What to do with my 401k?

Hello group,

Recently I switched jobs from a company that offered a 401k where I participated, to a job where I have an employee pension plan. I actually have 2 different 401k account from my past two jobs. I have only been able to contribute the minimum amount to get the 3% company match. So over the past ~8 years, I have a grand total of about 130k in the two 401k accounts. In most recent 2 years I have been averaging about 15% return on the money there. Now that I have the pension plan, I want to know what are my options for the 401k money. Role it into a ira? leave it there? I hear there is some roth ira rule change int 2010, that might effect my choices. What do you all think?

Thanks for any help/pointers.

--pat

I suggest you contact the two companies you had the 401Ks with and ask their policies.

Company 401k would have limited mutual fund choices. I would suggest you rollover your 401k to vanguard or fidelity rollover IRA. More flexibility and not tied to any ex-company. That is what I did when I switched jobs.

In general I'd say you probably want to roll them both into an IRA if you're interested in choosing your investments yourself since an IRA will give you much more flexibility in terms of what you can buy. You can also convert the IRA to a Roth IRA if you think that will be advantageous for your tax situation (like low taxes now, relative to those expected in the future).

On the other hand, there are some rarely used aspects of a 401k that may make it better than an IRA if:

1) you might want to take a loan against the 401k,
2) you might want to retire early (and the 401k can be tapped at 55 rather than 59.5), or
3) you like the investments in the 401k better than those you can get on your own (lower fees, closed funds, etc)

As people have said, look around - there's tons of info on the web about this stuff.

WhiteGuy said: The reasons and rationale behind saying roll your entire 401k into a single IRA will be crystal clear once you look into the subject.Not so fast. There are plenty of 401(k)'s that give you access to exceptional funds that are either closed or have unaffordable minimums, allow you to purchase institutional shares with much lower expense ratios than their retail counterparts and allow you to avoid paying very significant loads on great funds. Hence, depending on the OP's particulars, it may not always make sense to do the roll over.

P.S.
Stiggz, are you stalking me? Why on god's green earth would you neg this post?

geo123 said: I've never heard of a 401(k) loan when the plan is being held by a former employer. Have you seen plans that allow you to do this?
No, I haven't. But I have only had about four or five different 401(k)s, so I guess anything is possible.

cstark said: I'd probably suggest you roll it into an IRA... An IRA gives you a lot more flexibility.Again, there are plenty of 401(k)'s that give you access to exceptional funds that are either closed or have unaffordable minimums, allow you to purchase institutional shares with much lower expense ratios than their retail counterparts and allow you to avoid paying very significant loads on great funds. Hence, depending on the OP's particulars, it may not always make sense to do the roll over.

I agree with geo123 that rolling 401K into IRA is not a no brainer.

An aggregated retirement plan like 401k gives you access to load-waived, fee-reduced, institutional share classes that are often not available to retail investors in an IRA account. I have kept the 401k from my ex-employer precisely for this reason.