Ask MetaFilter questions tagged with 401K

401k overpayment dilemma

Anonymous — Thu, 24 Dec 2009 10:48:33 -0800

I overpaid into my 401k. What can/should I do? I switched jobs last year, after maxing out my 401k. I signed up for withholdings at the new company, which has a matching program, so for the last couple months of the year I had additional contributions from that.

A few months later, I realized that I'd overpaid. Looking into it, it seemed the straightforward answer was to amend one of the W-2s and get the plan to refund me the overpayment. The problem is, the first company basically refused to do it, and in the second company I'd give up all their matching funds.

I'm hoping that, since this is just a tax issue, I can simply pay taxes on the overpaid amount directly to the IRS (which might allow me to keep my matching funds, hence the anonymous question -- I don't feel like it's cheating, but I can see how others might disagree). I've also seen some suggestions that the IRS itself should have picked up on this and sent me a 1099-R to make this correction. Any experts out there willing to weigh in?

Can I use a retirement fund to buy out startup stock options?

Anonymous — Tue, 17 Nov 2009 19:25:12 -0800

I'm about to leave a startup to go to a different company, and I need some help figuring out how to handle my stock options. I currently work for a startup at which I have accrued X stock options at a price of $Y. From the date I leave, I have 90 days to buy out the options. I don't currently have the cash on hand to do this, but I do have approximately X*$Y in my 401k, which I would have to roll over either to the new company's 401k or to an IRA.

I think I heard that you can buy out options like this in a retirement fund, but if this is true I need to better understand the details and mechanics of it. Is anyone familiar with this situation who can tell me what to look for? Are there specific types of IRAs or anything like that which would give me more flexibility? What do I need to know?

For what it's worth, I do believe the startup will succeed; I'm leaving because my job there is not what I want. Also, I'm in my mid-twenties. So I am not concerned about using my (currently minimal) retirement fund to buy these out.

Hit the 401k to start a business?

wezelboy — Thu, 01 Oct 2009 15:17:02 -0800

I'm thinking about cashing out my 401k to help start a business. I know I will pay a penalty, and that what I take out will be taxable income, but I expect my business to post a loss the first year that would offset most of (if not all) of this income. Would I still have to pay taxes on all of the 401k money? The business I am planning will take a while to get going, and I expect a significant loss the first year- probably more than I take out of the 401k.
I'm also wondering if rolling over into an IRA and then pulling the money out might mitigate some of the penalty and/or taxes.

What to do with a leftover 401k account?

bookdragoness — Sun, 30 Aug 2009 17:27:27 -0800

What to do with a 'leftover' 401k account? I worked as an intern/co-op for a cumulative 9 months during college at a company that had 401k matching, which I took advantage of while I was there. I've since graduated and moved on to work for another company that does 401k matching and have one there as well.

I have about $1500 in the first 401k account that has been sitting there for the last few years but that I tend to forget about. I am fully vested and don't want to just withdraw it and pay the tax penalty.

I've done basic research into what to do with a 401k, so know my options, but don't really know what makes more sense to do.

Should I, given the market:
(A) Leave it where it is for now
(B) Roll it over into my current 401k
(C) Roll it over into a traditional IRA (and if so, recommendations for an IRA company?)
(D) None of the above (and if so, what?)

I am 24, female, in Arizona, and recently got married (but don't plan on having kids for a couple more years), if that helps.

And yes, YANATP/YANMTP (tax professional). Thanks in advance for the Hive Mind's input!

Finding "hidden" things.

joshgates — Sun, 16 Aug 2009 19:37:18 -0800

How do you locate the safety deposit box and 401k/IRA of a deceased relative who you've had little contact with lately? The situation is a bit unusual and since I'm having trouble coming up with the answers on my own, I thought I'd query the hivemind.

A few years ago my parents got a divorce, my dad took it particularly hard to the point where he pushed away anyone that he had contact with, including his family, and moved to China. A couple weeks ago he passed away over there from a sudden illness and I've been busy with making arrangements for what needs to be done.

