I have two 401k's to roll into an IRA. I'm 31. What kind of IRA do I want and why?

Question

I don't plan on wanting to withdrawl early. I put about 8-10K a year into my current 401k. How much will it cost to open an IRA?

Answer 1

You should want a rollover roth ira. That way whatevr you have now will grow tax free until you take it out. Max out this account in the future. However, if you want to keep contributing at your current level, simply max out the Roth each year, and put everything else into a Roth 401(k), assuming you qualify.

Answer 2

You will get someone to open it for free. In fact, they will love you.

There are two kinds
Traditional and Roth.

Traditional works pretty much the same as your 401k but you have more options. You don't pay income tax now, but rather when you withdraw the money. When I rolled mine over I did this because I already had not paid the taxes (as you have not) and didn't want the big tax bill now.

Roth you pay the taxes on now, but the earnings are tax free. I do this with my new investments separate from my 401K because in the long run it will be cheaper.

I could maybe invest more the Traditional way, but I will then owe taxes on the amount that I make over 30 years and I don't think that I will make enough on the tax portion alone to cover it. You are also betting on the tax rate a little.

There are ways to convert them slowly too. I never bothered, but I did listen and consider it. I'd just rather take the money I'd have to pay for the taxes to convert it and put that in the Roth now. I think it would probably be better in the long run if I did, but I have a hedge bet this way.

I will say this about 401Ks. You have to do them if there is a company match. There is no way to beat that even if it is a quarter on the dollar. There is no where else you make 25% on day one. But you have more options on you own, so after the match, do the IRAs. If you max them out (and you might as much as you have been putting in) then go back to the 401k

At 31 you probably want to invest fairly aggressively since you will get the best payoff in the long run and you have time to make up fluctuations but that depends on your personality. If you are going to kill yourself if you lose 20% next year that ain't for you. I had years I lost that much, but overall I've done about 12% and that is fantastic.

Your investment guy will explain it all to you and talk about the options. I would talk to a few and make a choice. Pick the guy who thinks the most like you, but understands investing. Then if you want to add money or do something different or additional, stick with him.

Answer 3

the only way you have performed this became in case you had left the money interior the previous 401Ks. A 401K may be rolled to a various 401K (if the hot plan facilitates it) or an IRA. What you pick to do is roll the IRA to a 401K. See IRS pub 590, internet site 23. A 401K is *not* on the checklist of targets for rollovers. The checklist is TSPs, 457 and 403s.

Answer 4

First.
There are plenty of free IRA and Roth IRA to choose from. You shouldn't have to pay to open either types of IRA account.

Second.
If you think you ever want to invest these two 401k in different products, or might have different investment options available to them because of where they were originated, you might want to keep them in separate accounts, whether two different Roth IRA, Traditional IRA or one of each.

The debate between Roth IRA versus IRA.
This would depend on your outlook for your earning potential in the future. For most people putting money in Roth IRA right now make sense. Because they expect to be making more money as their professional seniority increase. So if you are in the 25% tax bracket, it is better to roll the money to Roth and pay the 25% than wait until you are in the 33% bracket.

Best of luck.

Answer 5

why dont you roll them into your current 401k?
Plus, if you roll into a roth IRA, you will pay taxes on the money right now. Not the best idea, perhaps.
Shouldn't cost anything to open an IRA, but the best idea is to roll it into your current 401k.

Answer 6

Roll it all over into a Fixed Index Annuity clasified as an IRA for Zero cost. No annual IRA charges.

Fixed Index Annuities ------Where your account value does NOT Decline in Value. -----Where the Credited Interest to your account does NOT Decline in Value. -------Where the interest you earn each year is based ONLY on the Upside of a Stock Index (You would accept a Cap on the Upside of say 8% in exchange for not having your account decline in value, wouldn't you???? I know I would!!!!) The Cap varies by company & annuity and is usually guaranteed for 1 year. Other crediting methods are also available. To Learn more Visit: http://www.jdsannuities.com/index_annuities

By the way, the way the insurance company is able to vary the interest you earn which is based on a stock index is by the use of a derivative for the interest part only.

Answer 7

Here's what I did, and I'm VERY pleased with the results.

Put it all into American ICA - the Investment Company of America. They've been in business for decades. Year to date return is 9%.

I like that fund because it does well in an up market, and is very resilient in a down market. And between age 31 and 65, you will certainly see both up and down markets.

Most mutual funds (and there are thousands of them in the US alone) are no-load, but some (including this one) do charge a sales commission when you by into the fund.