links for rolling your 401k?

[Doctor Bagel]

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this is an issue where i'm perpetually confused (like lots of issues 🙂 ). what the heck are we supposed to do with our 401ks when we quit working and start going to school fulltime. we roll it to an ira, right? how does that work? does anybody have any good resources for dealing with the 401k thing? any ideas on good or bad places to roll it. my mom's a big fan of vanguard -- any other thoughts?

 

[.edu-MD]

this is an issue where i'm perpetually confused (like lots of issues 🙂 ). what the heck are we supposed to do with our 401ks when we quit working and start going to school fulltime. we roll it to an ira, right? how does that work? does anybody have any good resources for dealing with the 401k thing? any ideas on good or bad places to roll it. my mom's a big fan of vanguard -- any other thoughts?

There's always the option of NOT rolling it over, isn't there? I have a 403b and I believe I can leave it as is when I stop there because I exceed the minimum balance (I've read $5000 but I need to get this verified). 401ks seem to generally be treated the same as 403bs so this may apply to you too. My 403b is with Fidelity and I really like them. Low fees and a fair number of pretty good performing mutual funds available.

 

[scpod]

this is an issue where i'm perpetually confused (like lots of issues 🙂 ). what the heck are we supposed to do with our 401ks when we quit working and start going to school fulltime. we roll it to an ira, right? how does that work? does anybody have any good resources for dealing with the 401k thing? any ideas on good or bad places to roll it. my mom's a big fan of vanguard -- any other thoughts?

If your vested balance is over a certain amount (probably 5K or less), you can usually just leave it there if you are happy with your return. You can't make any more contributions, though, but you can probably leave it there until age 70. You can continue to contribute if you rollover into an IRA. Just make sure that the check is made out to your IRA's custodian, and not you. It's possible to get a "conduit IRA" which would allow you to move that particular money to a future 401k. For now, you might just want to leave it there. What's the rush?

 

[Doctor Bagel]

Hmm, I should look into that. I am getting a good or well decent return, so it might be easiest just to stick it there. It's not like I'll be earning enough money to make contributions for the next few years anyway.

 

[mshheaddoc]

I have the same problem. I'm making great returns on my 401K right now and I've been wondering whether to roll too.

I want that new Roth 401(k)!

 

[scpod]

I want that new Roth 401(k)!

It's a pretty cool deal, I think, since you can ad $15,000 per year instead of $4000 like the Roth IRA. Plus, there's no $160,000 income exclusion for a couple.

 

[.edu-MD]

Hadn't heard of a Roth 401k. Is there a Roth 403b??

 

[mshheaddoc]

Hadn't heard of a Roth 401k. Is there a Roth 403b??

I'm sure if it isn't offered now it will be in the future.

 

[MeowMix]

You can probably leave it where it is; that's what I did with my 403b. Your 401k company can tell you the details.

While you're in med school, consider rolling money each year from the 401k into a Roth. You won't have much other income, so you might not have to pay any tax at all by using up your deductions and credits. Talk to an accountant first, and also talk to your 401k company. I should have done this during my first year in med school, and didn't even consider it. You can leave the money in the same mutual fund, but just convert it over to Roth.

 

[Non-TradTulsa]

Hmm, I should look into that. I am getting a good or well decent return, so it might be easiest just to stick it there. It's not like I'll be earning enough money to make contributions for the next few years anyway.

As long as you're happy with how you're invested, I'd just leave it. My retirement money is in a 403(b) with Fidelity. I use their "2030 Retirement Fund" - it's fairly aggressive but automatically gets more conservative as retirement grows nearer so I don't have to worry about re-allocating. I'm planning on leaving it at my hospital. My question is, if I work ECB (emergency temporary) or during the summers, do I continue to contribute to it as a poverty-stricken medical student in order to continue to get employer match?? I'll be counting every penny I earn, but I do hate to leave money on the table by giving-up the match.

 

[.edu-MD]

While you're in med school, consider rolling money each year from the 401k into a Roth. You won't have much other income, so you might not have to pay any tax at all by using up your deductions and credits.

This is a great idea. I didn't know about this. I will definitely keep it in mind. Thanks!

 

[cfdavid]

It depends on the extent to which you'd like to be involved. But, most large financial companies will handle the rollover for you.

The financial company that you choose will give you some forms for your companie's 401K administrator (HR for most) to fill out. It instructs your company where to direct the funds.

If you're reasonably familiar with investing you could do a "self-directed" IRA (Vanguard is a very good example). You can invest in index funds and market segment funds (heathcare, technology, natural resources etc.).

The benefit of Vanguard is that, since you do your own picking of funds, you can avoid paying "loads" on your purchase of those funds. All Vanguard funds are "no load", which means you don't pay a sales commission for that fund. Loads can easily run 3-5% up front. So, if you roll over 100k, you can end up sacrificing $5k right up front.

