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I have a 401K with a former employer who was recently bought. Wondering if I should transfer the funds and where?

I have a 401K with Mass Mutual with a former employer. I have the option to rollover into a Vanguard 401K with new employer, convert to an Oppenheimer IRA with Mass Mutual, or rollover into another IRA. Recommendations?

Jan 07, 2015 by Ansu from Marietta, GA in  |  Flag
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4 votes

Ansu,

There are a few things to consider. 1.) What is your level of investment experience? 2.) Do you feel comfortable going at it alone with an online broker dealer (i.e. Schwab, TD, or Fidelity)? 3.) Do you have the time and energy to do some research to invest your money once it gets to it's final location? More often than not, we (financial professionals) encourage investors anytime they have the option to move money out of a 401K plan without penalty TO DO SO!!!! There are several reasons why, but the 2 most important reasons are typically cheaper fee's outside of a 401K plan and most importantly, you have MORE options to invest your money. Again, this is what I tell my clients because they have someone to lean on for help, me. If you don't have an advisor or someone to help you navigate your investment plan, this can become problematic as the last thing you want is your money just sitting in money market (cash), not working for you because you don't have the time to log in and create a portfolio. Often times these online outfits have branches and associates that can get you started in the right direction, or better yet, you can find an advisor to help you make this transition seamless and easy. Otherwise, if this all sounds too daunting, as a last resort I would roll it over to Vanguard. This way you will have some convenience and simplicity to managing your retirement. Let me know if you have any questions!

Comment   |  Flag   |  Jan 12, 2015 from San Diego, CA

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2 votes

You can roll your 401(k) to a custodian (many are extremely cheap) and manage it yourself. By leaving it at a 401(k) that you no longer work at, your investment options are at the whims of the current advisor for the plan. And, quite honestly, most advisors for these plans are not very good and their investment options change quite a bit. You will be better served rolling it over to your personal IRA and managing it yourself. If you do not feel comfortable managing yourself, find an advisor who can do this for you.

1 Comment   |  Flag   |  Jan 07, 2015 from San Diego, CA
Ryan Anthony Hughes

You can roll your assets to many different firms. If you plan to manage it yourself, check out Schwab, TD Ameritrade, and Fidelity. If you plan to invest via index funds, you can so at these firms, but also check out Vanguard, as they are the leader in that space.

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Flag |  Jan 07, 2015 near San Diego, CA

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If you want more investment options, roll it over into your own IRA and invest in whatever you please. That is a big benefit at this point for you, flexibility in how your money works for you.

Comment   |  Flag   |  Jan 07, 2015 from Chicago, IL

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Ansu-

I think that the easiest thing to do would be to roll it into the Vanguard 401(k). If you are wanting to have control and you have a hobby of investing then it can make sense to roll it into an IRA at a place like Etrade, Scottrade, Fidelity, Schwab, etc. where you have full control over it and can make investment decisions. The IRA will most likely be the less expensive way to go, but the Vanguard 401(k) you will have your money in one place instead of several. Whatever your decision might be, be sure to get the distribution or rollover forms from your previous employer to keep you from having to fill out multiple distribution or rollover forms. Let me know if you have any questions.

Comment   |  Flag   |  Jan 07, 2015 from Salt Lake City, UT

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Ansu,

Unfortunately there is no definitive answer we can give you without additional details about the choices you are considering and your preferences/personal situation.

Basically It comes down to balancing the following factors: 1. Convenience 2. Fees 3. Investment choices 4. Features

Transferring directly to an individual IRA can give you the most freedom and features but only if the IRA custodian you choose has a broad range of alternatives. For example, transferring into a brokerage account allows you to invest in virtually any type of investment (without knowing the details of the Oppenheimer IRA, I suspect that your choices will be limited when compared to a brokerage account). Note however if you transfer to an individual IRA, you will lose the ability to borrow any of those funds because you can only borrow from a qualified plan like a 401K. Transferring to your new employer's 401K offers the convenience of one statement but investment alternatives are likely to be more limited. If only Vanguard funds are offered that will likely still give you a broad range of funds from which to choose but although Vanguard is known for their relatively lower expense ratios, their funds are not always the best choices in all sectors.

Comment   |  Flag   |  Jan 07, 2015 from Fort Washington, PA

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Although rolling over to an IRA provides more flexibility, the cost will more likely be significantly higher than your new employer provided plan through Vanguard. Especially if your employer is paying for the recordkeeping and investment advisor.

Comment   |  Flag   |  Jan 07, 2015 from Mission Viejo, CA

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As mentioned previously it does depend on your individual circumstances and the only way to determine that is to look at a copy of an actual statement the you have. Some questions you may want to consider; Did you have company stock with a low cost basis? What choices are you looking for to redeploy this money? Do you think you may need at some time to take a loan on the retirement plan? These are some of the questions that you need to answer in order to make a decision as to roll over out of the plan, rollover to Oppenheimer or roll over to the new plan.

Comment   |  Flag   |  Jan 07, 2015 from Neptune Township, NJ

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Ansu, This decision depends on your personal goals and if you want more control over your investments. Cost is always something to consider as well. If you have an advisor you are comfortable with I suggest you discuss this with him/her and learn the pros and cons of each. I would think the 401k option with Vanguard would offer the Vanguard Target Date fund and if you are a hands off investor this is a good option. As mentioned if you enjoy managing your own money you will find more options through an IRA. Good luck!

Comment   |  Flag   |  Jan 08, 2015 from Greenville, SC

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