Financial Newb - Many Questions... do you has answers?

[El Dinero]

Hello to all :)

I've been very ignorant about my finances for 28 years and this year I've decided to wise up.  A part of taking on a new interest in my finances has been stumbling upon Mr. Money Mustache via the Tim Ferriss show.  And now, I'm here!

Questions, questions and questions

1.  My current savings account gets an APY of .01% but I could switch to an online savings account through https://www.synchronybank.com for an APY of 1.15%.  Worth the switch ASAP or should I look for other options?  My primary reason for a new savings account would be to save for a potential mortgage down payment.

2. What to do with my 401k? I have 17k sitting around in a 401k that I haven't touched in nearly 3 years (I know, I know) and since that time I have switched careers into education.  Can I roll over that 401k into a 403b?  What should I do with that moola?

3. To open or not to open a Roth IRA?  I've been looking into Roth IRAs and it's highly recommended by Ramit Sethi's book "I Will Teach You To Be Rich".  Do you believe it's smart to open one up if I haven't maxed out my 401k/403b? 

Those are my questions for now, I'm sure I'll have a lot more when it comes time to invest in the S&P 500 but that won't be until I get those top three questions squared away.

Thank you my peoples!

[Vindicated]

Welcome El Dinero!

Start here for where to put your money first:
https://forum.mrmoneymustache.com/investor-alley/investment-order/

The 401k I am not sure about.  It depends if you can roll it into your current employer's plan, and what the difference in fees are.  There shouldn't be any cost to actually roll it over, so it may come down to "Do you want two accounts or one?".

You'll surely have many more questions, and there are loads of helpful people here to help get you on the right track.

Good luck!

[El Dinero]

Thank you, Vindicated! Much appreciated!

[YoungGranny]

When I left my old company I rolled my 401k into an IRA account w/vanguard. The IRA account offered funds with lower fees so it seemed to make sense for me to do that.

As far as savings accounts go I switched to Ally years ago to get the 1% interest rate and never looked back. Especially if you're building up money for a down payment in it it's probably worth it to get .99% more. $99 per $10k each year which isn't much but it's free money for 5 minutes of work to open a new account!

[Lis]

Regarding your savings account - I recommend opening a separate, online, far away savings account (like Synchrony as you listed, if that's the best interest rate on the market right now). One, obviously the interest rate is better, but more importantly, you're less likely to spend/splurge with it if you don't see it. Now I keep most of my monthly budget in my regular savings account (I use PNC Virtual Wallet, which basically has the envelope system), so keeping a couple thousand in that same account would be confusing and (to be 100% honest) a bit tempting. If you're new and still getting your finances under control, it's much easier to put the money elsewhere where you can't "see" it.

[nexus]

Just a note on rollovers I learned the hard way...

Depending on how long you were with your old company & 401k, just be aware that you might lose some/all of your company match depending on what their Vesting rules/requirements are. My case is probably not the norm.

I was with a staffing company for 18 months & they provided me with a 50% match on my contributions up to 6% of my salary. When I was hired on full-time, I tried to rollover my 401k to my new employer, but lost 1/3 of my 401k's value because I wasn't vested. So, my $5k turned into roughly $3.3k by the time it rolled over because I forfeited all of my company's contributions. No idea how to get around not losing your company match if you roll over too soon, or leave before vesting kicks in. I would have had to of been employed for 5 years before I was fully vested. They had some sort of tiered structure.

[Guide2003]

1. High yield savings accounts are only good if you feel the need to keep large cash reserves. I'd argue that with credit cards, a high savings rate, and Roth investments you don't need that much outside of the market. Of course that depends on your income, living situation, and job stability as well.
2. Whatever you do with it, make sure you know what he money is actually invested in. Find the cheapest and best index fund that is available in the plan.
3. The investment order thread is a great resource to help you determine where to contribute first. Keep in mind the benefit of being able to withdraw Roth contributions without penalty as an emergency backup though.

