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I don't know why you would cut off the title? The study is also based on investing of a windfall, not regular income.
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Nov 21, 2014 14:38
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Guy Axlerod posted:I don't know why you would cut off the title? It doesn't matter as you'll get the same results regardless of the amount you invest. That said the average person is stuck with DCA regardless since retirement accounts are normally going to invest per paycheck and for an IRA you have a cap per year.
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Nov 21, 2014 16:02
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asur posted:It doesn't matter as you'll get the same results regardless of the amount you invest. That said the average person is stuck with DCA regardless since retirement accounts are normally going to invest per paycheck and for an IRA you have a cap per year. This is what I thought until I recently found out that my company (and I assume a good chunk of others) offer True-Up matching so that you can just cap out at the start of the year and not worry about losing out on match money.
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Nov 21, 2014 23:53
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Vilgan posted:This is what I thought until I recently found out that my company (and I assume a good chunk of others) offer True-Up matching so that you can just cap out at the start of the year and not worry about losing out on match money. In this case you definitely want to max as soon as possible as the research shows, however for everyone else you need to make sure that this is the case as the 401k matching plans I've seen don't do this.
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Nov 22, 2014 01:02
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My employer does 401k true-ups, but they still really encourage you to just do regular paycheck contributions and try to get close to the max on your own. If you max out 2 pay periods before the end of the year, they'll true things up no sweat.
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Nov 22, 2014 02:10
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What's the opinion on dividend ETFs? Seems like fools gold given how they have less diversification than the broader funds, don't pay much more than a broad index fund ~ 2 percent yield and chasing simple high dividend yield often ends in tears.
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Nov 22, 2014 02:19
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etalian posted:What's the opinion on dividend ETFs? This is kind of a meaningless question because the answer depends on your needs. For someone 30 years from retirement it doesn't really make sense because you are only concerned with total return, but it might be different for someone with income needs.
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Nov 22, 2014 02:29
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etalian posted:Vanguard did a white paper study and found while dollar cost average did reduce some short term risk, in the long run it had a worse return compared to a lump sum investment. All of the arguments against DCA seem to assume the investor has a pile of money and is going to bleed it into the market over time, which is suboptimal compared to just shoving it all into the market immediately. This is a valid and fair criticism of DCA, but it also doesn't need all these charts and poo poo to make that point: it should be obvious that if you expect the market to rise, holding part of your money out of the market reduces your potential earnings. (And if you don't expect the market to rise, you should't be investing in it regardless, right?) On the other hand, I think most of the goons who come into this thread and ask about periodic investing strategies, are in the opposite position. They are planning to put new earnings into the market in the future, and want to know if they should save up a lump sum to put in when the market is primed (e.g., timing the market), or if it's ok to bleed their money into the market as soon as they have it. In this case, "the sooner the better" is the optimal strategy, which is basically DCA. Investments of lump sums should be less frequent only if you're going to pay excessive fees for more frequent investing, or if there is some other obstacle that outweighs the lost earnings from accumulating cash longer before investing it. I don't believe anyone in this thread has advocated the first case, but we do frequently talk about the second.
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Nov 22, 2014 02:35
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I think the bottom line here is, if you have money earmarked for investing, regardless of whether it's $200 or $20,000, and you don't need to avoid fees, put the money in the market as soon as you can. In the case of someone with $200, chances are they're doing that every month. If it's $20,000, then it's probably a windfall. But really, it makes no difference. Put the money in!
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Nov 22, 2014 03:37
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So, I just recently started putting money into a Roth 401k. I'm 28 years old, and each paycheck I'm putting $100 into my Roth 401k(it's the max I can put in that my employer will match), but I have some questions. I'm an Accountant, but not an investor by any means, and don't understand investing that much. I'm good with my money, but never dove into the stock market or investing by any means. Some basic questions that might be stupid(please forgive me if they are), but I don't know what it means. What kind of return should I be looking at % wise over time? I see where I'm sitting at now, based on $328 into the account(I had a 4th paycheck that was minimal that covered the days when my pay was retroactive to my promotion), I've gained about $11 of my vested amount to this day. That appears to be only 3% at this point, but I know it's still young and I'm always happy about a gain instead of a loss. Do most people distribute their funds between multiple investment funds, or should I stick to just 1? The fund I vested in is a newer one for Vanguard, and it looks like most of their funds start slow, then get a nice return, then fall off a bit. Is it safe to say I should try to follow that trend, and swap funds when they open new ones and keep going after the funds that are towards the end of their 2nd year and moving up in age? I'm looking for the least risk at this point. I have a great job, and I work hard at it. I'm young, so I have plenty of years to stick to it. I just wish I knew more about the investment world.
