I am retired, with a VERY meager pension. Within 6 months, I will reach the minimum age for Social Security. Which Trump may kill.
Several days after the election, I transferred my money from one part of my old, State-sponsored 401k, to a “value preservation” fund. Minimum risk.
Should I consider rolling-over to a private 401k?
Is my fund choice a panicky overreaction?
All opinions welcome.
The most that Congress would ever pass would be (to give an example) a plan where Social Security continues as before for people over the age of 50, but is replaced by some lesser or non-existent plan for people under that age.
I doubt that Trump would even propose something that takes away retired people’s actual living money, but there’s certainly no fear that it would ever even happen if he did.
I’d mostly just be looking at how to diversify outside the borders of the US economy.
Most likely yes - but you don’t roll into a “private 401k”, you roll it into an Individual Retirement Account (IRA). Most 401k plans are full of fees (many of which are hidden in the funds’ expense ratios). You can open an IRA at Fidelity for free with no minimum balance, and have access to no-expense mutual funds and ETFs. You should have your plan reviewed for fees, expense ratios and fund availability before making a decision.
I’m curious about this particular advice - with Trump’s planned tariffs, won’t international markets be taking a hit?
The US is an exporter of finished goods. We’re an importer of materials, basic parts, and components.
As we increase the price for materials, parts, and components, we need to raise prices that we sell our own products. That depresses demand, and reduces the quantity of our orders for materials/parts (e.g. from China).
Other exporters of finished goods - Japan, Taiwan, the EU, etc. - can now go in and buy up any freed production in China, probably at a discount, and undercut US products with stable or lower prices.
We lose market, driving down GDP, driving down the average wage, further depressing demand, further reducing orders against China, etc.
Countries under sanctions don’t do well on the open market. Tariffs are, effectively, self-imposed sanctions.
International markets - like the EU and most other tier 1 countries - will surge. China may suffer some brief shocks, but lost demand is liable to be quickly filled.
I was told a couple of years ago that I should start moving some of my 401K to a Roth IRA, that amassing a huge 401K was no longer the smart decision that it once was due to changes in the tax laws. I didn’t do it at the time but now I feel like I’d better get on it before Trump tanks the economy.
Who services your 401k? I’ll bet it’s a private company, it doesn’t matter much if it’s MyStateGovt serviced by Schwab vs. an IRA opened on schwab.com except that how you invest in it and how it mgiht be treated as withdrawals. If you’re already retired, you may want a bond-heavy portfolio, and most work pensions are designed to automatically change the stock/fund to bond ratio over time as it reaches a target year.
As with anything involving the market, it’s either a panicky overreaction or a prudent measure, and you can only know in hindsight.
Deciding between post-tax account vs. a Roth is an important decision, but there are Roth 401ks now so the distinction between these particular two is moot. Just that you can’t “decide” to have any type of 401k, your work offers it (or a 403b, or 457, or 401a, or SIMPLE), but anyone can have access to an IRA in some fashion as long as they have earned income.
If we were allowed to bet I would bet my social security that Trump won’t kill it. Trump loves having worshippers. His worshippers hate entitlements and think they are entitled to social security without seeing the irony. He will continue to pander to the cult and not piss them off. If something happens to social security it won’t be while Trump is in office.
without knowing the specifics of your 401k or the funds within it, this is good advice. An IRA at Fidelity (or Schwab or Vanguard, etc.) will allow you access to very low cost index funds and bond funds that invest in just about any combination of assets that you could want. I wouldn’t convert ALL of your investments to a “value preservation” fund. Such a fund will likely invest mostly in government bonds and various cash instruments and will struggle to grow in value. You would likely still want some money invested in equities.
the wisdom of this depends on your tax bracket now vs what it will be when you would otherwise take retirement distributions from the 401k. Traditional 401k contributions and earnings are pre-tax, so you will pay taxes on them when take distributions or convert them to Roth. It’s a bit of a guessing game, but if you are in a low tax bracket at the moment (e.g. you have low income), then it may make sense to convert some of your traditional 401k money to Roth money now.
At the very least, you should move from a 401k to an IRA, because fees are likely higher in your 401k (assuming that a) you are no longer working at the employer that sponsored the 401k (or are old enough to rollover from that account) and b) the fees/benefits of that 401k aren’t beneficial compared to a fee-less IRA.)
If Trump is going to tank the economy, you’ll save a bundle converting to a Roth after he tanks it.
My IRA is in a socially-responsible set of investments, and has been since I retired. I’m not changing that, those are my values. I won’t be surprised if the income and share values go down, but I won’t be surprised either if they don’t. As far as I’m concerned, there isn’t anyone that I am likely to have contact with who has any idea what is going to happen. I will take what comes.
You can open an IRA at Fidelity for free with no minimum balance, and have access to no-expense mutual funds and ETFs. You should have your plan reviewed for fees, expense ratios and fund availability before making a decision.
Could you explain this?
Who would do such reviewing?
And, are we discussing the new or old account? I mean, the 401k, or the IRA?
You can do this yourself, but you have to be thorough and follow up with the plan provider.
Honestly, I’ve never seen a 401k that was cheaper than going with Fidelity or Vanguard on your own.
Also, most 401(k) plans have a limited selection of investment options but at Vanguard, Fidelity or another such company, your choices are vast.
Are these online?
And, what am I looking for?
The money I have in my current employer’s 401(k) plan is in a target date fund at Fidelity (which is the 401(k) plan custodian), as is the money from previous employers’ 401(k) plans (which is in a rollover IRA at Vanguard). These funds change the investment mix to be more conservative as the target date (when you expect to retire) approaches. I think you’re already retired, and they have funds for that stage of life, which might last a decade or two. Given that, you don’t want to be too conservative, so you still want some investments in stocks.
Go online to your account. There should be a summary of the investment options in your account, along with their YTD, 1-year, 5-year and 10-year performance. That should also include each fund’s expense ratio (but not always - my provider just removed it from mine).
If you cannot find it, you need to click the “contact us” button on the website, and call or email to ask for “a summary of the expense ratios for your investment options”.
Absolutely correct. My 401k plan has about 20 funds from which to choose. Fortunately, several of them are Vanguard funds, which have done me quite well since I retired 8 years ago.
I am in the process of rolling over my 401k into my Fidelity IRA, which I opened earlier this year. I’m pretty sure that damn near every mutual fund in this country, and maybe the world, is available through Fidelity.
There are a handful of mutual fund families that Fidelity doesn’t platform that I used to see quite often on 401k platforms, like MFS and DFA - but I believe that’s their usual target market. I’m extremely pleased with having my funds at Fidelity - it’s a very easy platform to use and navigate, and their support when rolling over was unreal.
BTW, regarding this, yes, the “value preservation fund” will probably avoid serious loss but it will of course miss any gains as well. If, as you say, you’re reaching the minimum age for Social Security, you’re as young as 62. You could very well be in retirement for twenty years or more and will need your money to grow. If nothing else, inflation is going to eat into what income you’re getting from it.
Seconded. I have nothing but high praise for their website, and my account rep is very responsive and patient.