Tonight I was going back through the few emails we'd sent to each other over the last couple years and in several of them he'd referenced a safety deposit box and a 401k plan that he'd rolled over into another one to keep away from my mother. I suspect that he'd actually put it into an IRA as at the time he didn't have a job that offered a 401k.

The only idea that I've been able to come up with is to call all the banks in the area and inquire. I'm quite willing to do that should no other options be available.

Any suggestions and ideas are much appreciated.

As a side note, a few months ago he actually remarried, his wife is unable to get a visa to come back over to the US and I'm not sure how that'd affect things.

How can I get at my UK pension now that I'm leaving the country?

cubedweller — Mon, 13 Jul 2009 08:40:48 -0800

I moved to the UK in January of 2008 from the US. I've been paying into a pension since I started and there's now £10,000 in there. I (foolishly) assumed that it was like a 401k and now that I'm leaving the UK, I could take the money out. Wrong. Apparently I can't touch it until I'm 55. Please tell me that I haven't pissed away £10k and there's some way to get this money.

How do I do this right?

Anonymous — Tue, 07 Jul 2009 09:55:27 -0800

I want to do savings/401k right this time - how do i do that? After going through layoffs back in February and running through a good bit of my savings – I’ve landed a brand new job that almost doubled my salary – I want to do 401k/savings right this time to save for the future and be prepared for an unexpected/vacation/life events.

The vital stats

Current Salary
- ~70K+bonus
Current Assets:
- Savings ~500 (ING at 1.5%)
- Checking ~4000 (schwab at 1%)
- Rollover IRA (~2000 in a target date (2050) fund)
- Investments (~6000 in various blue chip stocks) – doing ok – back in the black.
- No debts excluding credit cards (with cash back) which I pay off in full every month

Current Expenses:
- Rent 840 a month
- Misc expenses ~500 a month
- Thinking about going back to school part time in the near future – but my company has an education reimbursement program so I’d likely only be on the hook for 1000-2000 a year.

What I’m currently doing:
- Contributing 6% to the company 401k (has a 6% match)
- Transferring random bits of money to my savings account.

My question is what should I be doing? From what I can tell – post expenses, taxes, and payroll contributions I’ll have ~$2000 left over each month. I’m just leaving most of my money in the checking account for now. Should I be moving x percent over to my IRA? Or just savings? Or a combo of both? Any specific tips + general financial best practices would be appreciated. I’m 25, living in NYC, and single.

Thanks all

Paying for graduate school out of your 401k. Stupid idea?

falameufilho — Fri, 03 Jul 2009 16:28:00 -0800

Paying for graduate school out of your 401k. Stupid idea? I have been working on a masters degree for some time now, paying out of my own pocket. It is not cheap, but I believe it will be worth it in the long run.

However, some extra income I was counting on to help me fund my tuition didn't materialize, so it looks like I could run out of money before I finish graduate school. I've been thinking about tapping into my 401k to cover the rest of my tuition, but I have a feeling that might be a stupid idea. Is it?

P.S.: I am not a permanent resident in the US, so student loans are not an option for me.

401K Loan Default: When is a disbursement not a disbursement?

Anonymous — Thu, 02 Jul 2009 08:22:01 -0800

I discovered today that I have defaulted on a 401K loan in the amount of $3,896.31 ... help me figure out what the penalties will be & if the confused-sounding rep at Fidelity really knew what she was talking about. I discovered today that I have defaulted on a 401K loan in the amount of $3,896.31 due to a combination of Fidelity being inept (they sent the notice to an incorrectly spelled street address) and my HR dept. giving me bad info (they told me the loan would be suspended while I was out on FMLA, but it was not). Fidelity informs me that
a) my payroll deduction payments will stop and cannot be restarted - to repay now I'll need to pay by coupon/check;
b) my defaulted loan will continue to accrue interest until paid off;
c) even if I pay it off within 60 days of the date of default (June 30th), I'll still have to pay the IRS penalties & the amount will still count as part of my taxable income.

