401k rollover help

[jengod]

I have a Fidelity 401k account left over from a job I left in 2011.

Just got a letter that they are closing down all the employee stock purchase funds from this corporation and selling them en masse (but responsibly, they claim!), if you don't sell out yourself by year's end. I don't think the employee stock-purchase plan (ESPP) is tax-protected in any way, so I think when I sell out I can just close the account and get a check and then pay taxes on the gain next year.

ANYWAY, I think it's time to get off my behind and roll over the whole 401k account into something else, presumably a Roth IRA. The 401k proper has $140K and the ESPP has $4.5K. We can pay the taxes although of course it will be irritating.

401k allocation:
65.63%   LARGE CAP STOCK FUND
21.72%   VANG SM CP IDX IS PL
5.71%   SMALL/MID CAP STOCK
4.98%   SPTN 500 IDX ADV IS
1.96%   INTERNATIONAL FUND

I am a 37-year-old SAHM, DH is 39. Assume a 30-year time horizon.

We have other investments (wealthfront, IRAs, 401ks) and a paid-for house, so I feel like we are fairly diversified already and perhaps can afford to be somewhat aggressive with this account. I would prefer something that I can just set up and ignore, but tell me if that's wrong. (I'm not even sure I'm organized enough to do periodic rebalancing.) I do think I like DRIPs.

* Should I do the Roth IRA rollover or something else or nothing?
* What company do you recommend?
* What investments do you recommend? I see a lot about VTSAX on the board.

Help, please. And thank you.

[Gin1984]

Why do you want to pay extra taxes now, instead of just rolling the 401k into a traditional IRA?
But beside that, yes you can sell the ESPP off now and be done with it (besides taxes).

[Frankies Girl]

NO. Do a rollover IRA, which is essentially a traditional IRA, not a Roth, unless you do want to pay a large chunk towards the process.

What you'd need to do is create a new account as a Rollover IRA and then tell them to roll the 401k over "in kind" to the rollover account. Once it is there, you can sell off whatever is in there and buy whatever you'd like. You can do this all online, or get on the phone and have one of their reps walk you through it - it shouldn't cost you anything if you leave it at Fido even.

You can keep it at Fido if you want to. I personally like Fido, and there are many other folks on here that use them instead of Vanguard (not knocking Vanguard as they are the gold standard for savvy investors, but it is still possible to do just fine at Fido). Fido has a great index mutual funds series (Spartan), so go with those and just avoid the "actively managed" stuff, and tell any reps that you are self-managing (never had any be pushy, but just in case). If you want to be aggressive, sell off the funds after the rollover, invest all the way in the Spartan Total Stock Market Index Fund (FSTVX), as that is the Fido equivalent of Vanguard's VTSAX fund.

http://www.bogleheads.org/wiki/Fidelity
^shows equivalent funds at Fido

I'm also going to repeat a post I made a short time ago - things to find out before rolling a 401k:


1. Do I have access to any exclusive institutional shares/funds or receive a discount on funds through this 401k?
(my answer: no)

2. Do I get charged any management fees by staying with this 401k?
(my answer: no. but if the answer had been yes, I'd have considered that an pretty big plus to getting it rolled over ASAP)

3. Are there any funds I'd rather be investing in that are unavailable in this 401k?
(my answer: yes, so that's a big plus to roll it)

4. Are there any protections I currently have as a 401k that would be unavailable if rolled to an IRA?
(my answer: no, because I live in a protected asset state, so another plus to rolling)

So based off that checklist, there is every reason to roll my 401k over to an IRA. You might be getting different answers, but try running through those questions yourself, do some research, and you should know one way or another if rolling to an IRA is the right move for you. There technically isn't anything wrong with leaving it as a 401k if you are okay with your current allocations, since in some cases it can be more beneficial than moving to an IRA, but definitely do your homework.

As per #4, another thing to think about is do you have protection from judgements in the case of getting sued/bankruptcy/creditors/etc...

I live in a state where everything is protected out the wazoo no matter if you have 401Ks or IRAs (Texas), but some states do not offer the same protections for IRAs, and 401Ks are more sheltered from judgements (like California). Not that this should be the only factor involved in deciding to roll a 401k to an IRA, but you still should be aware of the coverages.

http://www.investopedia.com/ask/answers/07/seizing-savings.asp

http://www.irafinancialgroup.com/selfdirectedassetprotection.php
^has a chart showing state by state statues for protection





I just did this with my own 401k, and it was super easy.

[jengod]

Thank you, Frankies Girl. Rollover IRA opened at Fidelity and transfer underway. I'll poke around the passively managed options and try to grab a few good ones. This board is awesome. Appreciate it.