What to do w/401k when leaving a company

[shelbean91]

Dh is leaving his company, I think the official date of separation was 6/2 (long back story about this- not important).

We got info about what to do w/his 401k and it's a huge book. I know we can take a payout (not recommended or wanted at this point), can roll over to new employer (not an option yet- no new employer at this point), or roll over to an IRA, either roth or traditional, or leave w/the employer.

I'm really pretty good at this stuff, but if someone could give it to me in a nutshell the benefits/drawbacks of the rollover to IRA, I'd greatly appreciate it. I WILL read the book- it's through Wells Fargo Retirement, so whatever we do, they can handle it for us.

Thanks!

[velochic]

I would roll it over into a traditional IRA with a good mutual fund company like Vanguard. You cannot put it in a Roth directly from a 401(k), but if you choose you can roll it over from a traditional to a Roth later. You will have to pay your marginal tax rate to the IRS when you convert to a Roth.

The advantage of an IRA is that you can choose any combination of investments vehicles that you want... you are not constrained by what the company's 401(k) offering are.

[SleeplessMommy]

I would also suggest Vanguard ... lowest expense ratios in the industry. They have lots of info on the web site about how to invest. I mostly do the "target retirement 2025" (or whatever) accounts - you choose the year and Vanguard adjusts the risks accordingly.

[McFeelings]

Vanguard IRA. Pick a fund that has the same strategy as your current 401K (i.e. mix of growth and income, etc.). It is just a matter of paperwork that takes about an hour to read, complete and mail.

[shelbean91]

Why Vanguard and not Wells Fargo, who is currently handling it? I used to have a 401k through Vanguard and they were good, but I'm assuming 401k and IRA handling would be done differently b/c of the company aspect, right?

His 401k is pretty decent in terms of options and I think we have a good mix, but I've never chosen stuff outside of certain parameters.

[mightymoo]

Originally Posted by velochic

IThe advantage of an IRA is that you can choose any combination of investments vehicles that you want... you are not constrained by what the company's 401(k) offering are.

:

You are better off shopping around and rolling it in an IRA. If you leave it with the current employer, you are tied to their offerings, if you wait and roll it into the next employer, you are tied to what they choose, this is your chance to have more control.

This is also what we did when my husband and I left the company we worked for. So he now has the IRA we rolled his previous 401k into and a 401k with his current employer. If he leaves this employer, we will roll his 401k into the IRA.