I know you are not my tax professional but I don't have a tax professional, and can't afford at this moment to hire one, so you'll have to do.

1) Is the info I got from Fidelity correct? I'm a bit puzzled that it will both be considered a disbursement and still need to be repaid with interest. That seems like double dipping to me. I have previously (many years ago) had a 401k loan turn into a disbursement (due to end of employment) and it was just a disbursement - there was never a demand I also repay.

2) Can you help me calculate what my penalty payment will be (not counting the additional tax I'd need to pay with amount as part of my taxable income)? Will it be a flat 30%, or is it more complex than that.

3) I am expecting a large insurance settlement within the next few months. This money will not be taxable. If I put some of this not-taxable money into, say, an IRA, what (if anything) will this do to offset the tax hit I'll take for this disbursement.

Again, I know you are not my tax professional. Our finances are very tight (what with FMLA and medical bills and so forth) until the claim settles, but if I can avoid penalties by repaying within 60 days, that will be another stick to use to encourage my attorney to get things wrapped up.

Other things you may need to know: I'm in the USA. I was on unpaid medical leave for 12 weeks but have now returned to work. My employment status has not changed.

Thank you for your help.

Flexibility on Open Enrollment Dates for a 401(k) Plan

Conrad Cornelius o'Donald o'Dell — Thu, 25 Jun 2009 14:13:25 -0800

401(k) Question: I've been offered a job where new employees are eligible to enroll in what the company calls its "401(k)/Profit Sharing plan" after a year on the job. The firm has open enrollment for the plan twice a year - Jan. 1 & July 1. They've asked me to start working in the middle of next month, which means I wouldn't be eligible to participate in the plan until Jan. 1, 2011 - just under 1.5 years away. Is it worth asking if they can grant me slightly early eligibility for the July 1, 2010 enrollment date? If you have any experience with these sorts of plans, do you know if companies typically retain any flexibility in terms of enrollment eligibility? Or is this kind of thing usually set in stone in company policies or bylaws? Obviously, I'm only going to miss the July 1, 2010 enrollment date by a couple of weeks. While I can ask my liaison at the company about this, I'd like to know if my request has any hope at all before I consider doing so.

In case it helps, this is a small (~20 attorney) law firm, with its main offices in NY and NJ. I don't know where the firm is incorporated, or what structure (LLC, LLP, etc.) it is. This issue is by no means a dealbreaker (or anything remotely close) - I just want to understand it better before taking any action.

Moneyfilter: Withdraw from my 401K for my downpayment?

Anonymous — Fri, 12 Jun 2009 20:10:45 -0800

Is it a bad idea to use money withdrawn from a IRA for buying a house? I want to buy a home but I'm having trouble with the down payment and closing costs and I've got a 401K that's just kinda sitting there from my last job. I've found a older house on the market for about $45K, It needs some work done but I didnt see anything that jumped out at me as being show stoppers. I work and make a decent salary, Not quite 40K a year. My big problem is my savings amount to about $1500 in the bank and thats not enough for the 3.5% down I need or the closing costs which are estimated to be in the $3-5K range currently. My credit score is good enough to do the whole 203K loan otherwise according to my agent.

I have $31K in a 401K I cant access unless I transfer it to an IRA due to the 401K being from my previous employer, Yeah I'm dumb and should have done something about it 8 months ago when I left.

Anon because I dont want to share info about my worth with the world under my name. Throw away email 401korbust@gmail.com.

Reporting rollover from IRA to 401k on U.S. Taxes

Anonymous — Mon, 11 May 2009 11:30:42 -0800

US Tax Filter: How do I report an asset transfer/rollover from an IRA into a 401k to the IRS so that we are not taxed for the amount? I know you are not my tax advisor. I do the taxes for for myself and my husband. In 2007, he neglected to give me a tax form and I filed our taxes incorrectly as a result. The IRS just sent me a letter, and I have 3 weeks to figure this out and fill out a 1040x for that year. I would like to do this myself if at all possible.

