Author Topic: Rollover 401K to Vanguard Fund  (Read 4934 times)

SpaghettiMonster

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Rollover 401K to Vanguard Fund
« on: March 05, 2013, 12:10:32 PM »
Hi there! I'm looking into rolling over a 401k of around 10K from my last employer to a Vanguard fund. I already have a Roth IRA of around 30K in Vanguard's Total Stock Market Index Fund Admiral Shares. I think I understand from what I've read that I cannot roll over a 401k to a Roth IRA, but can roll it to a regular IRA and then convert to a Roth if I so choose.

So, my first question is how do I choose which fund to roll the 401k into? I'm 30 so I plan to keep the money in there for a while yet, so I'm thinking I should pick a similar stock fund or maybe even the same fund that I have the Roth in. Secondly, how do I decide if I should convert from a regular IRA to a Roth after the rollover?

icefr

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Re: Rollover 401K to Vanguard Fund
« Reply #1 on: March 05, 2013, 12:45:38 PM »
1) The fund you're using in your Roth IRA is fine to use for the Rollover IRA as well. What do you think about international stocks? Having fixed income in your portfolio?

2) If you convert from a regular IRA to a Roth, you will pay normal income taxes on that money. So if you're in the 25% tax bracket, you'll pay $2,500 on that money. I don't know anything about how states tax that either. The general recommendation around here is to only convert traditional IRA money to Roth IRA money when you are in a year of low income. Personally, I would just leave the money in your Traditional IRA, but other people could have different opinions.

tylerherman

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Re: Rollover 401K to Vanguard Fund
« Reply #2 on: March 17, 2013, 08:08:14 PM »
Roll it over to a traditional ira. Don't want to pay taxes now while you're making lots of money.

GreenGuava

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Re: Rollover 401K to Vanguard Fund
« Reply #3 on: March 18, 2013, 10:52:12 AM »
1.  Roll it into a traditional IRA, and if you're going to convert to Roth, wait until a year that you're in a lower tax bracket.

2.  Generally, you should treat all of your tax-advantaged retirement accounts as one large portfolio with separate accounts.  I suggest picking a desired asset allocation and figuring out how to best implement that across your IRA, Roth IRA, and 401(k).  Are you comfortable at 100% stocks?  I don't see a significant upside to 100% stocks versus 80% stocks and 20% bonds, and plenty of downside. 

3.  Reasonable people differ on whether or not the taxable investments - which are to be used to retire at a reasonable age instead of 59.5 or later - should be treated as the same portfolio with the tax-advantaged accounts.  But that's another story for another time.