I have 70k in a 401K from a company I just left, in a volatile market. What should I do with it?

Answer 1

Roll it over and convert it to a Roth IRA.

By rolling it over to an IRA, you'll be able to more freely direct what you invest in...you won't be limited to the few choices offered by the 401(k) program at your old employer.

By converting it to a Roth, you'll have greater access to your funds.

Mathematically speaking, you'll get the same rate of return whether you do a Roth or a Traditional IRA. However, when you do a Roth, you have a couple of advantages over the Traditional....you can take out your contributions at any time (even before retirement). And, since you've already paid the taxes, after retirement, you have much free-er access to your funds...there's no limit to how much you can take out without incurring any additional tax liability.

Answer 2

Rolling it over to an IRA is a good idea. As to what to invest it in, only you can answer that question. Can you sleep at night "knowing" this is a volatile market and may go down more? If not then invest in CDs or a bank account/money market fund. Check www.bankrate.com for the ones with the highest FDIC insured rates. If you can sleep soundly at night in this market, and think this is a buying opportunity while the market is "on sale", then invest in stocks/mutual funds of your choice. If not sure which ones, maybe a Target Retirement one from a low cost no load fund family (T. Rowe Price, Vanguard, Fidelity etc) will be right for you. Noone here could say for sure without knowing your time horizion, risk tolerance, other investments, etc.

Answer 3

You can leave it in the 401K if you want to.

I rolled mine over into an IRA because there are usually a lot more choices of what to invest in with an IRA.

Just make sure if you do roll it over, you do a direct rollover so you don't wind up with some huge tax penalty.

There are literally too many IRA's out there to chose from for me to even tell you which one to try. My 401K was with Principal so I did a direct rollover from the 401K into a Principal IRA, picked the funds I wanted in the new IRA and have just left it alone except to check it now and then to make sure the funds I picked are still performing. I did change one of the funds last year but that was pretty simple too. I do it all on line.

Additional info on rolling it into an IRA and converting it to a Roth. I don't disagree with the idea but, make sure you understand the tax ramifications of doing that. You would have to pay the taxes on the $70,000 now. It would grow tax free after that but not everyone can afford that kind of a tax hit in the year they make the conversion so make sure you understand what you're doing before you do it.

Answer 4

Good chance to set up something nice.... log on to Fidelity ( or someone like them) and get " rolled over)! My advice would be to split it 60/40...leave 60 in Traditional IRA but convert about 40% into ROTH...( you're going to lose some of it to taxes...but it's a nice lump to start working on a great post- retirement TAX-FREE income !)
If you've been in the 401, you know the routine: put that 60% in a couple of conservative funds..say a balanced and maybe real estate, ( or moderate global)....then do the same with half of the ROTH funds...the other half..you go a little more aggressive and play catch-up.....energy? more global?
When you start withdrawing, you can almost control the amount of income tax you will be paying..( by withdrawing from the ROTH sometimes, the Trad others..)
Somewhere in those accounts you should be able to buy stock... if you pick a nice dividend paying stock, you'll have real potential for some gains in 10/15 years.
Good luck.

Answer 5

If your account is set-up well, you can keep it at your old company. With the market being volatile, you probably want to let the money stay there for a few months until the market cools down.

Go to morningstar or yahoo finance or cnn money and analyze the funds you have in your 401k. See if they are high risk or high cost. If they are not highly rated funds then you should look into moving them into better investments.

Answer 6

If it's invested in your volatile company stock...take it out quick and roll it over, until you find a better way to invest it.