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  1. #1
    Registered User Junior Member

    What to do with an old 401k

    Hello all,

    I need some ideas/advice from the community. As the title states, I am looking for your thought on what to do with my old 401k.

    Unfortunately, I do not have anyone in my life who can help with these types of questions. And while I would happily talk with a financial advisor, I haven't found any good recommendations. And I feel like most of them only want you to put your money with them to earn fees, and they are not committed to getting you the best possible outcome.

    Anyway, let's get started. Here is all the relevant information I think you will need.

    For several years, I was employed by an oil field service company. This was a great job. But there have been a lot of layoffs recently - and like a lot of other people, I was laid off.

    That is the bad news. The good news is that I found another job, though manly roughly $30,000 less per year. To offset that, in my years at the higher salary, I was able to save a little more than $50,000 that I used for a down payment on a house.

    On top of that, I have another $75,000 saved up - including about $50,000 in my old 401k, another $10,000 or so in an IRA, and the rest in a savings account or taxable brokerage account.

    Right now, I am trying to figure out what to do with my savings. And I want to tap into this community to see what ideas are out there.

    So far, I have come up with three options:

    1. Do nothing. Everything just stays as is, and hopefully appreciates over time.

    2. Roll my 401k from my old employer into my existing IRA. And then pretty much do nothing except watch it appreciate over time.

    3. Withdraw some or all of the money in my 401k/IRA and put it towards my house. I know there is an early withdrawal penalty associated with this option. But I like the idea of saving money, and this would reduce my monthly mortgage payments.

    I look forward to hear your ideas, comments and criticisms. Thanks!

  2. What to do with an old 401k
  3. #2
    Glad I got here first.

    Just want to point out that the hit on the early withdrawal of a retirement account is the 10% fee plus income taxes.

    You did't give us your current income, but my guess is the total cost on early liquidation will be approximately 35% (assuming everything is taxed at the 25% bracket).

    That is a lot to pay to save on interest expense that probably runs less than 5%.

    Second, I would look at the fees in your 401k. My guess is that rolling it over into your IRA will give you three benefits. (1) Access to lower fee investments. (2) Access to more investment opportunities. (3) And the consolidation of accounts to simplify your life.

    So I would vote to roll over into your IRA.

  4. #3
    Registered User Semi Pro Member
    I think Credit Dave just gave you some solid advice.

    And you may want to roll your entire IRA and 401k all together at a place like Vanguard or Fidelity. Access to low cost funds, not just ETFs. Plus, they will provide you advice and services just for being a customer. So you may even be able to develop the plan you are looking for without feeling like you will be fleeced.

  5. #4
    Registered User Semi Pro Member
    Well, with the new fiduciary rules in place for when you rollover your 401k, you should be able to get some honest advice. Maybe interview places like Vanguard, Schwab and Fidelity and see which you like.

    I would definitely try to avoid the penalties and taxes. Even if you don;t itemize to take advantage of the mortgage interest tax break, it does not seem worth it. Maybe just pay a little extra on the mortgage as you can. It sounds like you are good at saving, so you should be able to accomplish this.

    Also, I would not touch the approximate $15,000 you have in savings and taxable brokerage accounts. That should stay as your cushion.

    Hope the oil services companies bounce back soon and you can get rehired there to up your pay.

  6. #5
    Registered User Junior Member
    One thing I definitely forgot to take into account was the income tax impact on top of the early withdrawal penalty. That's a non-starter.

    And I do like the idea of having my retirement accounts rolled together in one place - it will be easier to manage. I'll start looking into that.


  7. #6
    Registered User Semi Pro Member
    Good luck ... it's a tough investing environment right now.

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