401K Rollover

I’m leaving my job in five weeks and I have to make a decision about my 401k. I do not know whether I will manage a job with retirement benefits, and it’s not likely, since I will be in school and plan to work part time.

Because of the 401K plan through my current job, I have to remove the funds from the plan - I have about $3300 in there, and they request that you take it out when you leave if there is less than $5K in it. I really don’t want to take the payout from it, but I’m not positive about my options for rolling it into something else.

Basically, what options are out there for me? Any links you can provide would be very helpful (I’m off to do some searching myself as well). And, if I roll it into an IRA, how do I go about doing that (I’m an internal auditor, I play with numbers, but I really have no idea who to even talk to)?

Thanks in advance

You can open an IRA with almost any financial institution – a bank, a stockbroker, a mutual fund, etc. Once you figure out who you want to go with, they’ll help you with the paperwork.

The bigger question is what you want to do with the money. If you take it in cash, you’ll pay a large tax penalty. If you roll it into an IRA, you’ll have to figure out what sort of investment you want.

Given that the stock market is so iffy right now, you might want to invest it in bonds or even a bank certificate for a year or two, or longer, and then look to converting it to something else later on.

Last fall, I had to roll over a 401k plan I had with a former employer because I needed access to the money and I couldn’t take any loans or withdrawals without being an active employee. I wound up opening an account with The Vanguard Group and rolling it over there. They were extremely helpful on the phone, they had a number of different investment options, and (if this matters to you at all), IRA’s have an option of taking a withdrawal for the purchase of a first home with no penalty (you still pay taxes, but not the additional 10% whack they give you on other early withdrawals).

I’m sure that there are a lot of other investment companies out there, but if you check out Vanguard, you can read through the info that they have on what will be required to set up an account and submit your rollover check. I would guess that other firms have similar procedures. You can also check out the prospectus on their investment options, in case you’re interested with going with them.

Take this all as you will, I am not a financial expert, yadda yadda. :slight_smile:

The rules may have changed since the last time I did a rollover so a little update help is requested.

At the time of my last rollover there was a rule that you would get tax withdrawn if the money touched your hands. To avoid taxation it was advised to decide on a good place for a rollover (a bank, a mutual fund family) and let them handle it.
Jadis picked a well-respected no-load family with Vanguard. Other respected families to contact (if you want to expand your choices) might include Fidelity, T. Rowe Price and Dodge & Cox.

Thanks, folks.

Fidelity is who it’s with now - I haven’t investigated the possibility of rolling it into something else with them, but all the paperwork I have from them says I have to remove it/roll it over if there’s less than $5K in it. I’ll do some hunting on my bank’s website and at Vanguard and check out my options.

Regarding this, if I’m 22 (which I am) and am investing for retirement, this shouldn’t be a concern for me, right? In fact, it’s probably good to be investing now, and even taking a loss now shouldn’t bother me, yes? (I realise you are not necessarily an expert, but I just opened a 401k with my job and know next to nothing about stocks and investing).

AFAIK, this is still true. When I rolled my 401k over to the IRA, I had to contact Vanguard to ask them who the check should be made out to when my 401k disbursed it. The check cannot be made out to an individual and then reinvested, or there will be penalties for early withdrawal, even if you subsequently invest the entire amount in a new IRA.

As long as the disbursement is made to another legitimate investment company and not to yourself, you should be fine. The disbursement check was mailed to me, which I forwarded to Vanguard, but it wasn’t made out to me, so it wasn’t considered to ever be “in my hands” so to speak.