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Nov 22, 2014 04:50
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Bulls Hit posted:So, I just recently started putting money into a Roth 401k. I'm 28 years old, and each paycheck I'm putting $100 into my Roth 401k(it's the max I can put in that my employer will match), but I have some questions. I'm an Accountant, but not an investor by any means, and don't understand investing that much. I'm good with my money, but never dove into the stock market or investing by any means. Some basic questions that might be stupid(please forgive me if they are), but I don't know what it means. What funds do you have available to you? Can you list them + ER? I would suggest not being that risk adverse. Just stop looking at the balance frequently if it bugs you. I see my balance go up and down a few hundred every now and then in Quicken and it doesn't bug me. One of my friends texts me constantly freaking out as his index funds go up and down... The S&P500 and similar indexes go up every year over the long run. I personally expect a 8-12% annual return over the long haul.
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Nov 22, 2014 05:03
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SiGmA_X posted:Hi 28yo accountant who also gets around $100 match/payperiod! Sorry, just figured I would give a little background that might help with the questions I have as obviously with a 401k we are all planning on the future. And the match is just 50%, but I'm putting the max % in that they will match up to. I might be sounding like a terrible Accountant at this point.  These are the funds I have access to: BMO Prime Money Market(.47%) Amer Century Inflation Adj Bd(.27%) PIMCO Total Return Fund(.46%) Vanguard Total Bond Mkt Index(.08%) Federated High Yield Trust(1.1%) PIMCO All Asset All Authority(1.95%) Putnam Absolute Return 500(.89%) Amer Capital Income Builder(.30%) MFS Value(.68%) Vanguard Value Index(.09%) Vanguard 500 Index(.05%) Vanguard Total Stk Mkt Index(.05%) Lad US Large Cap Growth(.77%) MFS Growth(.78%) Vanguard Growth Index(.09%) Wells Farge Adv Large Cap Gro(.79%) Alliance Ber Discovery(.93%) TIAA-Cref Mid Cap Value(.45%) Vanguard Mid Cap Index(.09%) Vanguard Small Cap Value(.09%) Vanguard Small Cap Index(.09%) Invesco Sm Cap Growth(.83%) Dodge & Cox Intrntnl Stk(.64%) Invesco International Growth(.99%) Scout International(1.02%) Van Total International Stock(.14%) Am Capital World Growth & Inc(.45%) T. Rowe Prc Intrnl Discovery(1.23%) Lazard Emerging Markets Equity(1.09%) Blackrock Natural Resources(.80%) Putnam Absolute Return 300(.53%) Vanguard Retirement Income(.16%) Van Target Retirement 2010(.16%) Van Target Retirement 2015(.16%) Van Target Retirement 2020(.16%) Van Target Retirement 2025(.16%) Van Target Retirement 2030(.17%) Van Target Retirement 2035(.18%) Van Target Retirement 2040(.18%) Van Target Retirement 2045(.18%) Van Target Retirement 2050(.18%) - Current Fund MFS Conservative Allocation(.70%) MFS Moderate Allocation(.76%) I wouldn't say it bugs me, it's just that I'm curious. I know with not even 2 months paychecks so far, I shouldn't expect much. But this is something new outside of a savings account, and like a new toy as a kid, you always want to play with it(or at least look at it). Bulls Hit fucked around with this message at 05:46 on Nov 22, 2014 |
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Nov 22, 2014 05:43
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Pretty decent funds, the Vanguard target funds are actually fairly good for lazy investment given their low expense ratio for a target fund, pays a 2% dividend, good tracking error and also solid returns. Vanguard target funds have around a 6-7 percent long term return which is pretty much the best you can do in investing without getting into the more expensive types of investments. etalian fucked around with this message at 06:32 on Nov 22, 2014 |
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Nov 22, 2014 06:25
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Bulls Hit posted:Do most people distribute their funds between multiple investment funds, or should I stick to just 1? The fund I vested in is a newer one for Vanguard, and it looks like most of their funds start slow, then get a nice return, then fall off a bit. Is it safe to say I should try to follow that trend, and swap funds when they open new ones and keep going after the funds that are towards the end of their 2nd year and moving up in age? This sounds like you are trying to time the market, and this thread is about not trying to time the market. You don't win when you try to time the market.
