputation: 5672
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Keep contributing in it, and leave it with the company until you are eligible to enroll with new company's 401k, then roll it over to them.
Make sure to do it following the rules, don't let them hand you a check or the IRS will have you for dinner...1
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11-19-2008, 07:52 PM
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Location: Great State of Texas
86,052 posts, read 81,631,694 times
Reputation: 27707
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I think you have the option of leaving it with your old employer. If you transfer it then they will have to liquidate and then you WILL realize your losses.
Talk to your HR dept about your options for your 401K after you leave.
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11-19-2008, 07:57 PM
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Location: Keller, TX
5,658 posts, read 6,023,128 times
Reputation: 4104
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You can certainly roll it over without selling (although some funds may not be eligible to add more to once in the IRA). That's what I would recommend. Keep contributing and then initiate the rollover once you've terminated employment.
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11-19-2008, 08:41 PM
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Location: Great State of Texas
86,052 posts, read 81,631,694 times
Reputation: 27707
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Quote:
Originally Posted by Nepenthe
You can certainly roll it over without selling (although some funds may not be eligible to add more to once in the IRA). That's what I would recommend. Keep contributing and then initiate the rollover once you've terminated employment.
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Not all funds in a 401K are publicly traded funds that can be transferred.
I believe the Tier 1 investment choices are funds specifically for the Company's employees. Those would have to be liquidated if you transfer your 401K.
All 401K's are not the same. Your HR person can give you all the options available to you. |
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11-19-2008, 09:40 PM
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Location: Keller, TX
5,658 posts, read 6,023,128 times
Reputation: 4104
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Quote:
Originally Posted by HappyTexan
Not all funds in a 401K are publicly traded funds that can be transferred.
I believe the Tier 1 investment choices are funds specifically for the Company's employees. Those would have to be liquidated if you transfer your 401K.
All 401K's are not the same.
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That may be true, but it would depend on the custodian and the firm you roll it over to. Definitely talk to the plan admin.
Usually there's no problem. For example, in my years of helping people with rollovers from Fidelity-held 401Ks to Fidelity IRAs, there was hardly ever an instance where a fund wouldn't transfer. Class K (institutional) shares can sometimes be converted into Class C shares of the same fund (which typically have a bit higher expense ratios) as part of the rollover, or Class K shares could be held in the retail account but with only closing trades possible (meaning you couldn't add more to the position but wouldn't have to sell immediately). The vast majority of offered funds, in my experience, are Class A, B, or C shares which are easily moved "in-kind" to a retail account.
I could see if you're rolling a Schwab 401K to a T.Rowe brokerage IRA that there might be a problem, for example. Talk to the plan admin for the goods. |
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11-20-2008, 01:32 AM
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Location: USA
27 posts, read 72,175 times
Reputation: 16
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Quote:
Originally Posted by psychofan
My question is whether I should continue to contribute to my 401K at my current employer until the change?
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Yes, keep on contributing at your current employer until you are there. |
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11-20-2008, 07:24 AM
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703 posts, read 2,867,967 times
Reputation: 674
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Thank you everyone for your advices. I went back to look at my company's website, I believe the 2040 Targeted Retirement fund that my 401K is currently invested in is not a publicly traded fund (more like a Company Savings Plan). Since this is the case, does it means that it will needs to be liquidated before it can be rollover to another retirement account (I have an existing Scottrade Brokerage account and a Scottrade Roth IRA account)? If so, would it be wiser to just leave the funds in this account with the current company after I leave and let it build up out of the red before making a rollover? Is it wiser to roll over into my Roth IRA or the future company's 401K equivalent account (TSP)?
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11-20-2008, 09:54 AM
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Location: Apple Valley Calif
7,473 posts, read 22,299,337 times
Reputation: 5672
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Quote:
Originally Posted by psychofan
Thank you everyone for your advices. I went back to look at my company's website, I believe the 2040 Targeted Retirement fund that my 401K is currently invested in is not a publicly traded fund (more like a Company Savings Plan). Since this is the case, does it means that it will needs to be liquidated before it can be rollover to another retirement account (I have an existing Scottrade Brokerage account and a Scottrade Roth IRA account)? If so, would it be wiser to just leave the funds in this account with the current company after I leave and let it build up out of the red before making a rollover? Is it wiser to roll over into my Roth IRA or the future company's 401K equivalent account (TSP)?
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NO...! don't liquidate it or the tax man will get you. You can roll it over to an IRA. If that's not possible, leave it with the old cpmpany and hope they are still in business when you retire. |
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11-20-2008, 10:15 AM
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Location: Keller, TX
5,658 posts, read 6,023,128 times
Reputation: 4104
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Quote:
Originally Posted by Donn2390
NO...! don't liquidate it or the tax man will get you. You can roll it over to an IRA. If that's not possible, leave it with the old cpmpany and hope they are still in business when you retire.
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psychofan is not referring to withdrawing the money, just to liquidating the position in the account. It would still be a rollover, it would just come over as cash instead of as shares in kind.
Also, people get a little hung up on "realizing the loss." If you take a 30% hit in one equity fund, sell it, and buy another equity fund, you really haven't realized the loss, if the second fund recovers. We're talking about mutual funds that track a large population of securities after all. And we're talking about non-diversifiable risk (market risk). This assumes the fund you buy is similar to the one you sold. |
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