IRA Rollover

Question: Rollover 401k to Traditional IRA or new company 401k?

Hi, I’m 30 years old, single but will be married in a few months and the company I work for has new ownership so the 401k company is changing. I have the option to cash out my previous 401k, which I don’t want to do because of the tax implications. So, I have the option of doing a direct rollover to a Traditional IRA or my new 401k provider. I cannot rollover to a Roth IRA, etc.

Answer: You actually touch on a few different issues about rolling 401Ks to IRAs. First, although you can probably roll into the new 401K, I believe you are better off with an IRA rollover. That way, you have complete control over your investment, not the company’s plan.

An IRA can be invested in many different things. If you have an IRA CD (which I don’t recommend for someone your age), it will be FDIC insured up to $250,000 currently. 401K plans are generally NOT bank deposited, so I’m not sure what you mean about the $100,000 figure.

Your IRA rollover can be invested in mutual funds. If you know nothing about investing you can do one of 2 things: a) go to an investment advisor who will educate you and make recommendations; or b) do online investing with a low-expense mutual fund company like Vanguard, for example. They have an investment choice that is based on your current age, and they change the investments over the years to reflect how soon you will need the money for retirement.

I suggest checking into both options and then making a decision. Good luck!

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