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Nov 22, 2014 06:32
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etalian posted:Pretty decent funds, the Vanguard target funds are actually fairly good for lazy investment given their low expense ratio for a target fund, good tracking error and also solid returns. Obviously I had no idea what to choose when I first started, and the fund description just sounded like something easy to get into if I was planning on retiring at that point. But if possible, if I could be smart with it, to transfer funds between options and get an optimal gain. Looking at a couple of the vanguard target funds, it looked like they peaked for a high percentage between years 2-4. Is that something I should think about, and regularly expect?
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Nov 22, 2014 06:32
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Where are you getting the 6-7% return for Vanguard target funds?
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Nov 22, 2014 06:33
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Bulls Hit posted:Sorry, just figured I would give a little background that might help with the questions I have as obviously with a 401k we are all planning on the future. I would either put together an allocation kind of similar to mine, or go with a target date fund and not worry about it. The fees on Vanguard products are so low, you have nothing to worry about. Some companies (Mine!) tack on a management fee in addition to the fund ER. VTSAX - Vanguard Total Stk Mkt Index(.05%) - 63% VBTLX - Vanguard Total Bond Mkt Index(.08%) - 10% VTIAX - Van Total International Stock(.14%) - 27% You could split the VTSAX up to be small/mid/large cap, but this is easier and gets pretty good results. Also, check out The Four Pillars of Investing by William Bernstein.
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Nov 22, 2014 06:34
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crazypeltast52 posted:This sounds like you are trying to time the market, and this thread is about not trying to time the market. You don't win when you try to time the market. It's not that I'm trying to time the market, but I would like the best return possible if at all possible. I put my funds into the option that sounded like alright, you are starting out now, planning on retiring along the road, this fund should help you save money and get you a positive return at that point when you do retire and withdraw. But who wouldn't want to increase the return you get if possible? There were too many funds for me to go through and try and decipher with my limited knowledge of investment.
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Nov 22, 2014 06:35
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SiGmA_X posted:I am a newb with investing, but it interests me and I have read a bit about it, between books and forums/webpages. Most of my coworkers have no clue about allocation/etc, and they all do accounting for financial instruments (stocks, bonds, & derivatives none the less!) so I wouldn't feel bad about where you are at all. A few coworkers who actually know what they have in their 401k and etc, but most do not, they just do the companies recommendation allocation... I'm sure once I know more about investing and such, I would be glad to split where I put my money. I'm just happy I'm able to have a 401k period at this point. But is a 401k, the money you put in protected, or if the stock market crashes, are you at the whims of the bulls? If you know about my current fund, what is your comment on that? Honestly, I'd have to know a lot more about the certain funds, and just investment in general to try to split up my money. I just picked the one basically that said if you plan to retire now this is a safe bet. :/ Terrible, but I wasn't expecting these kinds of options. I figured it was "safe plan, moderate plan, risky plan". This is my first big time job, and I had no idea what to expect.