Of course, if you feel more comfortable using an investment "advisor", just remember that you'll pay for it. However, you may be able to negotiate with your advisor right up front, with respect to load fees. Mutual funds offer these "load" incentives to brokers/advisors to promote their product. BUT, there's nothing that says that the broker/advisor MUST take the full amount of what the fund pays him (i.e. 5%). So, you may be able to negotiate that you only pay 2%, in turn for some direction from the advisor.

You MUST bring up the load question/advisory fee issue right up front whenever you work with a financial advisor. Personally, I think that you could easily self-direct your rollover and pay a very minimal (if not zero) amount of fees. Sure, there will be a set rate ($200-300 maybe) for transaction and paperwork handling. But, the big expense comes when you actually invest in a mutual fund that may be loaded (note: there are different kinds of loads-front, back etc.).

 

[Captain Fantastic]

I use Vanguard for other investments and I used them when it was time to roll my employer sponsored plan into an IRA. I can recommend them with out any reservations.

For me the issue was being able to control the distribution of the funds. Sure, I could have left the fund with my employer but I wouldn't have been able to manage it. It was heavily invested in stocks. That's okay now, but as I age I want to be able to redistribute the investment.

Anyway, I self directed my roll-over with Vanguard and paid no fees. Their customer service guys can walk you through all the details.

 

[scpod]

While you're in med school, consider rolling money each year from the 401k into a Roth. You won't have much other income, so you might not have to pay any tax at all by using up your deductions and credits.

Except you can't rollover directly from a 401k into a Roth. You can rollover into a regular IRA, then eventually convert into a Roth IRA, but you will have to pay the the taxes between the conversion. You can't put any money into the Roth that hasn't been taxed first. The money in your 401k hasn't been taxed yet.

 

[MeowMix]

Except you can't rollover directly from a 401k into a Roth. You can rollover into a regular IRA, then eventually convert into a Roth IRA, but you will have to pay the the taxes between the conversion. You can't put any money into the Roth that hasn't been taxed first. The money in your 401k hasn't been taxed yet.

You're right, it's a conversion, not a rollover.

The point is that most people will have more unused deductions/credits than income during med school. There are no taxes to pay because you only convert as much money as you have unused deductions. That's why you want to make sure you double-check with an accountant first, and make sure all your numbers are correct before you do the conversion.

 

[medworm]

I'm wondering if anyone else is facing this 401K/IRA situation.

Let's say that I've got $1M in several 401Ks (NOT), and I want to move the $1M into a consolidated IRA account (so that I can invest it in virtually any vehicle I want) and be smart about taxes.

So what I do is that first I roll my 401Ks into a consolidated traditional IRA. Then in 2007 when I have $0 MAGI in med school, I convert ALL the funds (All $1M of it) from the trad IRA to a Roth IRA. In this conversion, I don't get taxed at all b/c of the $0 net income.

My question is: can I actually do this conversion and pay $0 in taxes (harhar! take that Uncle Sam), if I timed the transaction to coincide with a $0 net income tax year? Does this loophole really exist? I know there are lots of ex-CPAs and investment gurus in this forum! 😉

I was told by my financial advisor that I can do that in one fell swoop, and not be restricted to maximum limits which typically applies ONLY to new contributions.

I know that I have to yadda yadda with a tax advisor, but I'm just curious if anyone has actually tried this? If so, is what I described a plausible tax consequence? Thanks.


PS: I had a very, very bad experience with leaving my 401K funds with my ex-employer. Hell broke loose and I would NEVER do that again.

 

[TacoStand]

My thoughts are 401k, IRAs are simply tax shelters that reduce your taxable income today, and of course, the company match for the 401k is a no-brainer. If you are terrible about savings, investments, etc, then 401k, IRAs are great because they help you plan for retirement. However....

In general, I dislike the idea of putting money away that I cannot touch until I'm 65 or 65-1/2 without a 10% penalty. There are a lot of other investments that I'd rather be using this money for versus having it stuck where I cannot touch it for 30-40 years. I can get the same or better rates of return outside of an IRA/401k as inside of it. Only problem is that you lose the tax advantages.

My plan: Roll over my 401k's into a traditional IRA. Withdraw the maximum IRA $s that I can during medical school to reduce the amount that I have to borrow. There will be no other time until I am "retired" - >65 that I will have $0 or near $0 income. I got the benefit of company match, and I'm using the opportunity to get my $ and use it without penalty during a time when my tax liability is very low.

I know too many people who are now "retired" and in too bad of health to enjoy the $ that they saved in their 401ks. My philosophy - be responsible, be smart, but don't forget to enjoy life now.

 

[anniemal]

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