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How do you transfer from a 401k to an IRA? I work for a very small company, so my 401k investment choices are limited and expensive. I'd love to have a cheap

How do you transfer from a 401k to an IRA? I work for a very small company, so my 401k investment choices are limited and expensive. I'd love to have a cheap index fund option.

ChuckMcM 13y ago
Sadly, you can only roll it over during a 'qualifying event' which is either you leave the company, the company drops the 401k, or reach the minimum age for disbursement. The most common case is people leaving the company. I've known too many people who change jobs and just leave the 401k they had in their previous job with the company that is still managing the 401k for the old company. There can be (and often are) different rules for former employees that can be (and sometimes are) much more advantageous to the bank. When I left Sun the 401k moved all of the funds into a 'guaranteed interest' fund (aka a bond fund) with a 3% management fee. It was pretty egregious.
- joe_bleau 13y ago
  That's what I thought. My current strategy is to keep an eye on the total size of our account, hoping it gets big enough to add some better options, or big enough to be worth moving to a cheaper provider. I wonder what it would take to add a brokerage window (self-directed) option?
  - cdjk 13y ago
    All you can really do is pressure the company into picking a better 401k provider (Vanguard is a good bet). A self-directed option in a 401k isn't really possible as far as I'm aware, since you're limited to mutual funds. They don't want people "gambling" with their 401k money by betting on individual stocks. Still, given the tax advantages, you're likely to come out ahead in the long run in a 401k compared to a taxable brokerage account. Just pick the funds with the lowest fees.
    - djb_hackernews 13y ago
      Self directed options in 401ks are definitely available and if your 401k plan doesn't offer it you should be raising a stink with hr. I'm coming to the conclusion that if your plan doesn't offer it then your company either got screwed by the salesman or are incompetent.
  - orofino 13y ago
    Some 401k programs do allow for "in-service" rollovers which would allow you to move the funds to an IRA before you leave your job. Those that allow this aren't all that common, but it is worth checking into.
- zaroth 13y ago
  There's no such thing as a 'qualifying event' for a rollover. See for yourself: 'http://www.irs.gov/taxtopics/tc413.html http://www.irs.gov/taxtopics/tc413.html Don't confuse the "plan documents" (aka the terms of service written by the bankers with their hands in your pocket) with the IRS regs. Some plans do allow in-service rollovers, and to be sure, you should make a request in writing. When rolling over money, have the money sent directly to the other retirement account. If the check comes to you first, then the payer has to withhold 20%, which you won't get back until after you file your taxes and prove the funds were in fact rolled over. And, of course, you would need to 'front' that 20% in order to get the whole amount rolled!
  - smartician 13y ago
    >There's no such thing as a 'qualifying event' for a rollover. Publication 560 defines when distributions from 401(k) plans can be taken (page 18): http://www.irs.gov/pub/irs-pdf/p560.pdf http://www.irs.gov/pub/irs-pdf/p560.pdf A rollover is nothing but a distribution and re-deposit into a qualifying account.
  - ChuckMcM 13y ago
    Having done this four times, in each case the people managing the 401k sent me the check made out to my IRA's bank, with the notation FBO me, aka "For The Benefit Of" and each case my bank cashes the check and transfers the proceeds into my IRA.
greenyoda 13y ago
You can roll over a 401(k) into an IRA only after you leave your current employer. The company where you open your IRA account should be able to provide you with the proper forms.
refurb 13y ago
Two options for those with bad 401(k) options: 1. Call and ask what funds are eligible to be rolled over in a self-directed IRA. Some funds allow you to, some don't. For some weird reason, my old employer allowed me to rollover my 401k match but I couldn't touch my own money. 2. Most 401k plans off a brokerage account option. You may have a crappy selection of funds offered, but with most brokerage accounts you can invest in most anything (stocks, ETFs, other mutual funds). However, again, it will likely be limited, my own 401k brokerage account doesn't allow me to invest in REITs. (?!?!)

How do you transfer from a 401k to an IRA? I work for a very small company, so my 401k investment choices are limited and expensive. I'd love to have a cheap index fund option.

ChuckMcM 13y ago

Sadly, you can only roll it over during a 'qualifying event' which is either you leave the company, the company drops the 401k, or reach the minimum age for disbursement. The most common case is people leaving the company. I've known too many people who change jobs and just leave the 401k they had in their previous job with the company that is still managing the 401k for the old company. There can be (and often are) different rules for former employees that can be (and sometimes are) much more advantageous to the bank. When I left Sun the 401k moved all of the funds into a 'guaranteed interest' fund (aka a bond fund) with a 3% management fee. It was pretty egregious.

joe_bleau 13y ago
That's what I thought. My current strategy is to keep an eye on the total size of our account, hoping it gets big enough to add some better options, or big enough to be worth moving to a cheaper provider. I wonder what it would take to add a brokerage window (self-directed) option?
- cdjk 13y ago
  All you can really do is pressure the company into picking a better 401k provider (Vanguard is a good bet). A self-directed option in a 401k isn't really possible as far as I'm aware, since you're limited to mutual funds. They don't want people "gambling" with their 401k money by betting on individual stocks. Still, given the tax advantages, you're likely to come out ahead in the long run in a 401k compared to a taxable brokerage account. Just pick the funds with the lowest fees.
  - djb_hackernews 13y ago
    Self directed options in 401ks are definitely available and if your 401k plan doesn't offer it you should be raising a stink with hr. I'm coming to the conclusion that if your plan doesn't offer it then your company either got screwed by the salesman or are incompetent.
- orofino 13y ago
  Some 401k programs do allow for "in-service" rollovers which would allow you to move the funds to an IRA before you leave your job. Those that allow this aren't all that common, but it is worth checking into.
zaroth 13y ago
There's no such thing as a 'qualifying event' for a rollover. See for yourself: 'http://www.irs.gov/taxtopics/tc413.html http://www.irs.gov/taxtopics/tc413.html Don't confuse the "plan documents" (aka the terms of service written by the bankers with their hands in your pocket) with the IRS regs. Some plans do allow in-service rollovers, and to be sure, you should make a request in writing. When rolling over money, have the money sent directly to the other retirement account. If the check comes to you first, then the payer has to withhold 20%, which you won't get back until after you file your taxes and prove the funds were in fact rolled over. And, of course, you would need to 'front' that 20% in order to get the whole amount rolled!
- smartician 13y ago
  >There's no such thing as a 'qualifying event' for a rollover. Publication 560 defines when distributions from 401(k) plans can be taken (page 18): http://www.irs.gov/pub/irs-pdf/p560.pdf http://www.irs.gov/pub/irs-pdf/p560.pdf A rollover is nothing but a distribution and re-deposit into a qualifying account.
- ChuckMcM 13y ago
  Having done this four times, in each case the people managing the 401k sent me the check made out to my IRA's bank, with the notation FBO me, aka "For The Benefit Of" and each case my bank cashes the check and transfers the proceeds into my IRA.

greenyoda 13y ago

You can roll over a 401(k) into an IRA only after you leave your current employer. The company where you open your IRA account should be able to provide you with the proper forms.

refurb 13y ago

Two options for those with bad 401(k) options: 1. Call and ask what funds are eligible to be rolled over in a self-directed IRA. Some funds allow you to, some don't. For some weird reason, my old employer allowed me to rollover my 401k match but I couldn't touch my own money. 2. Most 401k plans off a brokerage account option. You may have a crappy selection of funds offered, but with most brokerage accounts you can invest in most anything (stocks, ETFs, other mutual funds). However, again, it will likely be limited, my own 401k brokerage account doesn't allow me to invest in REITs. (?!?!)