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IFallsRon

Rolling 401 into an IRA

7 posts in this topic

My 401 from a job 15 years back is being moved to another management company. It has maybe doubled in that time but there were years then the market wasn't too kind. I am researching the new company's options but am wondering if it may be good time to roll it into an IRA at my bank for a guaranteed 4+%. At 4%, I'm told it will double again by the time I reach retirement age. I've got another smaller IRA, a 403(B) that is growing without contribution and will be starting yet another 401 soon.

Thanks in advance for input.

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Well...this probably isn't the right forum for this but what the heck.

Why pay the big commissions and management fees with a local bank when you could roll it into any number of good stock funds with say...Vanguard or T. Rowe Price and avoid all those extraordinary fees?? I'd put it into one of their large or mid-cap index funds and forget about it.

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Im not a financial wizard or a professional money manager, but I've had some experience with my own $$$ and meet regularlly with my investment club which is focused on growing retirement money. At 4% you may have no risk but you have no chance of capture the upside of the markets natural progression upward. There are always going to be ups and downs, but history shows that the market averages 12 to 14 % per year over time. 4% is only about 1% of a return accounting for the rate of true inflation and you still have to figure your eventual tax payment. Judging from what you say that @ 4% your money would double by retirement you have about 12 to 15 years to go. I think that this is far to long to lock yourself in a plan that has that little of a return. At just 6% you double your return which in my opinion is not hard to do.

During the downturn I took the same hit you did, however my $$s have bounced back averaging 10% over the last 3 years. I achieved this by balancing my portfolio, and I am now in the position to take advantage of the upside of some bargains I obtained over the last 5 years using dollar cost averaging stratigies. Last quarter I was up 3.5%.

Unless this is extra cash that you do not need for retirement expenses and just want to park, then I would look around for a plan with a better possibility of a return. See a financial planner ( not a salesman ) and take a look at your whole picture. Doing this was the best $1000 bucks I ever invested.

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The bank is the easist and safest place for your money. But if want to make money you need to put it in the market. I have a few bucks in the bank, but all of my retirement funds are in mutual funds spread out over 7 different companies and each of those have at least 3 different types of funds that I am investing in. All but 1 are making some money. And I am wary of change the 1 that isn't cuz it is the newest and has not had enough time to really see if it gonna turn around, that I and really don't want to sell while things low.

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I agree that a fixed 4% would be fine if I had only a couple years before I retire, but the market averages 11-12% a year. Yes some are negative and some are positive but they still average more than 4%. Here's a little Rule that you might want to use when making your decisions.

Rule of 72

72 divided by %APR = # of years to double your $$

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Withdraw it all & put it on a hand of blackjack!!!!!!!!!! OK maybe not. I have been averaging 12% through fidelity in some medium risk categories.

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Diversify, diversify, diversify! One rule of thumb is to have the percentage of your investments in conservative investments (gov't bonds, fixed interest like your 4%, etc) about equal to your age. So at fifty, you're 50% conservative, age 60 - 60% and so on. You need to stay at least partially in stocks or stock funds as a hedge against inflation. Fixed rate investments, CD's etc are notorious for not keeping up with inflation. If you have a good agent or maybe the bank can help, have someone do an asset allocation analysis for you. It factors your time horizon, goal and risk tolerance and determines an appropriate mix of asset types for you. There was a study back in about '91 that determined that 90% of a portfolio's performance was directly attributable to the asset mix, not market timing, etc. This stuff isn't rocket surgery, just get a little help from the folks that have the tools. By the way, I'm a Chartered Financial Consultant. I can't sell or be an agent though due to my position in my company.

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