Profit sharing and 401K?

Question

I have a profit sharing and 401K account with a company that I left a year ago. Not sure what to do with the accounts, people tell me to open a IRA. I think I can also just leave the accounts open with the company. Any suggestions. Also not sure where to go to open a IRA or what type. THanks

Answer 1

Since the company obviously hasn't cashed you out, you can just let the money sit there.

However, there is something to be said for rolling it over into an IRA. First, you will undoubtedly have more investment choices. Most 401k only offer 10 - 20 investments to choose from.

Secondly, depending on what company handles your 401k, this is an opportunity to reduce the expenses charged on those investments. If you rolled it over to an IRA at Vanguard, you can choose very low cost investments. Less expenses mean more return generally. Vanguard has pretty much the lowest expenses in the business.

Third, once you've rolled over the money, there's no difficulty getting at it later on.

Bottom line, I highly recommend doing a direct rollover, that means you don't ever see the money. The money is sent directly from your old 401k to the new rollover IRA. This way you avoid all tax issues and tax witholding on the money.

Choose a low cost investment house, like Vanguard or Fidelity.

Answer 2

I don't know for sure, but I bet you would only be able to borrow against vested funds in the profit sharing plan if at all. If the profit sharing is going into a retirement fund of some sort, you will have to pay penalties and taxes if you do not repay the loan. You will have to check with your HR department or whoever manages the profit sharing plan. Regardless, borrowing against retirement funds is a bad, bad idea unless it is the absolute last resort to keep from losing your home. With 401k loans, when you are no longer part of the plan whether through getting fired, laid off, quitting, or the company being sold, you will have to pay off the debt within 60 days or pay 10% penalty plus taxes. Is a loan right now worth risking 40% of the debt? I don't think it is. I would imagine the profit sharing works in much the same manner. Also, when money comes out of the retirement fund, you are reducing the amount of interest you are earning. Probably doesn't sound like much now, but 30 years down the road, it could be tens of thousands of dollars (if not hundres of thousands). IMO, there is nothing I could buy right now that is worth the reduced retirement or the risk. If you are in financial troubles, there are other means to get out of a bad situation.

Answer 3

It is highly recommended, that you roll your 401k and other roll over elegible investments into an IRA with a legitimate investment firm.

Leaving your investments with the 401k plan only gives you the choice to invest it with the selected instruments of your employers plan. If you move it to an IRA then you are open to invest in anything and also most investment firms offer managed services of your money. Also leaving your money wiht the previous employer will most like incur an annual fee.

Answer 4

If you're present 401K is performing well and you don't have to pay any extra fees on account of not being an employee anymore, go ahead and leave it where it is.

If you decide to roll it, you can go to a multiple of places. I used Vanguard and my husband used Principle but you can go other places too. If you went outside the auspices of your former employer you'd have a larger pool of funds to chose from which might fit your investing strategy better than what it's in now.

You would need to open an Individual IRA to not have tax consequences. If you used it for a ROTH, you'd be taxed.

Answer 5

There are many options you can do with it. I invest with a firm I'm very pleased with, and I'm sure someone with them could help you better than I could. Try contacting Linsco Private Ledger (LPL)....www.lpl.com.