Is there a benefits to keeping money in a 401k account after the job is terminated?
November 1, 2011 1:39 PM Subscribe
I have $1000 in a 401k from a job at which I no longer work. The Personal Rate of Return right now is at -40%. Should I still roll this out into an IRA account or is there a benefit to keeping it in that 401k account?
There is no benefit I know of to keep it there. If you roll it over into an IRA, it won't incur any kind of tax problem if that's your concern
posted by RustyBrooks at 1:48 PM on November 1, 2011
posted by RustyBrooks at 1:48 PM on November 1, 2011
Roll it over. It's easier to manage your 401 stuff in one place and you might get breaks on fees for a larger balance.
posted by rhizome at 2:14 PM on November 1, 2011
posted by rhizome at 2:14 PM on November 1, 2011
401ks are pretty much an investment scam anyway, taking something that used to be a guaranteed return (i.e. a company pension) and turning it into a chip for Wall Street gamblers. Get that money into an IRA, definitely.
posted by Strange Interlude at 2:14 PM on November 1, 2011
posted by Strange Interlude at 2:14 PM on November 1, 2011
As it is a former job's 401k, this amount will not be added to in anyway.
As such you owe it to yourself to roll it over to an IRA.
Rate of Return doesn't matter much when the fund isn't even going to be a place where new funds are not going to anyway. RoR for any investment based fund will recover with the markets and the economy. It is very short-term to see that and think "I have to move it now!"
posted by Bodrik at 2:33 PM on November 1, 2011
As such you owe it to yourself to roll it over to an IRA.
Rate of Return doesn't matter much when the fund isn't even going to be a place where new funds are not going to anyway. RoR for any investment based fund will recover with the markets and the economy. It is very short-term to see that and think "I have to move it now!"
posted by Bodrik at 2:33 PM on November 1, 2011
Short answer: yes. (And I would recommend Vanguard wholeheartedly as a home for your IRA--but you will need to find a fund that accepts a minimum of $1,000. Some have higher thresholds e.g. $5,000.)
Longer answer: For $1,000 it's not such a big deal but note that if you don't have an existing IRA, when you roll this into an IRA you are creating an IRA with pre-tax funds. This is not an issue--everyone does this when they roll over.
You should be aware though that if you are ever earning above the income limits that entitle you to be able to contribute to a Roth IRA (to which you should contribute if you possibly can), then it affects your ability to be able to perform a backdoor Roth IRA. In a nutshell, to perform a backdoor Roth you pay post tax dollars into an IRA and then convert it to a Roth immediately. If you do this when you have any pre-tax dollars in any IRA then you pay tax pro-rata on the money you roll into the Roth.
But still--I would roll it over.
posted by NailsTheCat at 2:35 PM on November 1, 2011
Longer answer: For $1,000 it's not such a big deal but note that if you don't have an existing IRA, when you roll this into an IRA you are creating an IRA with pre-tax funds. This is not an issue--everyone does this when they roll over.
You should be aware though that if you are ever earning above the income limits that entitle you to be able to contribute to a Roth IRA (to which you should contribute if you possibly can), then it affects your ability to be able to perform a backdoor Roth IRA. In a nutshell, to perform a backdoor Roth you pay post tax dollars into an IRA and then convert it to a Roth immediately. If you do this when you have any pre-tax dollars in any IRA then you pay tax pro-rata on the money you roll into the Roth.
But still--I would roll it over.
posted by NailsTheCat at 2:35 PM on November 1, 2011
This thread is closed to new comments.
It was also nice being more in control of the account instead of having to go through the human resources people at my old employer.
posted by exogenous at 1:44 PM on November 1, 2011