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Nov 22, 2014 06:46
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Short answer - leave your money in that target retirement fund until you know what you're doing. Longer answer - read the OP (it's a good OP) and maybe the newbie personal finance stickied in this subforum. The money you're talking about is for retirement. Treat it as retirement fund, PERIOD. Don't touch until you retire. If you're planning on retiring around 2050, AKA ~35 years from now, you are NOT looking for the least risk as you stated in your first or second post. You are looking to grow your money over the long run because you're not going to use it until retirement. The lazy portfolio is basically what your target retirement fund is - an index fund (mutual fund made up of tons of different stocks) that tries to mirror the US stock market, an index fund that tries to capture foreign (developed) markets, and US bonds. The US stock market is long term growth, the international stocks are the same but give you some diversification in case the US market sees some bad times, and bonds are typically very low reward but very low risk. As time goes on, that Target Retirement 2050 fund will automatically be changed over so it puts more and more of the money in bonds instead of stocks to preserve your wealth. So now when you're 35 years out, it'll be mostly stocks. In 2045, it'll be probably 30% stocks (don't know what the actual method is), because you'll be about to retire and you'll want to lock in your earnings. The stock market is totally unpredictable and it goes up and down wildly at times. The only trend that it has for sure followed throughout its existence is that it hasn't been a flat sin wave - it ALWAYS has gone up over the long run. You've just got to remember that you never REALLY lose a lot of retirement money when the stock market is way down unless you sell it. Until you cash out, the dollar value is just a number. Once you know what you're looking at more you can move the money out to other funds if you'd like. Personally I plan to follow the allocations of the Vanguard target retirement fund basically, but once you have enough $$$ there are equivalent indexes that you can use that have a lower expense ratio, so I've already moved most of my money to those... Quick edit - You're a 28 year old accountant, that blows my mind. I'd think if ANY profession/degree would actually get an education on investing, it would be accountants. Brian Fellows fucked around with this message at 07:00 on Nov 22, 2014 |
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Nov 22, 2014 06:57
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Bulls Hit posted:If you know about my current fund, what is your comment on that? Honestly, I'd have to know a lot more about the certain funds, and just investment in general to try to split up my money. I just picked the one basically that said if you plan to retire now this is a safe bet. :/ Terrible, but I wasn't expecting these kinds of options. I figured it was "safe plan, moderate plan, risky plan". This is my first big time job, and I had no idea what to expect. To reiterate, the fund you have it in now is a great fund. When I actually got smart on the subject I was contributing to a 401K but had no idea what was going on (so you're ahead of Brian Fellows of Times Past already). I kept contributing and read a ton about it over a month, came up with my idealized plan, logged in... and saw that my 401k had defaulted to Vanguard Target Retirement 2045, which was exactly where I wanted it. GOOD THING I DID ALL OF THAT RESEARCH. My current employer uses Fidelity though, so it's good that I did that research. Fidelity Target Retirement funds have significantly higher expense ratios (though they're still reasonable) so instead of using those I was able to make a pretty good all encompassing mix of funds with low expense ratios that come out lower than my old Vanguard fund. Expense ratios are the biggest thing that murder people's retirement funds, always keep that in mind. That's how much money the firm that's managing your account eats.
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Nov 22, 2014 07:06
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Bulls Hit posted:But who wouldn't want to increase the return you get if possible? Common but important mistake you are making: paying attention to the return of specific funds at specific times. Chasing returns is a fools game - you have no way to know whether a fund goes up over a couple of years because it's good, or because you got lucky. Brian Fellows there has good advice. You've made a good choice for starting out, now leave it alone until you've learned more and know why you want to tweak it. And if you never get around to it, that's probably ok - it's a reasonable default choice for the next 40 years.
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Nov 22, 2014 07:08
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Bulls Hit posted:I'm sure once I know more about investing and such, I would be glad to split where I put my money. I'm just happy I'm able to have a 401k period at this point. But is a 401k, the money you put in protected, or if the stock market crashes, are you at the whims of the bulls? https://personal.vanguard.com/us/funds/snapshot?FundId=0699&FundIntExt=INT The money is not insured. But by being in index funds, you hold the stock of hundreds of companies. As a whole, the market goes up, not down. Don't worry about variations in the market, just keep putting money into index funds. And do more reading until you're fully comfortable with it. Brian Fellows posted:Quick edit - You're a 28 year old accountant, that blows my mind. I'd think if ANY profession/degree would actually get an education on investing, it would be accountants. VVVVV You have the right opinion on how to handle your 401k without question. Eg don't touch it, and make it grow. SiGmA_X fucked around with this message at 07:49 on Nov 22, 2014 |
