[Madison]

Hi all,

My wife's employer is doing away with their 401k plan, and she has to roll it over. My questions are these:

1. Would we be better off putting it into an existing IRA
2. Would we be better off putting it into a new IRA, like a Roth?
3. It can't be rolled into MY 401k, right? (just checking, it seems fairly obvious, but I want to double check)


Anything else you want to add/ask, please do.

Thanks,
Tom

[andi*pandi]

I was able to put it into an IRA, then roll it into a new employer's 401k later. I don't know about putting into your 401k, but I don't see why not?

[-Q-]

All tax-advantaged retirement savings accounts, including the 401k and IRAs, are individual accounts and must be held in the name of a single person. There is no exception for married taxpayers. So rolling it over into yours isn't an option.

Your best bet is to transfer it to an IRA.

[Dork.]

There are "rollover IRA's" which exist for just the purpose you need it for: a place to put the 401(k) money so it still "counts" as retirement savings. The terms under which the money is saved should be generally the same as the 401(k) -- i.e. your contributions (and in this case, the rollover deposit) are tax-free, and you don't pay taxes on the money until you withdraw from the account.

All the major brokerages with retirement accounts should offer rollover IRA's, and the process is easy enough that you can probably arrange to make the transfer yourself (or, more specifically, your wife will have to do this, since she will be signing all the paperwork). I did this a few years back when I changed jobs. The main thing to remember is that you want your wife's current 401(k) provider to roll over the money directly into the new account. This is important! If they cut a check to your wife instead of to the new account directly, there are tax implications which you probably don't want.

Roth IRA's are different: Your contributions are not tax-free, but your withdrawals are. Rolling over a 401(k) to a Roth IRA requires you to pay tax on the rollover amount. It may me a good move or not, you definitely want to talk to a financial planner before deciding to do this. (People who are doing this now are betting that Creeping Socialism will raise all our taxes to eleventy billion precent in the future, so they're better off paying tax now, and have the cash to do so.)

BTW, advice you get on the Internet is worth what you pay for it, but I'm sure you know that already!

[turtle777]

It also depends on how paranoid you are.

I don't think that the tax advantage in 401ks and IRAs is going to last forever. The government is going to try to get their sticky fingers on it.

Problem with 401ks and IRAs is that you are locked in as long as you are working for the same company.
If the government suddenly changes the rules (e.g., requirement to hold a certain % of your retirement savings in Treasuries, which is worthless Benny dollars), you are screwed, because you can't react to it.

If you pay the tax, and put it into a Roth IRA, you can take the money out and invest it elsewhere. You have much more flexibility. Me, personally, I would pay the tax and put it in the Roth IRA. But then again, I'm disciplined enough to not blow money that I have access to. For many people, savings only works if they absolutely can not get their hands on it.

-t

[SVass]

Originally Posted by Madison 

Hi all,

My wife's employer is doing away with their 401k plan, and she has to roll it over. My questions are these:
1. Would we be better off putting it into an existing IRA
2. Would we be better off putting it into a new IRA, like a Roth?
3. It can't be rolled into MY 401k, right? (just checking, it seems fairly obvious, but I want to double check)
Anything else you want to add/ask, please do.
Thanks, Tom

Roll it over into a Rollover IRA at a brokerage or with someone like Vanguard that has low cost funds. You can then convert it to a Roth IRA at any time afterwards if you want. I would suggest a brokerage account with someone like Fidelity as they allow one to invest in no-load funds from Vanguard as well as their Fidelity funds. Other brokerage houses may require you to buy their in-house funds.
sam