Author Topic: What to do with my little retirement?  (Read 2221 times)

darknight

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What to do with my little retirement?
« on: December 13, 2016, 12:16:36 PM »
I'm ending my employment and have roughly $7000 in a retirement account. 1/2 is traditional 401k, the other half is Roth401k. I'm getting a new job that won't add any retirement for me, so I need to figure out what to do with the $7k. Any ideas? I think I could keep it with the current investment group and add to it. It's currently invested in some aggressive stuff with their general "2055" retirement projected date. in the past year it's averaged over 16%.
What are my options to do with it? Should I keep contributing as-is or should I look into rolling into something else.
Please forgive my newness, this is the first time I have had an investment.

For the next year or so I won't have any employer contribution.

Snapshot of finances and a little backstory:
I'm 28 with no debt, currently renting. non liquid assets roughly $10k (vehicle, misc household), more liquid $7k retirement, roughly $5k (after ded. and taxes for 2016) in business account from new business started this year, and roughly $4000 cash/savings.
It would be much higher however I just finished paying off student loans and CC.
We're going overseas in Feb to teach English (paid position but really only enough to live on, maybe a little extra). Income will go up during the year, I don't know what it will be but I'm not calculating for the increase. Our business income will remain roughly the same during 2017 adding another 5-10k net. Not sure of long term plan, this job hopefully will be a step into other more lucrative job opportunities.

Any ideas or thoughts? Thanks again!

Interest Compound

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Re: What to do with my little retirement?
« Reply #1 on: December 13, 2016, 12:35:40 PM »
Sounds like you're in a typical high-fee 401k. I'd roll both of them over to a Vanguard 401k, and invest in their Target Retirement Fund, based on your age (not your expected early retirement date).

darknight

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Re: What to do with my little retirement?
« Reply #2 on: December 13, 2016, 02:16:10 PM »
Sounds like you're in a typical high-fee 401k. I'd roll both of them over to a Vanguard 401k, and invest in their Target Retirement Fund, based on your age (not your expected early retirement date).
Anything special with the Roth portion of the investment?

NESailor

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Re: What to do with my little retirement?
« Reply #3 on: December 13, 2016, 02:49:44 PM »
Roth IRA at Vanguard.  One interface with your traditional IRA, same great investment choices.

Cheers!

seattlecyclone

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Re: What to do with my little retirement?
« Reply #4 on: December 13, 2016, 03:23:11 PM »
Yep, traditional 401(k) -> traditional IRA, Roth 401(k) -> Roth IRA. Go with Vanguard for lower fees than your current plan likely offers.

darknight

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Re: What to do with my little retirement?
« Reply #5 on: December 13, 2016, 03:52:16 PM »
Thank you all! I am looking into them now. It looks fairly straight forward. I'm planning to continue contributing, or putting a lump sum into the Roth portion. Are there maintenance fees or rollover fees?

darknight

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Re: What to do with my little retirement?
« Reply #6 on: December 14, 2016, 08:22:11 AM »
Another question for you all.. So is it generally assumed for early retirement that you will draw funds from investments before 59&1/2? I know Roth you can draw your portion but not the gains until that age. For those already at it, what investments allow you to draw without penalty if you were to retire at 45-50?
Thanks!

seattlecyclone

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Re: What to do with my little retirement?
« Reply #7 on: December 14, 2016, 09:45:19 AM »
Another question for you all.. So is it generally assumed for early retirement that you will draw funds from investments before 59&1/2? I know Roth you can draw your portion but not the gains until that age. For those already at it, what investments allow you to draw without penalty if you were to retire at 45-50?
Thanks!

We have a whole sticky thread about that. In a nutshell, Roth IRA contributions can be withdrawn tax-free at any time. You can convert from traditional to Roth, paying the tax you owe on that money anyway, and then you can withdraw that money from the Roth five years later with no early withdrawal tax owed. There's also a thing called "substantially equal periodic payments" where you can take a small fraction of your IRA each year based on your age, and there's no early withdrawal tax. The gotcha there is that the formula is very strict and you have to keep it up until you turn 60, else you'll owe early withdrawal taxes and interest on all of your previous withdrawals under that method.

Cromacster

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Re: What to do with my little retirement?
« Reply #8 on: December 14, 2016, 09:52:18 AM »
If your income level is going to be low next year (20-30K total for your family) I would consider rolling the traditional 401k into a Roth IRA.  If you are in a low tax bracket this would be one place where this could be ideal over keeping it in traditional.  Depends on your income, but I would consider it.

darknight

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Re: What to do with my little retirement?
« Reply #9 on: December 14, 2016, 01:53:18 PM »
Another question for you all.. So is it generally assumed for early retirement that you will draw funds from investments before 59&1/2? I know Roth you can draw your portion but not the gains until that age. For those already at it, what investments allow you to draw without penalty if you were to retire at 45-50?
Thanks!

We have a whole sticky thread about that. In a nutshell, Roth IRA contributions can be withdrawn tax-free at any time. You can convert from traditional to Roth, paying the tax you owe on that money anyway, and then you can withdraw that money from the Roth five years later with no early withdrawal tax owed. There's also a thing called "substantially equal periodic payments" where you can take a small fraction of your IRA each year based on your age, and there's no early withdrawal tax. The gotcha there is that the formula is very strict and you have to keep it up until you turn 60, else you'll owe early withdrawal taxes and interest on all of your previous withdrawals under that method.

Thank you for the insight, reading through the sticky now. Thank you for the advice

darknight

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Re: What to do with my little retirement?
« Reply #10 on: December 14, 2016, 01:54:31 PM »
If your income level is going to be low next year (20-30K total for your family) I would consider rolling the traditional 401k into a Roth IRA.  If you are in a low tax bracket this would be one place where this could be ideal over keeping it in traditional.  Depends on your income, but I would consider it.

I will likely swap it over to get the benefit of the Roth IRA. We'll def be in a lower tax bracket next year, somewhere in that income range.