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Nov 22, 2014 07:34
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Brian Fellows posted:Quick edit - You're a 28 year old accountant, that blows my mind. I'd think if ANY profession/degree would actually get an education on investing, it would be accountants. I really appreciate your post. It is a good guide and a helpful step in not being stupid with money. The part I'm quoting to, no, that's not true. Finance would sure, and I'm not saying the same for other Accounting degrees, but where I went to school you only had 1 Finance course that dealt with this kind of stuff. I wish I had duel majored in Finance and Accounting. I'm smart with money for the sake I don't spend what I don't have, but the stock market and investments aren't my cup of tea. And in addition, the money I'm putting into my 401k, I figure that as my unbreakable safe. That money is gone, taxed now and just sitting there waiting for me assuming I live until retirement. I have no intentions whatsoever to touch it until then. But if I can get a higher return on what I'm putting in than other funds, that's something I'm interested in. Bulls Hit fucked around with this message at 07:47 on Nov 22, 2014 |
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Nov 22, 2014 07:38
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Bulls Hit posted:But if I can get a higher return on what I'm putting in than other funds, that's something I'm interested in. Everyone wants higher returns. The fundamental thing I think you may not be fully grasping is that returns and risk are correlated. Specifically, the market tends to reward higher risk with higher reward. "Tends to" is a really, really loaded phrase to use there, and it's much more complicated than I'm making it sound. But essentially, think of investments as offers by someone - a company, a bank, the government - to reward you later for lending them money now. The higher the risk that the future reward will fail to materialize (or be less than what is being promised), the higher the reward ("risk premium") they must offer you in order to attract your dollars. So the government of the united states of america, which issues what The Market views as the most reliable promissary notes in the world - US treasury bonds - only has to offer a fairly tiny amount of interest in order to attract billions of dollars of money from individuals, institutions, and most every government in the world. Whereas a company whose prospects appear to the market to be grim indeed, has stocks that trade at a substantial discount compared to their current "worth" (the amount of money they'd have if they liquidated every asset on the books, and/or the amount of profit or loss the market expects them to make in the near future). A company that appears to be on the verge of bankruptcy might have stocks trading for pennies, even if "on paper" it's worth a lot more. So: mutual funds aggregate dozens or hundreds of stock and bond offerings (and potentially other types of securities too: real estate, foreign currency, commodities, etc.). Spreading your money across a broad range of securities by investing in no-load low-fee mutual funds has been proven to reduce your risk by a larger factor than it reduces your potential earnings, in the long run. The long run meaning when one considers decades. However, there are still a range of funds that focus on different segments or balances of segments of the market. Some of these funds are higher risk than others. The higher risk funds may be expected to provide better returns, in the long run. This expectation is dependent on "the market" being very good, in aggregate, at assessing risk and reward potential. The ability of the market to assess risk and correctly price securities accordingly is called "The Efficient Market Hypothesis." In reality, the market is not perfectly efficient, which means that it makes errors. The fact that the market is capable of over- or under-valuing a security, is the temptation that makes individual investors as well as giant investment banks believe that they can "beat the market" - identify investment opportunities where the market has underpriced a security (or overestimated its risk) and buy at a discount, or conversely, identify where the market has overpriced a security (or underestimated its risk) and sell at a premium. What all this boils down to for your retirement account is that you cannot seek higher returns without considering the higher risk. Your 401(k) has a wide range of funds. Because the Vanguard retirement-date funds are extremely well diversified, they mitigate one category of risk (the risk inherent in a lack of diversity); because they are very low cost, they also greatly reduce the drag on returns that is produced by fees. However, because these funds represent a very broad coverage of "the market," that lower risk comes with the inherent lack of the ability to outperform the market. If you look the historical performance of each of the funds in your 401(k) offering, you will doubtless find many that have outperformed the Vanguard target retirement funds. But, these funds doubtlessly carried higher risk. Looking backwards, it's easy to forget the risk factor: the dice have already been rolled, and those funds got high results. Does that mean those high results were guaranteed? Of course not. And most of those funds, even if they had superior returns in the past, are still following a higher-risk investment strategy. This higher-risk strategy might mean higher rewards in the future, but risk is not just a word, it's very real. Those funds carry a higher likelihood of underperforming the market in the future. And in fact, lots of very smart guys, including Robert Bogle (referenced in the thread's current title) have done a lot of research and have proven that in the vast, vast majority of cases, funds which