Money Matters
Hummingbird125
member
Dear Community,
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
newbie 401k question
Hey guys! So, I don't know much about finances, and I have no idea what do do about my current situation. I am switching jobs next week. I have a 401k with my current job, and I have about $9k in it. My new job has some sort of pension plan, but I can't take part in it until I've been there for a year. What do I do with my 401k for now? It's through Vanguard - can I just leave it alone for a year, or is that stupid? I read that if I roll it into a Roth IRA, it will cost over a thousand dollars in taxes. I am 26 years old and won't need this money for a while, but I just want to make sure I'm doing the right things now...
Thanks in advance for any advice!
Re: newbie 401k question
You have a few different choices.
1. You can leave it where it is. There's no harm in that if you are satisfied with the investment mix available and the fees, etc.
2. You could roll it over into a Traditional IRA. With this, it gets the same tax treatment as the 401k (taxes taken out at retirement).
3. You could roll it over into a Roth IRA. You would have to pay taxes on it as you already know but withdrawals at retirement would be tax free.
4. You could wait and roll it into your new company's plan if they have something similiar and accept rollovers.
Personally, if I would probably roll it into a Roth IRA and pay the taxes if I could afford it. The tax free growth is too tempting for me.
If you couldn't/didn't want to swing that, I would probably just leave it where it was. Vanguard is a trusted company with low fees, so it would probably be just fine there.
Good layout of the options.
I would agree. If you can swing it, roll it into a Roth.
Unless you have issues with the investment mix/returns, you can always leave it where it is until you are eligible to join your new employer's 401K plan and roll it over (if that is an option).
I had an old 401K over $100K from a job many years ago. I left it where it was until the options they had available were so miserable I couldn't afford to lose any more money. I rolled it into my current employer's plan and it's doing very well, LOL.
Or, you can do what the others have suggested. Ask the HR department at your new employer if a roll over is even an option.
I would roll it over to a Traditional IRA. If you cannot afford to convert to a ROTH IRA - do it over time - Maybe 3K a year?
For this year - do a ROTH.
This. It probably makes sense to roll it over into your new job's 401k once you're eligible (assuming you can do that roll-over). But whatever you do, you should definitely still be saving this year, and a ROTH is a great place to put your individual retirement savings.
"You know you're in love when you don't want to fall asleep because reality is finally better than your dreams." - Dr. SeussI have Vanguard accounts. I rolled over my 401K money when I became a SAHM. Just so you know, Vanguard will call it a Rollover IRA, but it is like to a traditional IRA. If you call them, Vanguard will do all the paperwork for you or at least walk you through the steps. They are very helpful.
I would do a Roth if you can or roll it over so you can have more control over it and won't have to deal with bs if your old employer goes belly up.
I ditto PPs about Vanguard. It's a great company. I would leave the account with Vanguard, BUT I would rollover the 401(k) into a Traditional/Rollover IRA. Basically it's moving the account from the employer's plan into your own. This is exactly what I did with two prior jobs.
And, I also agree with PPs, for the year that you are not part of the new employer's retirement plan, you can still save for retirment by way of a ROTH IRA. When/if you do the rollover you can also have them set up a ROTH at the same time. You can also have them set up auto debit so the retirement savings money comes out of your checking account each month automatically.
I agree with everyone. You'll pay taxes on what you've contributed no matter what. Rolling it to a Roth will just have you paying taxes sonner than later. My advice of going Roth or Traditional depends on your tax bracket.
Overall, roll it over into something. You'll have more investment choices, more control over your money. If something happens where you need money there are benefits to taking money from your IRA principle than it is to take out a 401k loan.