Where to Roll Over My 401k

by David@MoneyNing.com · 21 comments




Now that I decided to roll my 401k into a traditional IRA, the next step is to figure out the company that I should roll the money into. As the funds will likely remain in the same place until I’m past 60 years old, it is a decision that I should carefully analyze. I managed to narrow the choices into three and here are some pros and cons of each.

As many of you know, I’m a customer of E*Trade Financial. Currently, I have a brokerage account, Roth IRA as well as an online savings account with them. Adding the traditional IRA account is only natural and it will also allow me to see all my investments in one screen, cutting down on administration.

On the other hand, E*Trade’s big loan portfolio and the current mortgage crisis could possibly (amid a very small chance) mean disaster for the brokerage firm one day. If I look at the situation on a strict risk analysis basis, I should open an account elsewhere. (Note that I know about being able to recoup the money through insurance and protection but why put yourself through trying to get back 5 different accounts equaling your life savings all at the same time?)

Vanguard index funds are the most popular way of index investing. By going to a reputable name like Vanguard for my traditional 401k, I cannot really go wrong. I don’t have much experience with them but I’m extremely confident that I will be happy with their service (the low fee index funds also doesn’t hurt).

My concern with putting my 401k into a Vanguard index fund is that I may not be maximizing my potential reward by being too conservative. In general, index funds are a pretty safe way to capture gains from a long term upward movement in the stock market. Since my 401k is not redeemable until I’m 59 years and a 1/2, this means that I won’t need the money for another 32 years. With this type of time horizon, perhaps funds/stocks with bigger price movements than an index fund are more suitable for me.

Wells Fargo
Even though they have ridicules fees, this option for me is not out of the question. I’ve been so impressed with Wells Fargo through banking with them for the last 5 years that I might be willing to play extra to have my money invested with them.

The only negative I see with this is really the cost. They charge something like $75 per year for maintaining the account and this just might be too much.

What Do You Think?

If you were me, what would you do?

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{ read the comments below or add one }

  • Brian Lobo says:

    I have dealt with Charles Schwab and Fidelity. I own a regular account, an IRA account and A Roth IRA account. I also have my 401K with Fidelity through my company. I think Charles Schwab has a good system and I prefer them. I like their rating system that they have for stocks.

  • andrew says:

    I would go with Interactive Brokers. You can trade any instrument in the world with them. Warning though, they are geared for professionals so there is little hand holding. They have the lowest trading fees of any broker and are traded on the stock exchange, ie, IBKR. So you at least know their financial stability, not so with private brokers such as Fidelity etc.

  • James says:

    I lost my job recently. I need to roll over my 401K to a IRA account. Who should I go with. Should I get a do it yourself type account to save are pay someone to help me with investment. I am an amateur to this stuff.

    • MoneyNing says:

      There’s no right answer. Doing it yourself theoretically is much cheaper for most people but that’s assuming the individual will take the time to learn simple to implement but efficient ways to grow the investments. Hiring someone can be good because the advisor can theoretically help you with taking the right steps at the right time but it is also costly, not to mention that you might find one who won’t have your best interest at heart.

      It boils down to understanding yourself. If you have the patience, discipline and cognitive ability to do it yourself, then that’s the way to go. Otherwise, spend even more time trying to look/compare/analyze advisors to find the right one.

  • Randall says:

    Roll it over to TDAmeritrade and start investing in their commission-free ETFs. They have 102 ETFs and charge no transaction fees. What does this mean? It means you can buy one share at a time if you want and have no transaction costs. ETF’s are also more efficient and charge less management fees than mutual funds. Vanguard, iShares and others are well represented in these TDAmeritrade no-cost ETF funds. You also will be able to buy individual stock in your roll-over IRA via your TDAmeritade account. An option that you want, look for Preferred Stocks and Gold CEFs (Closed End Funds), as well.

    If you can’t do it alone, then hire a financial advisor and watch them like a hawk.

  • Steve says:

    I just consolidated 3 of my previous 401ks into a Traditional IRA at my credit union and found out it only pays .10% in interests annually. What should I do? I have about $70k and this is not going to grow over the next 15 yrs. What can I roll it into? I was mislead at my CU. Thanks.

    • MoneyNing says:

      As this decision is much more complex than just finding an institution to hold your funds, you should research carefully on your options. There are many places you can transfer your IRA money to where you can invest to earn an investment return, though the more potential return, the more risks you are incurring. A good place is Vanguard.com, where you can buy their funds, ETFs and more.

      However, note the one year rollover limitation, where you aren’t suppose to roll money from one institution to the next for more than once a year. So before you roll over the money from a CU into yet another place, you should make sure you don’t violate this rule or else you will be paying a penalty on your funds.

  • Linda says:

    I was fired in April 2011 and have left my 401K intact with that company. Should I roll it into a traditional IRA, leave it, or what? There is over $140K in the fund.
    Thank you.