outperform the market from date A to date B, do not continue to outperform the market from date B to date C. Their higher performance was more dependent on luck than on the fund manager's ability to "beat the market." Their analysis, which the fund's investors paid for with higher fees, is usually literally worse than throwing darts at a stock ticker in the long run. Again, I am oversimplifying things greatly. What I want you to internalize, though, is that we aren't only recommending the Vanguard retirement funds because they're passively invested (e.g., they invest broadly without attempting to pick winners and losers) and because they're low fee (because there's no high-paid "guru" trying to accomplish that). We also recommend them because they're lower risk, compared to those actively-managed funds. The details of those target retirement funds are fairly simple. They invest in a broad segment of domestic stocks (e.g., most or all of the stocks listed on all of the major US exchanges), a broad segment of domestic government and corporate bonds, and a broad selection of international stocks and bonds. Your 401(k) offers a selection of Vanguard funds which do each of those things individually - you can buy a broad, passively-managed, cheap fund that is composed of all of the 500 stocks in the S&P500, for example, which would give you a reasonable facsimile of the US domestic large-cap stock market; and/or you could invest in the Vanguard Total Market index, which I believe is composed of a broad selection of both US and international stocks; you could buy a Vanguard bond index fund; and by buying all of those things, you could work out an asset allocation that is somewhat different from the target retirement fund you're currently in, while still owning all of the same components of that retirement fund. In fact, all of the Vanguard target retirement funds are composed of some percentage of each of a handful of other broad-based, passively managed Vanguard funds. So they're basically doing that balancing work for you, for a very small additional fee. But the most important point is that taken together, those funds should essentially match the returns of "the market." Since those subcomponents have different risk/reward factors, you can adjust your risk/reward balance by shifting emphasis between them... and that's what the target retirement funds do over time. Mostly higher risk/higher reward stocks when you are young (and can afford to absorb short-term losses in the stock market, which is more volatile); mostly lower risk/lower reward bonds when you are old (if you're retiring soon, you can't afford to absorb a shorter-term loss, so the lower risk is more important to you than chasing another percentage point or two of possible returns). You can't have your cake (lower risk) and eat it too (high returns). That is one of the central messages of this thread. Right now, you have a comparatively tiny amount of money in the market. If it all goes poof in six months, it's not as big a deal, because you have decades to replace it. Also, even if your money makes 100% returns in the next year, that's still only going to be a couple thousand dollars. When you're 60, and you have $500k in the market, a loss of 10% of value from a stock market crash would cost you fifty thousand dollars! By the same token, though, modest returns of a large portfolio are a large amount of money. For now, stick with the target retirement funds, until you've done a lot more reading and understand not only what these market segments are about, why passive investing is better, why fees are bad, and how the market functions to evaluate and quantify risk; but also what your long-term retirement plans are, how much money you think you'll need when you retire, and working backwards, how much you can and should invest and what level of returns you require in order to meet your goals. And finally, what your risk tolerance is; how much can you afford to lose, taking a gamble on winning more? To learn more, seek out the resources in the OP. In particular, start with The Four Pillars of Investing. Leperflesh fucked around with this message at 09:10 on Nov 22, 2014 |
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Nov 22, 2014 08:55
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onemillionzombies posted:Where are you getting the 6-7% return for Vanguard target funds? It's done pretty well even if you include the 2009 recession, below is the 2045 target fund:  For comparison the bread and butter VTI etf:  It's another reason why Vanguard funds are good deal, low expense ratio and also spot on tracking error vs the target benchmark
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Nov 22, 2014 16:48
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Leperflesh posted:To learn more, seek out the resources in the OP. In particular, start with The Four Pillars of Investing. This is the most important part. The Four Pillars will fill in all of the knowledge gaps that you have. You have a degree in accounting so you will easily understand and absorb the information in the book. That and everything you're being told is in that book with full explanations. Once you have read it you will be competent to invest, and it will become quite obvious why it is recommended. I was interviewed for an article on peer to peer lending. The interviewer said that I sounded like a sophisticated and knowledgeable investor. Most of what I discussed and the language used I learnt from that book, with exception of a few existing skills and knowledge I applied.
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Nov 22, 2014 20:07
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Leperflesh posted:A fantastic post.
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Nov 22, 2014 20:52
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Leperflesh posted:Truncated for readers. Thank you, amazing post with lots of info. I appreciate this response.
