What should I do with my 401k?

Question

I left my old job and started my own business 4 years ago. My 401k is still there! I have had numerous banks and investment firms shouting give us your money! I am 47 years old, struggling to make the bills with the slow economy. Its ok eating Cherio's for now but I don't think I can chew on them in my golden years. I have asked my accountant about this and he sends me information on IRA's. They remind me of buying a new car, you get different packages with different options. Then when you get it home you find a blank spot on the dash where the option you wanted should have been!

Answer 1

The old 401 doesn't even have all the options you want ( new car analogy )...log on to Fidelity and get rolled over into a self-directed IRA... then you will have ALL the options you need to improve the total balance in your " Cheerios" account.

You've got at least 13 years to work with... a decent portfolio could double two, three or even four times in that time.

Make a couple of solid cautious investments with most of the money...but " shoot for the moon" with about 20% for three years or so...get into some " sector funds" that have reasonably decent outlooks... " materials" , " emerging mkts", even a little " energy" ( or alt energy).

ANYTHING is better than leaving it lay there...doing little to " change your diet"... Don't be sitting around at 70 eating Ramen noodles because it was " just too much trouble" to put a little effort into something soooooo simple.

Answer 2

For business owners there are better options than an IRA.  Look up IRS publication 560

Answer 3

Fire your accountant...he should have been more persistent in " nagging" you. Has that 401 " doubled" in those four years ?..it easily could have !!  

Don't be quibbling about details of the IRAs.. just get off the pot and do it.

In 15 years, the government won't be able to help anyone at all...make definite plans to take good care of yourself !!

...and if somewhere down the road your business makes some better " bill- paying" money...also open a ROTH IRA and get a little into that...working on a second ( tax-free) income stream in those golden years.

Answer 4

It's usually not a good idea to leave your 401K with your employer when you leave the company, because most employer-sponsored plans have limited investment choices.  A self-directed IRA rollover account gives you access to practically every mutual fund out there, plus a few other investment vehicles that employer-sponsored plans don't.

Now, who to 'give' your money to?  You can make all your own choices yourself, or you can pay someone to do it for you.  Naturally, everyone wants to manage your money for you.  Some of them are good and very qualified and some are sharks, and it's hard to know the difference sometimes.  My advice - find a fee-based financial advisor and avoid the commission-based brokers.  The brokers will sell you load mutual funds and other investments that give them an upfront commission.  These funds and investments also have higher management fees than no-load investments.  You don't have to make money for the broker to make money.  Fee-based advisors charge a small percentage of your investment portfolio on an annual basis (paid quarterly) that doesn't immediately eat up a large chunk (5% or more) of your capital, money that is no longer working.  The fee people have a vested interest in seeing that you do well - the more money you have, the more they are paid.

If you don't trust anyone but don't know what to do yourself, here is what I suggest:  Roll your 401K over into a self-directed IRA with Charles Schwab.  Schwab's expenses are low, and you will have access to most every mutual fund out there.  Be sure to buy only no-load funds.  If you don't know where to start, buy exactly what you have in your work plan now - you may even be able to directly transfer what you have to the new account.  If any of them are load funds (the load may have been waived for the employer-sponsored plan), don't buy them and look for a similar no-load fund to replace it.  Then start studying mutual funds on Morningstar and elsewhere to learn how to invest your own money.

I use a fee-based advisor.  He's a professional, I'm an amateur.  He understands asset allocation, which is crucial.  I understand it somewhat, but the time I'd be putting into learning is better spent doing what I do to make a living, so I leave it to the pro.

Answer 5

donate some money to china to build school.

Answer 6

Wow! I really wanted to answer this, but I think the combination of " Mrs.Clean" and " Erin K." did it better than I would have. ( I'm impressed...you should be, too.   Seems someone cares ! ? ! ?)

Answer 7

The first thing you have to understand is that your golden years are just like your first years; you still will need cash!

With that said, you probably didn't know that there are Literally thousands of options available to you now, that will make you a killing in the market place.  Did you know that some of the best plays in the market aren't even open to you by your broker?   It's true!  Brokers are not allowed to even talk about certain types of trades and investments.  Why do you think things like option trading and forex investing and commodities are off limits when you talk to your broker?  And yet, this where some of your best money is made!  There are some people who have retired, and living their golden years, who are very good at both styles of trading.

With that, I would open up an accoun with a very good broker, such AS  www.sharebuilder.com and trade in one of their etf funds. You are not going to leave it there, but this is a good resting place for now. Then, I would take the monthly income from this fund and pay some bills with it. Next, I would go to this site WWW.DAILYWEALTH.COM and subscribe to their daily newsletter. It's free so don't get scared. Then I would sit back and learn everything I could about DAILY income and trading that will make me some real money in the market.

When you are comfortable with that, I would sell off the ETF and use the money to trade like I had learned to do!

Just for the record, ANY investment can become an IRA. You don't just have to take what your employer or broker offer you. Simply set up the account, trade from it and they will take care of the paper work and tax issues!

I was once bogged down at a desk as a broker-advisor and trhis is excellent the way I live now!

Answer 8

Your accountant is right - roll it into an IRA.  You then have total choice of what investment to use.