My husband had a 401k from a previous job that he wanted to roll into the 401k at his current employer. The previous one never did very well and the current one was making money. In addition, it was a fairly small amount, just under $15,000, and we were afraid we would lose track of it throughout the years. By the time he was able to get to this, the previous company had been sold, and this 401k was converted to a simple IRA. In retrospect, I realize he should have left the money in this IRA, but the momentum was already there to get this into his current employer's plan. In 2007, he got a check from the administrators of the IRA, and wrote a check for the same amount to his current retirement plan. He had about an inch of paperwork related to this, and feeling overwhelmed, he asked his HR department if there was anything else he needed to do, they said "no" and he stuck it all in the file cabinet. Taking tax advice from his employer's HR department is not a good thing, no? Especially since they didn't know they were giving out tax advice?

We got a letter Friday from the IRS saying that this was income we neglected to report, and that we owe back taxes and penalties of almost $7000. Digging around in our files, I found a 1099-R from AIG, the previous admin of the IRA, showing a gross distribution of the entire amount on line 1, and that the entire amount is taxable, per line 2a. He found a Confirmation of Asset Transfer/Rollover from Vanguard, the admin of his current 401k, for that same amount. How should I have reported this? I am assuming that we would not owe taxes on this since 401k assets are taxable when they are cashed out far in the future. However, I can't find anything on the IRS site or anywhere else reputable about how to report this. Apparently we are the only people in the world who have ever cashed out an IRA and put the money into a 401k.

Ultimately, what I would like to do is file a 1040x the way I should have filed the 1040 in 2007, then appeal the notice from the IRS and use a copy of the 1040x as documentation as to why we don't owe the taxes.

You can also email me at whining.about.taxes@gmail.com

Hair brain or financial genius???

Carbolic — Fri, 13 Mar 2009 14:18:04 -0800

Is this a hair-brained idea? You are not my financial adviser, trying to time the market is a bad idea, etc. but I've been entertaining making a change to the way the money in my 401K is invested. I've got about 12 years to retirement at 60, I have a defined benefit pension equal to 50% of my current salary and a portable pension that should be worth about $200K by retirement. So here's the Idea... This is the current mix in my 401K:

Vanguard International Value Fund (value stocks from non-U.S. markets) 9.50%

Vanguard PRIMECAP Fund Investor Shares (large- and mid-cap growth-oriented equities) 20%

Vanguard Total Bond Market Index Fund Institutional Shares (Invests in U.S. Treasury, investment-grade corporate, mortgage-backed, and asset-backed securities.) 12%

Vanguard Total International Stock Index Fund (Diversified index portfolio of non-US stocks representing the major developed and emerging equity markets.) 9.5%

Vanguard 500 Index Fund Signal Shares 19%

Vanguard Extended Market Index Fund Signal Shares (mid- and small-capitalization stocks) 9%

Vanguard Wellington Fund Investor Shares (Portfolio emphasizing large- and mid-capitalization value stocks.) 11%

Vanguard Windsor Fund Investor Shares (Portfolio emphasizing large- and mid-capitalization value stocks.) 10%

Now for the hair-brain part. I'm considering, under the assumption that, even if the market has yet to hit bottom, over the next 12 years I will realize greater gains by putting all my eggs in the Primecap and S&P 500 Index funds.

Tell me just how stupid or overwhelmingly insightfull you think doing so might be.

No more company-funded tuition reimbursement, how to afford grad school?

etherealclarity — Fri, 13 Mar 2009 10:42:53 -0800

Company was paying for grad school, but had to cut back. I can't put off finishing my degree, but I can't afford the out of pocket expenses either. They also cut back on my 401k. I'm considering a lot of options but none of them seem pretty. What should I do? I just got word that across the board at my company, salaries are being cut 5%, 401k matching is being suspended, and the tuition reimbursement program is being "scaled back", which apparently means they'll only approve one more course for reimbursement for the rest of the year. Given the economic climate, I highly doubt these cuts will be reversed when they re-evaluate in December, and they may even get worse.

