Need finincial advice. A good portion of my retirement savings was going to my companies stock option plan.?

Question

My corp. has gone private so I'm no longer able to get stock. Sould I increase my pre-tax 401K contributions ( currently I 'm only contributing up tp the company match) or should I take the extra money (post tax) and open a Roth IRA?

Any other advice would be appreciated.

Thanks...Rob

Should've given more info. My 401k is diversified and since the company did a stock buy back... I 'm trying to determine what to do with the portion of my income that used to go toward co. stock. I'm 44, my income so far this year will be arround 140K. Considering that I'm in the highest tax bracket does that make a Roth less desirable?

Answer 1

Always very risky to tie your retirement to an individual company stock (i.e. Enron). Better to choose a diversified mutual fund (i.e. from Vanguard, Fidelity, TRowe Price) for your 401K. If you were ever to move to a different company you could either leave the balance there (although you can't contribute to the balance), or roll it over into a rollover IRA that you control yourself. Consult IRS for income limits on contributing to a Roth IRA.

Answer 2

It would depend on where the company is investing the funds for the 401K, check the prospectus and see if they are diversified. Then I would say yes, increase the 401K contributions by whatever you were spending on the stock.

or you could open another 401K elsewhere with those funds and take the tax deduction for the deposits at tax time. Or you could open the Roth IRA. or you could start an investment account not tied to retirement specifically.

Do you have a tax accountant or a financial advisor? Consult them and discuss what works best for you financially.

Answer 3

Rob,

You ask a great question, unfortunately there are several possible answers. I typically advise people who are young and still in a low tax bracket to take advantage of the after tax savings a Roth can offer. Your doing the right thing currently in my opinion by deferring as much as you can to get the match. Whatever that amounts to along with other factors such as your age, income level and potential will indicate whether or not utilizing a Roth is truly in your best interest. On a separate note, it is always a good rule of thumb to limit your exposure to company stock so you can be properly diversified. It may be in your best interest at this time to evaluate what your total exposure is to the stock you already accumulated.

Feel free to contact me directly if you have any more questions.
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I hope I was of help.

Answer 4

First and foremost, never invest more than 10% of your retirement portfolio in your own company, there are thousands and thousands or Worldcomm, Enron and Lucent former employees who can explain to you why....

If you are going to take an active role in managing your compnay 401K ( that means reviewing you quarterly statements and moving your contributions to the best returning funds) then contribut up to the company match,, if you are getting up there in age,, exceed the company match.

If you aren't going to take an active role, then cash out pre-tax and rollover to a roth IRA, this will give you the safest furture income, but will not allow you to move the investment into better performing funds.

hope this helps.

Answer 5

Maximize your 401K contributions, minimize your exposure to your employers stock.

Answer 6

you don't say how old you are.............or what are the 401 options,,,,,,,,mutual funds???????????/////
If your young, max your 401k and max your IRA,,,,,,,,,,,,,,,,sooner you do it the more you will have.......On the IRA.open one with a broker so you can buy and sell stocks and bonds in it.................and cd's if you want.......