    • MoneyNing says:

      Some 401ks allow participants to invest in special types of funds, but most will find that there are lower cost equivalents in a traditional IRA that anyone can setup.

      Unless there’s some special reason why you want to leave your funds in the 401k, you probably would want to transfer them to a traditional IRA.

  • Need advice says:

    I got laid off last month. Should I roll my 401K over to a Roth IRA and then take out the money. This to pay of my car/credit card have some money for mortgage and maybe put $5000 in individual stocks? My other option is to sell my house and keep my Roth IRA intact.

    • MoneyNing says:

      Unless you have NO savings at all, I would never advise you to take money out of the 401k because of the penalties and taxes that you have to pay. Remember that on top of the 10% penalty, the amount of money you take out is considered income, and may even push you to a higher tax bracket than you normally would be.

      However, if you take the money out, I would just take enough to pay off your obligations and not more. In other words, take as little as you need and learn to cut down your spending drastically to cope.

      Finally, note that when you roll over a 401k (assuming it’s not a Roth 401k), it needs to be rolled over to a TRADITIONAL IRA (not Roth).

  • Roger says:

    I personally believe in finding a financial advisor, i guess when i was young i was told that you dont go to a doctor to get your car fixed, and i guess my retirement and financial planning is more important to me then a cheap servicing fee. But that is just my opinion. The way I look at it i am willing to pay 1% to a advisor when it is his profession, alot of my friends try to do it themselves, but i always say..i would rather pay 1% more in fee to a professional advisor then have cheap fees and loss more. I feel a advisor protects me from losing to much on the downside, and also helps me on the upside to gain more of the profits. just my take on it, i stick with a advisor.

  • Len Fox says:

    I think that buying an index fund is fine for passive investing. Passive investing reulted in a 40% loss for “passive” investors in 2008. You would now need to make 65% to recover. I used to be a passive investor during the dot.com crash and vowed that never again would I take more time taking out the trash than I did managing my most critical assets. I learned how to use market timing techniques and made money last year.

    There are groups of advisors in an organization called NAAIM. National Association of Active Investment Managers. Don’tt be passive. If you don’t have the tools to manage hire a professional that does. You may have to pay them more than a index fund but you will have someone that gets up every morning and thinks about where your money has to be to safely make money that day and every day. Even in Bear markets.

  • No Debt Plan says:

    If Warren Buffet is happy with index returns, shouldn’t we all be?

    Our stuff is with Vanguard.

  • Dividend Growth Investor says:

    I have heard that Fidelity is cheapest to open an IRA in terms of fees. But of course it all depends on what you want to invest your funds into. If you want to purchase individual stocks, you might want to open an acocunt at Zecco or sharebuilder. If you want to have mutual funds instead, then go for fidelity.

  • Joseph @ Debit versus Credit says:

    I love Vanguard and based on that list I would probably go with them. You do know that you can invest in more than just index funds with them of course, right? You’ve got access to stocks, bonds, funds… even options. Like I said if it was me I would go with them.

    Otherwise T Rowe price is a good option as well.

  • IRA CD Rates says:


    I’m hurt. That is what we do. :O)

    Actually our niche is CDs so at this point not a good option for you, given your age.

    Our broker/dealer uses a lot of Charles Schwab’s products.

    Honestly, since we mainly deal with CDs, I don’t check on most of the other things. Our company plan goes through Fidelity. There fees same high.

    Good luck.

  • marci says:

    If you are already agressive with the Roth and the investments, it doesn’t hurt to have a conservative side to the three legged stool. I like vanguard. I like Van Kampen.

    Thru my Edward Jones account, I have the option of splitting up my IRA into various components… part are in conservative funds, but some is in very agressive funds. I like being able to have that flexibility to move things around within the traditional IRA.

  • MoneyNing says:

    david: Thanks for the suggestion. I will definitely check it out.

    Bill Davis: Hmm $1 million might be a little too much for me right now but $10.95 isn’t bad I guess since I probably won’t treat that often with this account.

    ETFs a good idea. I will look into it once I switch over and have access to stocks/funds/ETFs etc.

  • Bill Davis says:

    I hesitate to offer this suggestion, but you should check out Fidelity or Schwab. Fidelity is not likely to fail (unless everybody else does) and it offers great choices and very low commissions, especially if you have a lot of funds to invest ($8 if over $1 million in assets, 10.95 if over $50k). I’d suggest putting a lot of your money in ETFs, as you pay a one-time fee of $8 or $10.95 no matter how many shares you buy (ETFs cost much less than even the lowest-cost index funds).

    Hate to muddy the waters, but you could get some great ETFs “on sale” right now for next to nothing in fees.

  • david says:

    Personally, we love TRowePrice, it’s where all our retirement and mutuals are.

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