I am currently contributing (what used to be) the max for matching funds to my 401k, and am in grad school 2 nights per week earning an MBA, which my company has been reimbursing me for. The classes for this program are approx $2000 each (give or take a little depending on whether you count fees and textbooks), and my plan was to take 4 more classes this year and 4 next year, which would complete my degree. I've been working really hard to try to get my degree done as soon as possible, and for a number of reaosns, putting off classes isn't an option. I also don't have $14k lying around (my emergency fund is somewhat depleted as it is due to a recent large purchase that I chose not to finance, and I can't be sure I won't be laid off next time the cost-cutting measures come around). Saving for tuition will be much harder with the 5% decrease. There are areas I could cut back on, but not enough to save the amount I need. At the same time, I'm concerned about neglecting my 401k... I was planning to start contributing to a Roth IRA soon in addition to my 401k contributions (which I think is even more important now that the matching is gone), but with the tuition and 5% decrease, I'm not sure there will be any money left over to contribute!

I'm considering several options, including doing some freelance work, finding grants/scholarships, and/or student loans. I want to avoid loans if I can, but freelance work takes time (and between the job and school, time is tight as it is), and grants or scholarships seem to be much harder to find for graduate degrees. Do you have any suggestions for what else I could be doing to get through my degree while not neglecting retirement savings or going insane?

Should my recession dollars go into my 401k, or my wallet?

logovisual — Tue, 17 Feb 2009 15:03:38 -0800

Where is my money doing me, and the world, the most good right now: going into a 401(k), or going into my wallet and getting spent? I'm in my mid-twenties, in a stable but low-paying job that I expect to be in for a while (he said, in a fashion that he hopes does not prove ironic). I am basically living paycheck to paycheck in NYC -- not starving, but not really saving in any meaningful way whatsoever beyond my company 401(k), which has quite a good matching program. For the last couple of years, I've been paying the maximum match into my account, and had built up a reasonable little stash (about a third of my annual salary) only to, of course, watch it take a 30%+ hit over the last few months. I only have a couple thousand dollars in credit card debt, which I would like to pay down/off, but the tight squeeze for what's left over from my paycheck doesn't really allow for that.

I was rebalancing my 401(k) into some less aggressive investments today -- I know that I am young, and there'll be plenty of time for a rebound, but there's no sense in wasting money when you know the market is probably still on its way down -- and began to wonder where my dollar is doing the most good for the economy: going into investments, or going into my wallet to be spent on consumer goods? And yes, that definitely is where it would go if I reduced the percentage of my paycheck that goes into my 401(k): food, home goods, etc.

Thoughts on this matter? I am obviously loath to give up much of the "free money" that comes from a company match, but I am also loath to watch every dollar I put into my 401(k) turn into sixty-five cents when it could turn into a dollar's worth of food, or furniture, or entertainment. And on the larger scale, do I help America more by buying a new couch instead of another share of a mutual fund? Should I reduce (not eliminate) my contribution to my 401(k)? Or stick to business as usual and try to make my budget work another way? I'd like to hear some thoughts that go beyond the conventional wisdom of "you should never ever stop paying into your 401(k)," unless you can make me see that argument in a whole other way.

To Roth or not to Roth?

gnash — Mon, 09 Feb 2009 12:06:36 -0800

Should I convert my Traditional IRA to Roth IRA now or ever? What are the criteria for moving from a Traditional IRA to a Roth IRA? Is it something people suggest? Given the market downturn it seems like it might be good timing to make such a move, but the feedback I have been given is mixed, so I humbly turn to the hive mind for answers.

For arguments sake say I have over $100k and I am 30 years away from retirement. I anticipate at least 6% return a year average but believe it will be higher given history and other factors.

