What to do with my IRA?

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LifeExplorer
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What to do with my IRA?

Post by LifeExplorer »

So I need to roll over about $300K 401K from my previous employer into an IRA account.

What should I do with that money once it’s in my IRA? What would you purchase? I am in my 50s and have plenty of other investments.
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retired@50
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Re: What to do with my IRA?

Post by retired@50 »

LifeExplorer wrote: Thu Mar 23, 2023 11:24 pm So I need to roll over about $300K 401K from my previous employer into an IRA account.

What should I do with that money once it’s in my IRA? What would you purchase? I am in my 50s and have plenty of other investments.
Without any other context, I'd say invest it according to your desired asset allocation. 60/40 or whatever you've chosen for your stocks / bonds / cash percentages.

If you want specific advice, consider posting your portfolio details in the Asking Portfolio Questions format.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Metsfan91
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Re: What to do with my IRA?

Post by Metsfan91 »

LifeExplorer wrote: Thu Mar 23, 2023 11:24 pm So I need to roll over about $300K 401K from my previous employer into an IRA account.

What should I do with that money once it’s in my IRA? What would you purchase? I am in my 50s and have plenty of other investments.
Why not buy same kind of fund in the IRA? If I was OK with the funds in 401K, I'll hold the same kind of funds in IRA and maintain same allocation.
"Know what you own, and know why you own it." — Peter Lynch
mhalley
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Re: What to do with my IRA?

Post by mhalley »

Why do you need to roll it over? If you do, you can’t do backdoor Roth’s going forward. Plus you might lose some creditor protection.If you have reasonable expenses in the 401k, you might just keep it there. If you have plenty of other investments, you invest it according to your overall asset allocation, with bonds going in the 401k as much as possible.
You could always put it in an index based target retirement fund, or in the 3 fund portfolio.
Topic Author
LifeExplorer
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Re: What to do with my IRA?

Post by LifeExplorer »

mhalley wrote: Fri Mar 24, 2023 12:25 am Why do you need to roll it over? If you do, you can’t do backdoor Roth’s going forward. Plus you might lose some creditor protection.If you have reasonable expenses in the 401k, you might just keep it there. If you have plenty of other investments, you invest it according to your overall asset allocation, with bonds going in the 401k as much as possible.
You could always put it in an index based target retirement fund, or in the 3 fund portfolio.
Back door Roth IRA is another topic.

I can leave it there.

Some companies would charge a few hundred dollars maintenance fee each year.

I can have more control over the investment I guess. I was thinking of buying SPY and QQQ.
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arcticpineapplecorp.
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Re: What to do with my IRA?

Post by arcticpineapplecorp. »

LifeExplorer wrote: Fri Mar 24, 2023 11:28 am I was thinking of buying SPY and QQQ.
is that how it was invested in your previous employer's plan?

if yes, ok.

if not, why was it ok to be invested in a different way in your previous employer's plan, but now it needs to be invested differently?

that's the question previous posters are asking.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Topic Author
LifeExplorer
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Re: What to do with my IRA?

Post by LifeExplorer »

arcticpineapplecorp. wrote: Fri Mar 24, 2023 11:33 am
LifeExplorer wrote: Fri Mar 24, 2023 11:28 am I was thinking of buying SPY and QQQ.
is that how it was invested in your previous employer's plan?

if yes, ok.

if not, why was it ok to be invested in a different way in your previous employer's plan, but now it needs to be invested differently?

that's the question previous posters are asking.
In the 401K account, the only option is to use their Retirement at X Year packages. I don’t even know what is in the package.
Doctor Rhythm
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Re: What to do with my IRA?

Post by Doctor Rhythm »

Unusual that a 401 only had target date funds as options, unless maybe it offered some kind of linkage to a brokerage with other offerings.

We cannot make recommendations without knowing more about your financial situation and risk tolerance. Your prior posts seem to indicate a lot of disparate ideas and beliefs (everything from a dividend portfolio to the speculative investment-that-must-not-be-named), so it’s difficult to gauge what makes sense for you.

Here’s the template for asking portfolio questions:
viewtopic.php?t=6212
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arcticpineapplecorp.
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Re: What to do with my IRA?

Post by arcticpineapplecorp. »

LifeExplorer wrote: Fri Mar 24, 2023 5:17 pm
arcticpineapplecorp. wrote: Fri Mar 24, 2023 11:33 am
LifeExplorer wrote: Fri Mar 24, 2023 11:28 am I was thinking of buying SPY and QQQ.
is that how it was invested in your previous employer's plan?

if yes, ok.

if not, why was it ok to be invested in a different way in your previous employer's plan, but now it needs to be invested differently?

that's the question previous posters are asking.
In the 401K account, the only option is to use their Retirement at X Year packages. I don’t even know what is in the package.
thanks. how long were you in the 401k target date fund? You could just stay in a target date retirement fund now that the money's in your IRA. That's one idea.

