Author Topic: 401k rollover for over 55  (Read 1994 times)

TechYogi

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401k rollover for over 55
« on: January 08, 2014, 11:55:31 AM »
Hi All, new to MMM and frugality and loving all the new tips. Unfortunately having brought up kids and sent some to college there were a lot of expenses as I paid for their college. Somehow felt duty bound as I was earning quite good money. Anyway I am currently not working and need to make a rollover to pay of some cards and put money aside for next few months. Around $400,000 now in old Company's Fidelity run 401k. Being over 55 I can make a one time withdrawal and pay a 10%penalty. But in this plan I need to rollover all of the money. So looking for advice on where to go and not be ripped off. I have a small account with E-Trade and could go there. Or move to within Fidelity. They all seem to want to extract a fortune in fees for running the 401k though. Any advice?

Jamesqf

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Re: 401k rollover for over 55
« Reply #1 on: January 08, 2014, 12:43:07 PM »
Not an expert, but I think you can set up an IRA with mutual fund companies like Vanguard & T. Rowe Price, for no fee beyond those associated with whatever funds you invest in (which are fairly small for inedx funds).  I did a pension buyout->IRA rollover a couple of years ago, with no fee or hassle,

geekette

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Re: 401k rollover for over 55
« Reply #2 on: January 08, 2014, 01:24:57 PM »
You can roll over a 401k to a Vanguard IRA (or probably any other company) for no fee.  If you make a withdrawal, and you're under 59.5, there's the 10% penalty on top of taxes.  You can look into an SEPP withdrawal to avoid penalty. 

TechYogi

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Re: 401k rollover for over 55
« Reply #3 on: January 08, 2014, 01:46:07 PM »
Thanks for the quick response. I understood there was a separate rule for those over 55 who are no longer with their company. I retired recently and have been told I can make this withdrawal with no penalty. I'll look at these funds.

See http://retireplan.about.com/od/401kplans/a/401K-Withdrawal.htm

Cheddar Stacker

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Re: 401k rollover for over 55
« Reply #4 on: January 08, 2014, 01:51:52 PM »
I agree you should check out Vanguard, and the only fees should be the small percent from the index fund you put it in.

I just read your reply about the "non-penalty option" which is great, so congratulations on that. However, I read that right after I typed the following which I'll leave up in case anyone who just turned 54 is considering the same thing:

I think you should look into every other possibility before paying a 10% penalty for withdrawal. Do you know any bankers? With $400K you should be able to use that as collateral for a loan. Do you own a house? If there is any equity you can get a home equity line of credit. All of these option would include some interest, and likely some minimal monthly payment, but they would be substantially less than coughing up 10% + taxes.

If you are planning to take out $50K, you would be giving away $5,000 in penalties when you file your income tax return. Even if you take a $50K home equity loan and hold it for 4 years (when this money can be withdrawn without penalty) paying nothing but the interest you will likely come out far ahead from simply withdrawing it. I would only use this as a last resort if you're talking about saving 20% interest on credit cards, and even then you might be able to find a loan of some sort.