What to do with my older 401k's?

[JustinH]

So,

I'm turning 32 years old this month. I've been working a w2 job since I was 14 years old.

In my mid 20's I got a job with a 401k at Citigroup. Worked there for about 7 years. 401k is invested in a general blend fund. Not a penny is invested in the Citigroup company stock, which is good because a lot of fellow co workers got beat on this one real bad when it went into the dumps.

Also have another 401k from a job I worked 3-4 years with.

Currently, I work for a city in Central Texas that gives me a pension. So, I just make biweekly contributions to an account in my name and they guarantee X amount of pension money for the rest of my life after 20 years of service.

That amount is based on what I earned, and it is also based on years of service. You can work more than 20 years and get more pension.

I have no say what the pension contributions get invested in, I just get a newsletter spelling out the financial status of the Texas retirement, and it appears to be smartly invested, and doing VERY well.

So the Citigroup 401k has been sitting idle doing pretty much nothing. I make no contributions to it, it makes money from stocks, interest, etc.

Also the other employer 401k is doing nothing either, I make no contributions to that either.

Moving around money in either plan incurs pretty substantial fees.

I'm looking to roll over both 401k's into something else.

Looked at Vangard, have heard a lot of positive reviews about them, but I am not a financial advisor and do not know a lot about the subject.

Citigroup has their 401k company constantly spamming me asking for me to hire a financial advisor through them for a huge fee. It is annoying and I dislike the company.

Basically, my end goal is to move all the 401k money into a retirement account, and I want to contribute about 5 grand in cash to the account per year for the next 20 years.

While I do that, I will contribute to my pension about 400 dollars per month for 20 years.

At age 50, I will retire with a paid off house in Central Texas, a retirement account, a pension, investment properties, and I will do IT consulting from my house for extra money.

Thoughts?

Thanks guys.

 

[spasm3]

There should not be that much of a fee if you roll it into another 401/403. You don't want to take possession of the money to transfer it, or you will pay tax. Some plans do charge a fee if it did not sit there 2 years.

 

[pcoxe]

You can probably consolidate the accounts with a rollover distribution so you won't be taxed to death. Talk to a financial adviser at your bank. I used Wells Fargo.

 

[bigt61]

Vanguard is good and cheap. You could put everything in VOO (Vanguard S&P 500 ETF .05 expense) and likely do very well over time. You can buy Vanguard funds in other trading accounts like TD Ameritrade or Schwab. Just consolidate and simplify.

 

[Kuato]

Originally Posted By: bigt61
Vanguard is good and cheap. You could put everything in VOO (Vanguard S&P 500 ETF .05 expense) and likely do very well over time. You can buy Vanguard funds in other trading accounts like TD Ameritrade or Schwab. Just consolidate and simplify.


+1

Vanguard would be my choice for this also. They should be able to facilitate a rollover of the two acounts. IIRC they require $3000 to start a new account so keep that in mind; and they offer advisors at cost or free, depending on your balance.

My choice in your position would be to put it all into A Roth.

 

[Mr Nice]

Roll over to Vanguard.

 

[Bud]

Vanguard.

 

[Bandito440]

Does the city offer a 403b in addition to the pension? If so, that fund may (but is not required to) accept rollovers from 401k/403b accounts. You may find that to be your lowest-fee option.

The second option would be to roll over both accounts into a standard IRA at Vanguard. If you're looking at 20 years, put that into equities and let it ride until you're closer to retirement. VTSAX is the total stock market fund that I prefer, and also has an expense ratio of 0.05%. As you approach retirement, you can put more of that money into conservative investments. The mutual fund option allows you to set up regular allotments and buy fractional shares. I contribute $211.53 from each bi-weekly paycheck because the annual maximum for this year is $5,500. This will allow you to keep that money in one fund in one account.

The third option, and the one I would probably take is to roll over the existing accounts into a Roth IRA at Vanguard, and invest in VTSAX. This will create a tax event. You haven't yet paid income tax on the 401k money, and you would need to do that in order to roll it into a Roth account. Once that's done, any gains you make from the Roth account are tax-free as long as you abide by the rules.

Whichever option you pick, invest in equities (stocks) now, make regular deposits, and don't touch the money if there are market troubles; everything will balance out over the next two decades. Your greatest risk this early is not maximizing your gains.

Additional reading:

https://investor.vanguard.com/401k-rollover/options

 

[Danh]

Originally Posted By: Bud
Vanguard.


Vanguard or Fidelity. Both are low-cost with lots of investment options. Fidelity has a number of brick and mortar offices around the country that allow face-to-face meetings with financial advisors, Vanguard does not. And both will be very happy to help you roll these 401ks into an IRA.