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Nov 22, 2014 23:49
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Pretty much if you are new to investing, then the Vanguard target funds are pretty much the best option I found for retirement accounts. Another pro of the funds is they have more than enough investment, the 2055 fund for example has 1.4 billion total net assets under management. So to summarize -Fairly low expensive ratio especially when compared to Fidelity Offers (.18% vs 0.80%) -Good tracking error and also overall return over time, 6-8 percent is the basically the best you can do with a well diversified investments over a long time period -pays a small dividend (~2%) -Requires no management from the investor, Vanguard adjusts and rebalances the asset allocation over time -More than adequate investment, even the later funds have more than 1 billion dollars in assets under management -Only requires $1000 miniumum investment to use the fund
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Nov 23, 2014 00:46
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I'm 26, with a little over 30k in a 401k at Fidelity through the company I work for. The company was sold recently and they're going through the transition right now. I wasn't around the last time this happened but apparently they just cut everyone who had a 401k a check for how much they had in, minus a 33% penalty. They asked at the information session thing if that would happen again this time and the person didn't know and said we'd get some communication through Fidelity soon. First, is there any way to avoid that? If I can roll it over into the new companies 401k (also through Fidelity) I'll obviously do that, but if I can't is there any way around losing 33% of the value of my 401k? That seems like a really hosed up thing to do, not as much to me as people that are near retirement. Second, if that does happen, what is my best move? It'd be a bad idea to put it back into a 401k since I'd have to pay taxes on it again when I collect on it, right? Can I put it into a Roth? I also have about 15k in student loans I'm paying off that I suppose I could pay off but I'd hate to go back to almost no retirement savings.
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Nov 23, 2014 19:42
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Fork of Unknown Origins posted:apparently they just cut everyone who had a 401k a check for how much they had in, minus a 33% penalty Sounds like people took the cash instead of rolling it over to an IRA and thus had to pay a shitload of taxes. Don't do that. If they aren't combining the old and new plans, roll the money into an IRA. A traditional IRA is the normal thing. You could probably convert it to Roth - you pay a shitload of taxes for that too, but it's a smaller shitload because there's no 10% penalty.
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Nov 23, 2014 19:54
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Yeah if I can avoid pulling the money out at all I'd love to do that. The transition is going to happen Dec 31/Jan 1 (the old one closes Dec 31, new one starts Jan 1,) is rolling it over something I'd have to do now or after the new one starts?
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Nov 23, 2014 20:15
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Fork of Unknown Origins posted:Yeah if I can avoid pulling the money out at all I'd love to do that. The transition is going to happen Dec 31/Jan 1 (the old one closes Dec 31, new one starts Jan 1,) is rolling it over something I'd have to do now or after the new one starts? The fastest option is to roll it over to your own personal IRA or to the 401k plan of your new company. Rollover is a pretty simple process, most places can do it electronically if not follow these steps for the snail mail process 1. Request a rollover check from your current 401k plan, it should have something like on it like "For the benefit of Fork of Unknowns Origins" 2. Mail in using fedex to your new 401k provider or IRA, your new provider will get you mail address for the rollover check 3. After few days you should see your new balance show up there's no time limit, something like the company being sold or changing jobs is a qualifying event that allows you to do the above.
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Nov 23, 2014 20:50
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Great news, thanks. I was worried I'd be losing a third of it. I'll get ahold of Fidelity next week and see what I need to do and when I can do it.
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Nov 23, 2014 21:08
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etalian posted:there's no time limit Unless he gets a check made out to him instead, in which case it's 60 days.
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Nov 23, 2014 21:13
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slap me silly posted:Unless he gets a check made out to him instead, in which case it's 60 days. Yes if you take a direct withdrawal with the intention of rolling it into a IRA on your own you do have a time limit. Since both accounts are managed by Fidelity should be easier to do a electronic rollover to the new 401k or IRA. Here' a good article on what can happen but pretty move fast to avoid getting hit with the early withdrawal penalty: https://www.expertplan.com/articles/a013100.jsp etalian fucked around with this message at 21:20 on Nov 23, 2014 |
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Nov 23, 2014 21:18
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If I roll over to a Roth IRA I will have to pay taxes on the money this year, correct? But if I can roll it over into the new companies 401K I won't?
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Nov 23, 2014 23:53
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Roll it into a NON-Roth IRA if you want to avoid the tax hit. Also as has been mentioned a direct rollover is easier and faster. It also avoids you having to "float" a percentage of the balance out of pocket to avoid the tax hit (since they will likely withhold ~25% of the value if they cut you a check, even if you tell them you're going to roll it over).
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Nov 24, 2014 00:06
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| # ? May 26, 2024 22:53 |
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Yeah, it's looking like the direct roll-over is probably going to be the best option if it's available. Thanks.
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Nov 24, 2014 00:40
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