7 Replies Latest reply on Aug 9, 2016 9:46 AM by sherylbug

    Roll-Over to 401K or IRA?

    tjcs

      This may be too specific a question, but I would appreciate your thoughts:

      I have some funds (c. $300K) in a special retirement account which I can roll over by July 1 to either

      1. an existing 401K or
      2. a traditional or Roth IRA

      (or I could take the cash payment... which doesn't seem wise).

      I will be fully retired on July 1 at age 66.

      So, my question is, which is the better choice: add to the 401K or add to my traditional IRA (or some other choice).

      After retirement, I plan to take 3-4% from the existing 401K and IRA and other investments. This will add income to my pension and keep me close to my current income. I expect a 15% Fed tax rate and no state taxes on my income in retirement. Expected expenses will be reduced a bit. [I do plan to move IRA funds from traditional to Roth over the next few years in anticipation of RMD at 70 as long as I can keep tax rate down.] Thanks for any ideas!

        • Re: Roll-Over to 401K or IRA?
          sherylbug

          Actually, I think the question is not specific enough in some ways.  Plus the fact that nobody really should be giving you that kind of advice here.  Most of us aren't professionals and this is a complex question.  It depends on the specifics of the plans among other things.  Some 401k plans have high costs and limited/bad choices (a few years ago I was in a 401k plan with almost nothing but front-loaded high-cost funds).  But whether an IRA would be better depends on the IRA.  An IRA in a bank investing in CDs would be a completely different animal compared to an IRA at a low-cost brokerage with non-loaded mutual funds.

           

          The question of whether to do a regular IRA or Roth IRA also is complex.  You really need to find a good financial advisor who doesn't work on commission (which means you're going to have to pay a fee for the advice). 

           

          Also, you say you *can* roll over the money but that implies you don't necessarily have to.  I have a collection of IRAs, Roth IRAs, 401ks and 403b accounts floating around.  I left the 403b job a lot of years ago but decided not to roll it over to the 401k at my new company because 1) it was a lousy 401k and 2) 401k loans must be paid back ordinarily when you leave the company but my 403b didn't have that requirement.  I know that taking out loans on retirement accounts is not recommended, but it's good to have that option in case it's needed.

            • Re: Roll-Over to 401K or IRA?
              sherylbug

              Thanks to a posting about the benefits of 403(b) accounts, I found out that if you roll over your 401(k) into your current 401(k) and are planning to work past 70, minimum distributions are deferred as long as you're still working at the place where you have the 401(k) (assume 403(b) is the same). 

               

              Be sure and check with a reliable source before acting on this information.  But when I originally posted I couldn't think of a reason not to roll over into an employer's 401(k).  This would be one.

            • Re: Roll-Over to 401K or IRA?
              Susanna144

              I agree with Sheryl's general point that the only answer we can really give is, "it depends" but I am biased in favor of you rolling it over to a Regular IRA, preserving the tax-deferred property, but gaining freedom of choice, and hopefully also simplifying your financial life.  The TERI fund is probably uniquely managed and has a special set of obscure rules associated with it.  For example 403b accounts have slightly different RMD requirement than regular IRAs do. My Mom learned this the hard way.  Because of her experience, I plan to roll over my 403b to an IRA when I retire. Having many kinds of tax-deferred retirement accounts and many different investment houses complicates your life at tax time, and the older you get the harder it is to deal with complexity.  The freedom part means you get to select an investment that is suitable to your particular needs, and you probably can find investments that are lower cost, higher yielding, and/or safer than the TERI investment, whatever that is.   I am assuming here that you are capable of making your own selection of investment.  We certainly cannot make specific suggestions about that, TIAA doesn't permit that sort of discussion on these forums.

              • Re: Roll-Over to 401K or IRA?
                JerryD

                The previous posters make good points. I would support the idea of consulting with an advisor before any irreversible moves.

                 

                One piece of information that is missing is whether any moves would be within TIAA or whether other brokerages are involved. This speaks to the availability of investment options. If you are thinking at all about an annuity then TIAA is one of the best from what I can gather. I suggest that you visit the TIAA-CREF choice on the morningstar.com Discuss tab where very knowledgeable TIAA participants are waiting to discuss and suggest.

                 

                One other factor you should consider is what the costs of each choice is to you. This was touched on above. For instance, TIAA has a graduated cost structure for various types of accounts and size of the organization providing you your retirement account. The availability of ETF's at the brokerage can greatly reduce the investment costs for your retirement funds.

                 

                So as implied above, don't think it is a waste of time or a reasonable amount of money to seek out advice. Ask friends, family, lawyers, CPA, etc. for good advisor recommendations. The Internet can help to educate you. If TIAA is involved, also seek their advice with a meeting if possible. Your HR department may even provide some suggestions if asked.  GOOD LUCK!!!!!    :-)))))

                • Re: Roll-Over to 401K or IRA?
                  tjcs

                  Thank you all (sherylbug, Susanna144, JerryD) for your replies!  Very informative and clear. One idea not mentioned that intrigues is me is so-called "robo-advisors." Betterment is an example with the advantage of low fees and regular adjustment of one's investments based upon goals. But I also remain fond of TIAA, so my ultimate decision is to roll the cash to a traditional IRA...somewhere...and meanwhile identify a good advisor.

                    • Re: Roll-Over to 401K or IRA?
                      JerryD

                      I personally hold any automatic investment strategy as potentially dangerous. One needs to regularly monitor the results and the investment environment and make changes if some new investment scenario arises (or at least "new" in your experience). Just remember the dot.com recession, the housing recession of 2008, etc. where most boats sink and one needs to protect principle for an extended time or face a long recovery period. Those close to retirement or in it have little time to recover.  GOOD LUCK!!!  :-))))