Does one reduce risk by investing in mutual funds held by different groups?

grouse — Mon, 09 Feb 2009 08:57:48 -0800

Does one reduce risk by investing in mutual funds held by different groups? If I invest in an S&P 500 index fund with both Fidelity and Vanguard is that better than just going with Vanguard? Or is the SIPC protection such that I need not worry about such things? Many responders to this question seemed to indicate having your accounts all in one place would be a good idea because it eases management. That is definitely attractive.

Problems with Paychex 401(k)

josher71 — Wed, 21 Jan 2009 17:25:13 -0800

Things got bad enough that I cashed out my 401(k) from Paychex recently. On the 19th of December I gave the order, and a check was sent on the 23rd. I never received it and had to wait fifteen business days before they would void it. I was then told that it would take five business days for them to void and then re-send the check. Calling on the fourth business day today to check of the progress of the re-send, I was told that that the person I spoke to before was mistaken and it would actually be 10 business days before it would be processed. Now that it is the 21st of January, it has been more than a month since I requested this money and I have made financial promises for the 15th of January thinking I would have the money to cover them. Instead, I'm overdrawn totally and my rent check has bounced.

My sense from Paychex is that there is nothing I can do about this to expedite the process. However, I'm very frustrated as it seems like they are holding my money hostage as my financial situation deteriorates. What should be my strategy when I talk to a supervisor who will call in "24 to 48 business hours"? Let me note, that two weeks ago when i called I was told that a supervisor would call and never did. I have both the name of the supervisor and the rep who I talked to this time.

How should I invest for retirement?

Anonymous — Tue, 02 Dec 2008 16:11:22 -0800

I am trying to figure out how to invest money for retirement and otherwise. I am in my late 20s, earn $55,000 annually, have no debt, and about $90,000 in savings. I am currently putting 5% of my salary into a 403(b) which is the maximum amount my employer will match. I know I should put about $20,000 into an emergency fund. I will probably leave my current city in 3-5 years. At that point I am likely to need to buy a car so I plan to keep another $20,000 in savings. That leaves $50,000. I saw an adviser from Vanguard who said that if I wanted to invest that money the best thing to do would be to max out a Roth IRA account, and then max out my 403(b) contribution and get money for living expenses out of the savings until the amount decreases. This also means I will get some dollar cost averaging through the periodic extra contribution.

The other thing to consider is that when I move I might want to buy a house, and if the money is all locked away in tax-free retirement accounts I may not be able to get to it for a down payment, or only with tax penalties. Knowing this, is it a better idea to invest the money through something

Anonymous because I don't want everyone to know how much money I make or have saved. You can write me at momoney.moproblems.08 on gmail.

Picking the right solo 401k provider

gsh — Mon, 17 Nov 2008 16:55:44 -0800

How should I evaluate prospective solo 401k providers? I have recently become an independent contractor and I'm in it for the long haul. I've done the reading about IRAs vs. solo 401k and the latter is for me: it will allow me to contribute much more money for my retirement.

Now, to pick a provider! On what criteria should I compare them?

Cashing out a 401k without Penalty these days?

ZackTM — Tue, 11 Nov 2008 14:55:38 -0800

Cashing out my 401K without penalties? Hey,

So I'm 26 and I have a good amount of debt built up from a recent job change. I really would like to cash out my old 401K from my previous employer and I heard rumors that they were going to remove the penalties for doing so soon in order to help people pay down their debt thanks to the credit crisis. Is this just a rumor, or is this going to be a reality? When can I expect to see some action on this?

Can anyone point me towards information about this stuff?

What to do with my money?

atayah — Wed, 29 Oct 2008 06:28:16 -0800

New to 403(b)s... should I do an IRA instead? I just switched to a nonprofit job and was given the option of opening a 403(b) account with a financial institution of my choice. I'm fairly young (27), so would be looking for moderately aggressive investments with low fees. TIAA-CREF seems to be well-regarded, but I'm wondering what people's experiences have been (good or bad). My last job was with a for-profit employer that handled my 401k, so I don't really have any experience with a financial institution.

