When you quit, do you have to rollover your 401(k)

[Scanner]

I confess ignorance on this - I have been self-employed all my life. (I'll except beach lifeguarding from my career )

My sister worked for Apple Computers about 7 years ago, quit and has just let her 401(k) sit there. She now has a SEP-IRA and has moved from CA to NJ in thelast month.

She called me up and asked me to evaluate her portfolio as she was assessed some heavy sales charges by her financial advisor in CA and her portfolio hasn't done well (which I am scratching my head on in this market). She is not certain if she is doing well and wants my perspective, to which I am flattered.

Anyway, once we decide on asset allocation and vehicles, and even if we will move anything, I may either defer to a specialist at a mutual fund co. (Vanguard or TRP) to help with the rollover or refer her to my CPA.

Anyway, is it copasetic to just have let a 401(k) sit there? I thought you had to take it with you so to speak in a certain amount of time when you quit a company.

And. . .

Would you recommend a mutual fund co. help her or would you pay a CPA to help with the rollover?

Thanks in advance.

No, most companies allow you to keep your 401k with them, as long as you've accumulated a certain balance ($5,000 in my case). Not that it's a good idea, but it can be done.

[Scanner]

Would you recommend a dependable mutual fund co. handle the rollover? Or is this something to bring a CPA in on?

Yeah, well, this is part of her problem.

Her financial advisor loaded her up with heavy sales charged mutual funds in her SEP-IRA. It sounds like they are back-end loaded. So, understandably, she doesn't want to roll her 401(k) over into this and maybe that's why she let it sit there.

She's an artsy type and this dry financial stuff doesn't really excite her. But she is frugal so she's coming up to snuff pretty quickly.

She may have to bite the bullet and just pay them or we may just leave them (if they are performing average - I'll have to look at their morningstar ratings) and let the rest of her portfolio be no-loads or ETF's - we'll see.

Rollovers are just virgin territory for me.

[kv968]

She should be able to keep it in her 401k. That would most likely depend on the company's policy but if it's not a miniscule amount (ie. $500) I would think she could just keep it there. The question is, should she? I don't know if the portfolio you were talking about that wasn't doing so good included her 401k also but if she's not happy with it, roll it over.

With rolling it over I would just talk to someone at a mutual fund company and do it yourself. There's really nothing a CPA could help with. That is of course unless she had stock options in there. In that case, she may want to talk to a tax person to see how she should deal with that.

[Scanner]

KV,

Thanks.

I beleive it's her SEP-IRA she's actually unhappy with (financial advisor regret?) so. . .she's probably getting some paralysis on where she wants to deploy her money.

She obviously can't add to her 401(k) and isn't happy with her SEP-IRA at the same time because she knows she'll be hit on the back-end some day.

As far as performance, unless she bought silver , I don't know why she shouldn't be doing well this year.

I agree -- talk to one of the low-cost mutual fund companies. They pretty much handle the whole rollover for you. You open an account, decide which fund(s) you want your money to go to, then they send you forms to fill out and sign. They'll make sure the rollover is a direct rollover (i.e. the check is sent directly from the old employer to the mutual fund company to avoid taxes and penalties). Shouldn't be any need to hire an accountant or financial planner for this situation.

[scfr]

After I left my former employer, I decided to leave my 401K where it was for several years because I was really happy with the choices available to me (Vanguard plain-vanilla stock & bond index funds). Also, the company I used to work for was about as rock-solid as they come and I wasn't at all concerned that they'd go bankrupt, leaving me unable to locate the plan administrator. After several years had passed, I decided to go ahead and move it to a rollover IRA because there had been enough turnover that I realized sooner or later no one at the old company would know who I was, and I thought that might make rolling over harder. [Don't know if that's true or not, but it was a concern of mine.]

Some questions to ask her when deciding whether to move to a rollover IRA or leave the 401K are:
- Are the 401K choices available good?
- Is there enough in the 401K to meet the minimum requirements for an IRA to avoid paying annual fees?
- How confident is she in the future of the former employer?

[kv968]

She obviously can't add to her 401(k) and isn't happy with her SEP-IRA at the same time because she knows she'll be hit on the back-end some day.

As far as performance, unless she bought silver , I don't know why she shouldn't be doing well this year.

She should see how she's going to get hit with the back-end loads in her SEP. If it's something to do with the advisor him/herself, that's one situation. However if she bought into mutual funds with share classes (ie. American Funds) and she has "C" Class shares, the back-end load may diminish over time. In that case it might be better for her to hold onto the funds until the fee reduces or goes away completely.

And don't let her go crazy with silver

[Scanner]

KV,

I am not necessarily going to advise her to redeem it for the reasons you outline.

However, if it's carrying a 1 or 2 star morningstar rating, I may just tell her to ditch it, bite the bullet, and go with an index.

No matter what, she'll need another no-load vehicle to roll her 401(k) into. I'll see how often she contributes. If she throws money at it 1x/year, an ETF may actually make sense (or a couple - an international and a domestic or a bond ETF).

I told her she's got a few days before she visits to ponder her investment risk tolerance. She seems to get bugged during market drops so I suspect she's moderate or conservative.

And no, no silver for her, at least not more than what the Pundits say

[Scanner]

SCFR,

The problem is, because she is no longer an employee, she can't add to her previous 401(k). So yes, the choices may be good (probably are at Apple Computers) but she can't add.

And she may need the money to upstart a new no-load fund ($2500-$10,000 depending) that she can feel comfortable adding to.

I am not sure what kind of money we are dealing with here, whether it's 4, 5, or 6 figures.

[kv968]

And no, no silver for her, at least not more than what the Pundits say

The Pundits do kick out a good tune everynow and then

[MonkeyMama]

Yes - the new investment money will help with the rollover. As a CPA I can say there is no need to hire a CPA to help you with that, though one maybe be willing to charge you an arm and a leg to help fill out the forms. It isn't really complicated, you just pick a company and call them and they walk you through. You sing the forms, get them notarized perhaps, and that's about it, they take care of the rest.