The target date holds all the stocks in the world, which means whatever stocks are in SPY and QQQ will also be in the target date retirement fund.

The difference between your choice of SPY and QQQ and a target date fund is that the former is only stocks while the latter is stocks and bonds. The amount of bonds depends upon the year contained in the target date fund. A 2065 fund would have less bonds than a 2025 fund for instance. The closer you are to the target date, the more fixed income (bonds) because you want less risk than if retirement is 40 years away.

Make sense?

What percentage of fixed income/bonds you want to have is based on your need, ability and willingness to take risk.

Read more about that here:

How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/

the answers to those quesions will get you to your asset allocation. your asset allocation is important because it generally tells you your risk and return. Typically higher allocations to stock are risker and have the potential for greater returns (while having to deal with greater losses). Look how different allocations of stock have behaved in the Great Recession:

Image

that's the risk continuum.

here's the return continuums (and risk too):

https://investor.vanguard.com/investor- ... allocation

what other questions do you have after reading all that?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Navillus1968
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Re: What to do with my IRA?

Post by Navillus1968 »

LifeExplorer wrote: Fri Mar 24, 2023 11:28 am
mhalley wrote: Fri Mar 24, 2023 12:25 am Why do you need to roll it over? If you do, you can’t do backdoor Roth’s going forward. Plus you might lose some creditor protection.If you have reasonable expenses in the 401k, you might just keep it there. If you have plenty of other investments, you invest it according to your overall asset allocation, with bonds going in the 401k as much as possible.
You could always put it in an index based target retirement fund, or in the 3 fund portfolio.
Back door Roth IRA is another topic.

I can leave it there.

Some companies would charge a few hundred dollars maintenance fee each year.

I can have more control over the investment I guess. I was thinking of buying SPY and QQQ.
If you're considering creating a rollover IRA with $300k of pre-tax money, Backdoor Roth IRA is 100% part of the conversation, unless you know going forward you will have access to front door/normal Roth IRA contributions due to MAGI remaining under the limit.
If you do the one thing (rollover IRA), the the second thing (Backdoor Roth) is moot, so choose wisely.

In order to give coherent advice for your situation, there's a fair amount of missing info-
  • Do you have a new job &, if yes, does your new employer offer a 401k (or similar) workplace plan?
  • Is your MAGI close to/over the Roth IRA income limit- MAGI $138k filing SIngle or $218k MFJ?
  • How close are you to retirement? Age 51 is a different place than age 59, for most people. If you are 55 or over, the rule of 55 would let you withdraw penalty-free from your last employer's 401k if you wanted to start early retirement. This option doesn't exist in an IRA.
  • How high are the annual fees & mutual fund expense ratios in your old 401k?
If the fees & ERs are too high & you aren't happy with the funds offered, then you should either-
1. Do a rollover to your new employer's 401k plan (assuming there is one & you find it suitable). This option preserves your backdoor Roth option. Or-
2. Do a rollover to a Trad IRA. If your MAGI is too high for normal Roth IRA, you need to balance the fees & ER you will be saving in the old 401k against the loss of Roth IRA contributions for X number of years until retirement.
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ruralavalon
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Re: What to do with my IRA?

Post by ruralavalon »

retired@50 wrote: Thu Mar 23, 2023 11:28 pm
LifeExplorer wrote: Thu Mar 23, 2023 11:24 pm So I need to roll over about $300K 401K from my previous employer into an IRA account.

What should I do with that money once it’s in my IRA? What would you purchase? I am in my 50s and have plenty of other investments.
Without any other context, I'd say invest it according to your desired asset allocation. 60/40 or whatever you've chosen for your stocks / bonds / cash percentages.

If you want specific advice, consider posting your portfolio details in the Asking Portfolio Questions format.

Regards,
+ 1, you have not provided enough information.

What fund are you currently using in the old 401k account? Please give fund name, ticker and expense ratio.

If the old 401k offers good funds with low expense ratios, and has no account maintenance fee or only a small one, then it may be best to leave the old 401k account where it is.

If your current employer has a plan which offers similar or better funds with similar or lower expense ratios, and does not charge plan participants administrative fees or only small fees, then it may be better to rollover the old account into the current employer plan.

In an IRA I would personally use a target date fund or other all-in-one balanced fund with a low expense ratio.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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