 

[Pablo]

Simple if you want to use a brokerage at any point in the future: Roll all into a self directed IRA at Fidelity. Won't cost a penny.

If you never ever need a broker (for stocks, bonds, other funds):
Roll all into a self directed IRA at Vanguard. Won't cost a penny.

But you can't touch any until 59.5 without penalty.

A little more complex: Since you are so young (and smart!!!): Convert some or all to a Roth IRA IF you have a low income year. Then you won't have to pay income tax on that money.

 

[Bandito440]

Originally Posted By: Pablo
If you never ever need a broker (for stocks, bonds, other funds):
Roll all into a self directed IRA at Vanguard. Won't cost a penny.
I have no issues with Vanguard's brokerage services. I purchased some Planet Fitness stock in my Roth account just this week. $7 for the trade. Have you had problems with them in the past?

 

[mjk]

If you'd like to manage your money, how about rolling it into an a Scottrade IRA (or similar approach)?


https://www.scottrade.com/investment-products/ira/rollover-ira.html

 

[JTK]

Justin, if anyone would have had this sorted out by now, I would have bet on you brother!

Like said, Vanguard and Fidelity are both great. It's been 18yrs since I did a roll-over, but I rolled into Fidelity and I don't recall it costing anything back then.

Best of luck on your early retirement goals. Don't have kids..

 

[cashmoney]

Rollover the 401ks in to Vanguard. Open an account with Vanguard and ask them to initiate the transfers - you give them the location and account numbers and they can initiate the direct transfers.

Invest the funds in a portfolio that is very simple and very low cost like the boglehead 3 fund portfolio. Given your age I'd suggest being around 80% in equity and 20% bonds....If you feel confident you could go 90% equity since you have a lot of years to go.

So I'd recommend an asset allocation like this for the next 10 years then gradually change about every 3 years add a little more bond % and less equity to the mix till you get to 50-50 mix at age 67 (FRA).

60% Vanguard Total Stock Market Index Fund (VTSMX)
20% Vanguard Total International Stock Index Fund (VGTSX)
20% Vanguard Total Bond Market Fund (VBMFX)


That's about the advice a highly trained CFP would give you if he knew what he was doing.

 

[SatinSilver]

Originally Posted By: cashmoney
Rollover the 401ks in to Vanguard.


+1, call their 800 number and give them some info. They will do the rest of the work for you to get things started.

 

[Slick17601]

Best thing you could do is roll both account into a rollover IRA with Vanguard, Fidelity or Schwab.

 

[Bandito440]

Originally Posted By: cashmoney
Rollover the 401ks in to Vanguard. Open an account with Vanguard and ask them to initiate the transfers - you give them the location and account numbers and they can initiate the direct transfers.

Invest the funds in a portfolio that is very simple and very low cost like the boglehead 3 fund portfolio. Given your age I'd suggest being around 80% in equity and 20% bonds....If you feel confident you could go 90% equity since you have a lot of years to go.

So I'd recommend an asset allocation like this for the next 10 years then gradually change about every 3 years add a little more bond % and less equity to the mix till you get to 50-50 mix at age 67 (FRA).

60% Vanguard Total Stock Market Index Fund (VTSMX)
20% Vanguard Total International Stock Index Fund (VGTSX)
20% Vanguard Total Bond Market Fund (VBMFX)


That's about the advice a highly trained CFP would give you if he knew what he was doing.

Good advice, although I'd stay away from bonds right now. With an interest rate increase on the horizon and 20 years before you retire, save that for later.

You can initiate the rollover right on Vanguard's website. Easy.

 

[Warstud]

When you leave one job and go to another your suppose to roll it over. Maybe you can roll the two into one... IDK. Whatever you do...put it into a money market now to save your gains. I think the stock market is setting up for a correction.

 

[cashmoney]

Originally Posted By: Bandito440


60% Vanguard Total Stock Market Index Fund (VTSMX)
20% Vanguard Total International Stock Index Fund (VGTSX)
20% Vanguard Total Bond Market Fund (VBMFX)

Good advice, although I'd stay away from bonds right now. With an interest rate increase on the horizon and 20 years before you retire, save that for later.


WRONG!!!


The foundational concept of asset allocation and portfolio theory is that no one can predict what will happen to markets in the future. People advising staying away from bonds or equities or whatever because of such and such is going to happen is precisely why most investors don't manage to even match basic market indices over time. Pick a portfolio allocation based on your age and risk tolerance and pay absolutely no attention to advice on altering that basic overall allocation from folks who think they can predict the future of financial markets.

 

[Bandito440]

The Fed is planning to raise rates. I didn't predict that... they said so.

When rates increase, bond fund values decrease. Also not a prediction. So, why not remain in equities for a while longer? Bogle's theories are very useful, but not always gospel.