I'm also wondering whether or not I should think about investing instead in a Roth IRA, which would allow me to make a withdrawal for a downpayment for a house later on. If I invested in a Roth IRA, I know I'd have to pay taxes now on the investment, but I'm wondering if it would be offset since I could invest in a house much earlier than if I invested only in a tax-deferred 403(b) account.

I know You Are Not My Financial Advisor, and my partner and I are planning to see one in the near future.

Is it possible to time a rollover?

quadog — Tue, 30 Sep 2008 16:31:34 -0800

A crazy financial question about the timing of my 401k rollover to and IRA in light of current economic events in the US. Is it even possible to time a rollover? I held a 401k at my previous employer (invested in American Funds if it matters). I filled out the requisite paperwork to get my 401k released. I received the pay out check on Friday of last week for the full amount of the 401k. My final task is to mail this check to Bank of America where it will be rolled over into an IRA. I think by default the IRA is set up to reflect the same investments I had with American Funds - though if I wanted to change that before I send the check in I think that I could. I'm running on the assumption that the check I hold in my hand is "frozen" in the sense that although the investments I held at American Funds may have dramatically dropped yesterday, the amount on the check remains fixed.

I'm in a gray area here and out of my element in terms of investment knowledge. Should I hold on to this check until Congress passes something and wait for stocks to rebound? Should I deposit it regardless of what happens? Should I change up anything at BofA before I send the check? Am I even asking the right questions?

A question about timing, my 401K rollover, and the Wall Street bailout plan.

mosk — Thu, 25 Sep 2008 08:57:54 -0800

A question about timing, my 401K rollover, and the Wall Street bailout plan. I had two separate 401K accounts at Fidelity Investments: one from my current employer, and another, larger one from my previous employer. The larger one had not been performing very well, and the fund selection available to the account wasn't very attractive. On September 12, after speaking with a Fidelity representative, I decided to roll the old account into the new one.

Here is where it gets interesting: 401K rollover at Fidelity isn't an entirely electronic process -- a fact that may be true for other institutions as well, for all I know. Instead, the old account was closed out, and Fidelity cut me an actual check for the balance and mailed it to me. The check wasn't made out to me per se, but is payable to the other Fidelity account I will be rolling into, and my instructions are to mail this check back to Fidelity. So I have a physical check for the balance of my old 401K plan sitting on my desk, and it represents a large chunk of my current retirement savings (I am 45, fwiw).

In light of the current upheaval in the financial markets and the still-undecided-but-impending bailout plan, is there any advantage to just sitting on this check for a while before I send it in to Fidelity? Would sitting on it for a few weeks or months make a difference? Would it be A Bad Idea? Obviously, the money isn't earning anything at the moment, but it isn't losing anything, either.

I am somewhat surprised to find myself with a "choice" here, and am uncertain of the best thing to do. Thanks for whatever advice you can share.

When should I change my 401K investment strategy from active to passive?

shinybeast — Wed, 24 Sep 2008 13:21:23 -0800

Given today's equity market conditions, when should I change my 401K investment strategy from active to passive? In my 401K, I'm planning to switch investment styles, moving out of diversified actively managed equity funds to diversified passively managed Vanguard equity, REIT, bond, and TIPS index funds.

The question is, when should I do this, today or when my current fund mix has climbed above the performance of the S&P 500 index? Or, should I wait until the market recovers its YTD losses. I'm using the S&P 500 as a crude performance benchmark. According to Morningstar, my mix of funds is currently underperforming the S&P 500 by 4% YTD and underperforming the funds' respective category benchmarks by 0.25%.

Currently, YTD, the S&P 500 is down 20%.

I can't quite figure out when to make my move. My fear is that if I move money into REIT, bond, and TIPS funds now, I'll lose out if the equity market makes a healthy recovery later.

Any suggestions?