Where should I move my 401(k) account from my past employer?
I set up a 401(k) account through Merrill Lynch with my past employer. Do you have any suggestions for places I could move it?
I'll bet this question provides the most responses. I'd add my firm to the scramble.
However, some basic questions need to be addressed. If you are married, is your spouse still working. What other asssts do you hold. And of course, your risk profile. Matching your goals and ability to accommodate portfolio fluctuation is important.
I would seek an asset manager who operates on a fee only basis. Commission based advice provides an incentive to increase the transactions in a portfolio unnecessarily.
An IRA Rollover account will satisfy requirements and avoid a taxable event. Most Registered Investment Advisors can accomplish this transfer for you.
So can We!
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If you are working with a current advisor (my custodian is Charles Schwab) then they would help guide you on that. If you are working by yourself, then you can use any of the discount brokers like Charles Schwab, Fidelity, Vanguard etc. I think Fidelity and Charles Schwab are currently the lowest priced
Most employers offer four basic choices to departing or retiring employees:
- Leave the money where it is.
- Withdraw the money in a lump sum. A lump-sum distribution can trigger adverse federal and state income tax consequences and the distribution will be taxed to the employee as current income and the 10 percent early withdrawal penalty may apply.
- Roll the funds over into an IRA.
- Transfer the money to another employer’s retirement plan. If you are still working and want to delay taking required distributions, you can do so beyond age 70½, provided you continue to work for the employer maintaining the plan.
Keep in mind that these options are not mutually exclusive as you may make one choice for part of your plan assets and another choice for the remainder.
It is more common for you to move your retirement plan to either another retirement plan or an IRA. Some of the reasons individuals move their workplace plan assets would include (although if your vested account is less than $5000, the plan may cash out the ex employee's account):
- To consolidate retirement plan assets in an IRA.
- If you want to work with your personal financial professional.
- In order to have a broader choice of investment alternatives.
The most common type of rollover involves transferring funds from a qualified retirement plan to an IRA and typically occurs when an employee leaves a job or retires. When funds are rolled over, the account continues accumulating on a tax-deferred basis because the funds are simply moved from one retirement account to another. If done properly, no taxes or penalties apply. And, there is no dollar limit on the amount that may be rolled over.
The first thing you need to do is to roll it into an IRA Rollover directly. You almost never want to roll it into your new 401k for a multitude of reasons I won't go into here. But where to set up the IRA Rollover depends upon if you are going to manage yourself or have a money manager do it for you as they will have custodians they use. If you are going to self-manage, there are numerous discount brokerage firms like Schwab, TD Ameritrade, Fidelity etc.. that are suitable. I would not use a premium brokerage with higher fees. TD Ameritrade has an excellent trading platform especially with Think or Swim and Charles Schwab's excels in customer service. So it depends upon your strategy and goals.
Hope this helps and best of luck, Dan Stewart CFA®