[slappy]

Just a note on rollovers I learned the hard way...

Depending on how long you were with your old company & 401k, just be aware that you might lose some/all of your company match depending on what their Vesting rules/requirements are. My case is probably not the norm.

I was with a staffing company for 18 months & they provided me with a 50% match on my contributions up to 6% of my salary. When I was hired on full-time, I tried to rollover my 401k to my new employer, but lost 1/3 of my 401k's value because I wasn't vested. So, my $5k turned into roughly $3.3k by the time it rolled over because I forfeited all of my company's contributions. No idea how to get around not losing your company match if you roll over too soon, or leave before vesting kicks in. I would have had to of been employed for 5 years before I was fully vested. They had some sort of tiered structure.

There's no way around it. If you leave before the vesting period, you will lose that money. Good point for the OP to be aware of.

[Lis]

Just a note on rollovers I learned the hard way...

Depending on how long you were with your old company & 401k, just be aware that you might lose some/all of your company match depending on what their Vesting rules/requirements are. My case is probably not the norm.

I was with a staffing company for 18 months & they provided me with a 50% match on my contributions up to 6% of my salary. When I was hired on full-time, I tried to rollover my 401k to my new employer, but lost 1/3 of my 401k's value because I wasn't vested. So, my $5k turned into roughly $3.3k by the time it rolled over because I forfeited all of my company's contributions. No idea how to get around not losing your company match if you roll over too soon, or leave before vesting kicks in. I would have had to of been employed for 5 years before I was fully vested. They had some sort of tiered structure.

There's no way around it. If you leave before the vesting period, you will lose that money. Good point for the OP to be aware of.

I'm only in my second job and my previous one didn't offer a 401k, so my question comes from inexperience. Let's say I have $100k in my 401k, but only 80k is vested. When I leave, does the balance automatically drop to 80k or only that amount would roll over? What about any gains you make during that period before you roll over?

[slappy]

Just a note on rollovers I learned the hard way...

Depending on how long you were with your old company & 401k, just be aware that you might lose some/all of your company match depending on what their Vesting rules/requirements are. My case is probably not the norm.

I was with a staffing company for 18 months & they provided me with a 50% match on my contributions up to 6% of my salary. When I was hired on full-time, I tried to rollover my 401k to my new employer, but lost 1/3 of my 401k's value because I wasn't vested. So, my $5k turned into roughly $3.3k by the time it rolled over because I forfeited all of my company's contributions. No idea how to get around not losing your company match if you roll over too soon, or leave before vesting kicks in. I would have had to of been employed for 5 years before I was fully vested. They had some sort of tiered structure.

There's no way around it. If you leave before the vesting period, you will lose that money. Good point for the OP to be aware of.

I'm only in my second job and my previous one didn't offer a 401k, so my question comes from inexperience. Let's say I have $100k in my 401k, but only 80k is vested. When I leave, does the balance automatically drop to 80k or only that amount would roll over? What about any gains you make during that period before you roll over?

I'm not sure about the gains part. I don't believe the balance actually drops until you roll over.  I think thats why a previous poster said they learned the hard way. The balance probably showed the $5k and when they went to roll, they only got the $3k.

[Heroes821]

1.  My current savings account gets an APY of .01% but I could switch to an online savings account through https://www.synchronybank.com for an APY of 1.15%.  Worth the switch ASAP or should I look for other options?  My primary reason for a new savings account would be to save for a potential mortgage down payment.

2. What to do with my 401k? I have 17k sitting around in a 401k that I haven't touched in nearly 3 years (I know, I know) and since that time I have switched careers into education.  Can I roll over that 401k into a 403b?  What should I do with that moola?

3. To open or not to open a Roth IRA?  I've been looking into Roth IRAs and it's highly recommended by Ramit Sethi's book "I Will Teach You To Be Rich".  Do you believe it's smart to open one up if I haven't maxed out my 401k/403b? 

