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bobobeer · May 30, 2012, 05:32 PM

I have a 401K from a previous employer with roughly $11,000 in it (still young so its okay). I am currently seeing a 5% return which I am happy about (should I be?). Anyway I can no longer contribute to this 401k and am wondering where I should move it and what I should "roll it into" to obtain an equal or greater return while allowing me to contribute to it if I want too.

I am a programmer, not a finance guy so please do enlighten me or point me to a good book in this matter for bonus points. Thanks for reading.

ScottGem · May 30, 2012, 06:10 PM

If your current job offers a 401K you can roll it over into their plan. Otherwise you will need to roll it over into an IRA. You can research several financial institutions like Schwab, Fidelity, Vanguard and many others ro see what investment vehicles they offer.

A 5% return is OK, but if you are young you might be better off with a long term investment instead of a fixed income one.

bobobeer · May 30, 2012, 06:46 PM

I think they said I can't roll it over for some reason... which I thought was mighty strange. I'll have to ask again.

What do you mean by long term investment vs fixed income? Is there a college class or a book I should read on this stuff? Cause I feel like a noob.

ScottGem · May 31, 2012, 03:11 AM

Who said you can't roll it over to where? Some companies don't accept rollover contributions to their 401k plan, but that is rare. I don't know of any reason you can't roll over from a former employer to an IRA.

Despite dips in the markets, investment in stocks or other tradeable commodities have had yields that have outpaced fixed income investments over the long term. So lets say you have 25-30 years until retirement, the odds are a long term investment fund will give you a return much better than 5%. A 5% return sound like you have the money in a Fixed Income fund.

ebaines · May 31, 2012, 05:45 AM

I would suggest that rather than roll the old 401(k) to the 401(k) offered by your current employer, consider rolling it to an IRA instead. Reason is (a) much wider choices for investment are available and (b) typically fees are lower, so you get to keep and reinvest more of your investment. It's easy to do - simply decide which firm you want to have as the IRA custodian (firms like Charles Schwab, Fidelity, Vanguard. T. Rowe Price, etc), review their investment options, and then submit paperwork so that they can do a direct rollover (you don't actually have to submit any paperwork to the old 401(k) plan - the IRA custodian handles the transaction).

As for investment choices - you say you are young (perhaps around 30?) so I agree with Scott's advice that you should be weighted more towards investments in equities (i.e stocks and mutual funds that invest in stocks) than fixed investment (T-bills, CDs, money markets).

bobobeer · May 31, 2012, 12:15 PM

Originally Posted by ebaines

I would suggest that rather than roll the old 401(k) to the 401(k) offered by your current employer, consider rolling it to an IRA instead. Reason is (a) much wider choices for investment are available and (b) typically fees are lower, so you get to keep and reinvest more of your investment. It's easy to do - simply decide which firm you want to have as the IRA custodian (firms like Charles Schwab, Fidelity, Vanguard. T. Rowe Price, etc), review their investment options, and then submit paperwork so that they can do a direct rollover (you don't actually have to submit any paperwork to the old 401(k) plan - the IRA custodian handles the transaction).

As for investment choices - you say you are young (perhaps around 30?) so I agree with Scott's advice that you should be weighted more towards investments in equities (i.e stocks and mutual funds that invest in stocks) than fixed investment (T-bills, CDs, money markets).

Thanks. Yeah I am in my late 20s.