401k Rollover Question

[poorgradstudent]

So my wife has cut ties with her job and we need to figure out what to do with her 401k account. She is over the $5k amount that seems like the bare minimum to not be forced to act extremely quickly, but I’d still like to figure out what the best plan for her retirement account is. She is not likely to work anywhere with a 401k or 403b in the next couple years.

She doesn’t currently have an IRA; her 401k was her only retirement account. It is pre-tax. I’m leaning towards a Brokerage IRA with a low cost broker. Maybe Zecco? My main goal is to minimize risk and fees. Set it and forget it, basically. I like ETFs more than Mutual Funds due to lower management costs.

Thoughts? Am I on the right page here? Way off base?

[Diego Mamani]

Call Vanguard and put roll all the money into an IRA, with 100% of the funds going to either the Vanguard 500 fund (mimics the S&P 500 index), or a “target retirement” fund based on your spouse’s (or your combined) expected retirement date. The latter choice maybe less risky; both have low fees.

The main choice is whether to go for a regular rollover IRA, or a Roth IRA. There’s no right or wrong choice. I suggest the latter, pay taxes now, and don’t worry about them when you start withdrawing in the future.

There you go, low cost, moderate risk, and you can leave the money on auto pilot.

[Coronita]

[quote=Diego Mamani]Call Vanguard and put roll all the money into an IRA, with 100% of the funds going to either the Vanguard 500 fund (mimics the S&P 500 index), or a “target retirement” fund based on your spouse’s (or your combined) expected retirement date. The latter choice maybe less risky; both have low fees.

The main choice is whether to go for a regular rollover IRA, or a Roth IRA. There’s no right or wrong choice. I suggest the latter, pay taxes now, and don’t worry about them when you start withdrawing in the future.

There you go, low cost, moderate risk, and you can leave the money on auto pilot.[/quote]

Vanguard charges a monthly fee if your account is below a threshold. I forget what, but $5000 if I recall is below the threshold. If you’re thinking just about an an s&p 500 index, i think schwab offers a comparable fund with slightly lower fees than vanguard’s 500 index fund.

[Coronita]

Yes, I recall reading about Schwab going to war with Vanguard on index funds. Last time I checked, Schwab has lower expense ratios…

I was too lazy to move stuff, plus rates are different if reach different tiers @ vanguard.

http://www.indexuniverse.com/sections/features/6355-schwab-vs-vanguard-battle-royale.html

[Raybyrnes]

Before doing anything evaluate the funds in the account. Sometimes the company 401K’s have access to institutional accounts which you may not have access to in a brokerage account. If that the case see if that fits into your asset allocation and leave it alone.
If the 401 K is not great the funds are not good and have high expense fees then consider a Roll over IRA. 5K is not much. Schwab has a family plan and when the family hits target amounts in the account you are subject to lower fees. This asset accumulation may work well. As to what to put the 5K into is entirely dependent upon your target asset allocation but I like the thought of the ETF for one time transaction although a good mutual fund that you dollar cost into over time may prove to be advantageous dow the line as you hit certain thresholds and the fees go down. Typically 50 and 100K.

Good Luck

[UCGal]

If you want to get a quick education in a low-cost (fees), diversified approach to investing, read up over on Bogleheads.

Specifically, look at the couch potato (aka lazy investor) portfolio approach.
http://www.bogleheads.org/wiki/Lazy_Portfolios

The idea is to come up with an asset allocation – (bonds, equities, int’l, and cash) appropriate for your time horizon, and pick LOW COST index funds to match that asset allocation.

The brokerage houses that get the best ratings for low cost are Vanguard, Schwab, and Fidelity. Vanguard has crappy customer service, but super low expenses. Fidelity has better customer service – but still low cost. And Schwab is in the middle. (FWIW – I’m at Fidelity and Schwab – because Vanguard pissed me off when we were settling my dad’s estate.)

The more you save in fees/expenses – compounded over time – the bigger nest egg you’ll have at retirement. It really adds. up.

[img_assist|nid=16649|title=How Fees impact nest egg.|desc=|link=node|align=left|width=340|height=276]

[Coronita]

FYI: Vanguard charges $20/year/per fund if you don’t meet the minimum requirement

http://firefinance.blogspot.com/2007/05/vanguard-how-to-waive-20-service-fee-on.html

The fee is waived in two ways..

Sign up for account access on Vanguard.com and choose electronic delivery of shareholder materials, including statements, confirmations, fund reports, and prospectuses.

or

Maintain total Vanguard mutual fund assets of $100,000 or more.

I’m at vanguard, fidelity, and schwab. I think in terms of customer service, schwab has been the best. For most purposes, I really can’t tell the difference if I were to index the same way across three things. The only thing I have done is to move from one Vanguard 500 fund to a Fidelity 500 fund back to a Vanguard 500 fund. Fee wasn’t too much difference for 1 year.

[poorgradstudent]

Thanks for all the ideas. I will have to look into them with more detail this weekend.

[desmond]

[quote=poorgradstudent]Thanks for all the ideas. I will have to look into them with more detail this weekend.[/quote]

“Set it and forget it, basically”

Don’t make the process to difficult, I would go with Schwab, get the account setup and then keep upgrading. The days of just letting money sit somewhere are over. Too many people don’t work hard enough WITH the money they have. Think about how hard you had to work to save it, work harder to keep it and make it grow. Good Luck.

[Coronita]

[quote=desmond][quote=poorgradstudent]Thanks for all the ideas. I will have to look into them with more detail this weekend.[/quote]

“Set it and forget it, basically”

Don’t make the process to difficult, I would go with Schwab, get the account setup and then keep upgrading. The days of just letting money sit somewhere are over. Too many people don’t work hard enough WITH the money they have. Think about how hard you had to work to save it, work harder to keep it and make it grow. Good Luck.[/quote]

+1

Schwab has really good customer service imho..
So for practical purposes, I’m using them as a fully service shop from brokerage, to banking, to day to day finance management.

They have local branches in case you need it.

Also, if also also get a schwab bank account setup, it’s pretty easy to move money around. No atm fees anywhere. You pay the fees first, and schwab will automatically pay you back at the end of the month.

So, I can go to any ATM to withdraw without worries.

Check deposits are pretty easy too, with the mobile phone deposits. It works similar to chase’s mobile banking service, in that you can deposit a check by using your mobile phone and taking the front/back side of the check…

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