Firstly, Welcome!

1. My only advice here is to not close your old bank account if you enjoy that bank and it's convenience to your daily life.

2.  If possible I would rollover to an IRA to a place like Vanguard so that you have full control over the assets inside.  Depending on your IPS (could be mental not physical) https://www.bogleheads.org/wiki/Investment_policy_statement   I like http://jlcollinsnh.com/stock-series/ fund advice.   at 17k you qualify for admiral funds so yay!

3. When you rollover to Vanguard it will take about 30 extra seconds to open a Roth IRA alongside your rollover tIRA. As far as funding a Roth goes.  Follow this forum a little longer and read things from MDM and other tax buffs regarding when a Roth is worth it.  Now if your income is above a deductible tIRA and you can still fund a Roth (income is not too high) then clearly it wins as the only choice.

[LovesToTravel]

One thing to consider before choosing an IRA vs. rolling into your current employer plan (assuming they allow incoming rollovers) is whether you think you'll ever need to do a backdoor Roth (because your income is too high to contribute directly to a Roth).  If this may ever be the case, you want to minimize pre-tax IRA balances (which would be what a 401(k) rollover is). 

You can search the forum for a number of threads on the details of a backdoor Roth and how it works.

If this may apply to you, and your current 401(k) or 403(b) has good fund choices (and allows incoming rollovers), the rollover into your current plan may be the better option.

[El Dinero]

Excellent advice to all.  Thank you! I'm meeting with a friend on Sunday to help set up a VanGuard account for the 401k rollover and I'll go with Synchrony ASAP. 

I really appreciate the advice :)

[Rosy]

A word about banks - online and brick and mortar.
Do a little digging - my local credit union for instance offers what they call a Holiday Club account which pays 2% up to $4K.
The same CU also has a 1% checking up to $10K, as long as you keep a balance of $1K. (MidFlorida - may only have locations in Florida)
I love them and they do offer a plethora of other products - some of them absolutely worthwhile.
I do like for my emergency fund to be available right now:) as in I can walk into the bank:)

Last week I opened an account with an online federal credit union that gives you 100 bucks if you save at least $50 a mo for two years. They call it an emergency savings account, plus they pay 0.25 interest or o.50 interest from $1K up to 10K. (Thrivent - via Peak Financial, asks if you are Christian:)

If you have a military connection look into Navy Fed CU - they have a CD for their new account sign ups that pays I believe it is 3% at the moment up to $3K, plus they have good rates on all sorts of things. Great CU all around - love them.

It's not big bucks, but I made a couple hundred bucks in interest last year in accounts that were easily accessible with no penalties if I need it. However, since you are saving up for a mortgage - Vanguard is a good option for that as well, you will have access to your money within seven days or so, which shouldn't be a dealbreaker for a home purchase. 

I don't know how much money you have in savings at present, but if you have either 10K or 15K you can open a Chase Bank savings account and get $150 or  $200 if you leave your money in the account a minimum of 90 days. Sweet deal.
You will need a coupon or print out one of their online offers and read the fine print. Search for it at doctorofcredit it is a great blog - worth looking into if you are thinking of switching banks anyway - not pitching, just a suggestion to make a little extra on something you were going to do anyway.

Good luck and welcome to MMM - enjoy the forum!

[Classical_Liberal]

I really like the idea of this poll, but I think its too confusing to draw any accurate assumptions. 

What if you provided a link to a data set of living wage income based on location and household size?  Then you could create a likert regarding multiples of that adjusted amount.  <50%, 50-100%, 100-200%, etc;  however you would want to set it up. Using adjusted federal numbers like poverty threshold would correct for HH size and location, allowing us to compere apples to apples.

[Rocketman]

About the 401k vesting ... what you saved is yours. The company match may have a vesting schedule. The only part you lose is the unvested part.