Anyone here know about 401 k stuff?

[PaKettle]

I wasn't sure where to put this thread so I thought someone here might know about these things.

I have a minimal 401k savings account from my former employer. I am now unemployed and the rule is supposedly that after 6 months of being unemployed I can roll the 401k over into a new account, that is not with my former employer.

I want to change it to a different account because the Hartford who handles my 401k have the WORST investments to choose from and the worst way of handling my money.

I have only been earning 2.something % on my (no-risk, safe) investment, yet I can earn 3.something just by putting it in a frickin' BankOfInternet checking account!

So I want to put the money into something that is 100% safe yet where I can earn at least 3.something % on it, and something that I can roll it over into without paying penalties (I know they won't let me put it in said checking account because that's not a 401k approved account.) So I just want to get it out of Hartford's hands because they're jerks, and into something that earns at least 3.something % but without paying a penalty.

So how do I go about rolling this over into a non-Hartford account? Can I do it myself or do I have to pay some financial guy to do it for me? Where do I find out what options I have? I think if I call the Hartford guy they're not going to tell me where ELSE I can put my $... right? So I need to find out my options and then just tell them to transfer it out and into the new one... but where?

[Flamingo]

You will need to open an IRA and roll the funds over into it unless you get another job that had a 401(k). First, go to your bank and explain your situation and see what they offer. Then, depending upon what you want to do you can either leave your 401(k) with your former employer until you get another job or you can roll it over into an IRA. Then call your Hartford rep and they will take it from there. If you take a distribution without rolling over, you will be responsible for taxes and penalties - it has to be rolled over to another retirement account.

[chloe0724]

You should be able to do a Trustee to Trustee transfer anytime after sepration form your employer. There isn't a 6 month waiting period. Flamigo is right, if you go to your local bank, they can set up an IRA CD for you and complete all the paperwork.

[PaKettle]

You should be able to do a Trustee to Trustee transfer anytime after sepration form your employer. There isn't a 6 month waiting period. Flamigo is right, if you go to your local bank, they can set up an IRA CD for you and complete all the paperwork.

Thanks for the replies. I'll check with my banks and see what they offer.

As to the "waiting 6 months" issue, yes, I do have to wait 6 months. I believe it is because I am (was) a "daily hire" via the union and it is my understanding that the reason for the 6 mo. wait is that, because we are daily hires, we might go 2-4-6 months in between working, as a natural course of things, so they don't want us being able to move our money out of the Union-affilated 401k (via the Hartford) just because we have not worked for a couple (or, 6) months. According to the rules of my 401k, yes, we do have to wait 6 months after not working as a Union employee before we can roll over our 401k to a different investment vehicle. Personally I think 6 months is way too long to have to wait, but that's the way they've set it up. Believe me, in case you did not know, Unions are not what they once were. Now, they are more about protecting their own interests than they are about doing the best for their members!!!

[PaKettle]

You will need to open an IRA and roll the funds over into it unless you get another job that had a 401(k). First, go to your bank and explain your situation and see what they offer. Then, depending upon what you want to do you can either leave your 401(k) with your former employer until you get another job or you can roll it over into an IRA. Then call your Hartford rep and they will take it from there. If you take a distribution without rolling over, you will be responsible for taxes and penalties - it has to be rolled over to another retirement account.

Thanks. One more question:
Aren't their different types of IRA's? Or do I only have one choice? I remember hearing something about Roth IRA vs. another type...?

[Never_Again]

You will not be able to roll your 401K into a Roth IRA... however, you CAN roll it into a regular IRA and convert it in 2010.

A "safe" 3% loses money every year after inflation, which is around 4%. Just information to think about.

[chloe0724]

Roth IRA's are opened with after tax contributions.

[PaKettle]

You will not be able to roll your 401K into a Roth IRA... however, you CAN roll it into a regular IRA and convert it in 2010.

A "safe" 3% loses money every year after inflation, which is around 4%. Just information to think about.

Well, I'd like to make as much as possible, but I know that most of the other options in my Hartford 401k were all LOSING money, not even making 1%, so I figure if I can make 3% or more, then I'll be doing comparatively well.

Do you have a recommendation on a safe investment? In today's topsy turvy market, I don't want to take any risks on my 401k money!

Up until last year I used to diversify my 401k account into some international funds and so on and was at times making 10% or so. But then I began to see the market becoming very unstable so I moved everything into the safe fund that was supposed to make 4% or so but in reality has only been making 1.5-2% which is why I want to take my money out of Hartford. I figure if that's the best they can offer our union in a 401k plan, then they don't deserve to hold my money! Like I said, my checking account at BankOfInternet makes more than that!

[Never_Again]

But, if you make 3% with inflation running at 4%, you have lost 1%!

Over the last year, the stock market has taken a big hit. Historically, the market has averaged 10% growth in a ten year period.

You can put it into a CD, and keep the original principal safe, but its purchasing power would be eroding every year. You also can not say, "I'll put it in a CD until the market turns around." By the time that you know the market is turning around, it is too late, as many of the gains to be had are already realized, and you have missed out.

It is best to have an intelligent plan for long term growth, and stick with it. If you need the money within five years, it is OK to keep it in an investment that protects the principal.

[ssdsco]

Vanguard and others I'm sure have a large portfolio of CD's. They can guide you through a 401k-IRA conversion. If you want to get back into the market they have all kinds of low cost mutual funds and you can buy individual stocks, bonds if you like. All through the convenience of your keyboard.

For the money I don't need in the next 5 years I'm throwing a chunk of change into the market every time the DOW gets below 8500.

[PaKettle]

But, if you make 3% with inflation running at 4%, you have lost 1%!

But losing 1% after inflation is better than losing 5-25% which is what many have lost in my 401k plans' investment options!

Never_Again, can you give me a specific recommendation on what you would do with my paltry $18k 401k money if I take it out of where it is where it is currently only making about 2.5%? I really don't want to risk losing any of it!

Also, I was looking at WAMU and BofA and some other banks and was SHOCKED that their cd's are only paying like 1-2%! That's crazy! So where do I need to look to find a decent return on my 401k money when/if I roll it over to a new IRA?

[chloe0724]

Pa,

CD rates are going to be low for now and probably for a long while. Your best bet is a credit union.

[ssdsco]

https://personal.vanguard.com/us/funds/bonds

[usmccop]

With stocks (equities), many, unfortunatley, turn a simple loss in value into an actual loss by selling/moving when the market falls.

Just leave it alone. Sure it has lost value (a lot in 08), but you haven't lost anything if you leave it alone. You still have the same amount of stocks (units), plus if you continue to re-invest into the same fund (mutual), you are now buying more (units) at a lower price.

If you had $100,000 in 2007, but a loss of 40% in 2008, you now have $60,000. If you sell now, you just flushed $40,000 down the toilet. Granite, you won't lose anymore. If you just leave it alone, hopefully-as it always has, it'll grow back. You still have the same amount in stocks/units regarless of the performance of the stock market and your portfolio. They only went down in value.

[Never_Again]

And over the long term, it will.

A specific recommendation would be a good growth stock mutual fund. Vanguard, Fidelity, and T Rowe Price have decent ones. An index fund (S&P 500, Wilkshire 5000, etc.) is a good, low expense way to invest, and Vanguard generally has ones that beat the market. If you don't need this money for five years or more, this is a good place.

However, if you are dead set against loosing principal, which it sounds like you are, then by all means, put it in a bank CD from an FDIC insured bank. Of course, your purchasing power will erode every year, but you will have the same principal dollars that you have always had.

Unfortunately, there is some risk, and if you take smart risks, you can do fine long term. There is no guarantee in life or investing.