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Old 03-10-2017, 02:53 AM   #1
nikkeiS2K
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Rolling over 401K & down payment savings

I need to find a new place for both my retirement savings and the savings I am accumulating for the down payment on a primary residence. I think opening a brokerage account is the obvious choice here, but I am confused about which brokerage I should go with. I have heard good things about Vanguard and see they do not charge any commission fees if you trade with their ETFs, which is what I want to do. The plan is to throw the down payment savings into the S&P500 ETF (or possibly something riskier) for 5 years which is when I plan to buy my home. Vanguard also has a 401K account, so I thought it would be good to have my money be managed there. As if now my money is sitting in a Fidelity account being unmanaged because it was with a company I quit a few months ago. I feel like my money could grow at a greater rate by rolling it over to the Vanguard 401K account. The reason I don't want to rollover into my current company's 401K plan is because they are a small company and their options for mutual funds are very limited. I am still taking advantage of their matching contributions, however. Besides Vanguard are there any other brokers I should consider? I am pretty new at this stuff.

Last edited by nikkeiS2K; 03-10-2017 at 02:56 AM.
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Old 03-13-2017, 05:26 AM   #2
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As a general rule, you'll roll your old 401k into an IRA if you move it to a self-managed account (instead of another company 401k) unless you're self-employed or otherwise eligible for a solo-type 401k plan. The tax advantages are the same, the only "downside" really is legal protection from creditors in some states is not as robust for IRAs as the federal protections in place for 401k's. Just be sure you set up two separate accounts, one for the roll-over and a separate one to be used for the down payments money.

Vanguard is a great brokerage for long-term investing when using their funds. Can't hardly beat "free" and they have some great funds with very low expenses. I use TD Ameritrade and take advantage of their commission free ETFs (including some Vanguard funds) but I'm with them primarily for reasons that aren't applicable to your situation (what they offer for trading stocks instead of investing for instance). I can't think of any compelling reasons to use a brokerage other than Vanguard in your situation of the top of my head though.
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Old 03-13-2017, 08:11 PM   #3
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Quote:
Originally Posted by Wraisil View Post
As a general rule, you'll roll your old 401k into an IRA if you move it to a self-managed account (instead of another company 401k) unless you're self-employed or otherwise eligible for a solo-type 401k plan. The tax advantages are the same, the only "downside" really is legal protection from creditors in some states is not as robust for IRAs as the federal protections in place for 401k's. Just be sure you set up two separate accounts, one for the roll-over and a separate one to be used for the down payments money.

Vanguard is a great brokerage for long-term investing when using their funds. Can't hardly beat "free" and they have some great funds with very low expenses. I use TD Ameritrade and take advantage of their commission free ETFs (including some Vanguard funds) but I'm with them primarily for reasons that aren't applicable to your situation (what they offer for trading stocks instead of investing for instance). I can't think of any compelling reasons to use a brokerage other than Vanguard in your situation of the top of my head though.
Good info. Just a few questions:

1) Would I be able to move my retirement savings to a 401K if I change companies again and find that I like the new company's 401K plan?

2) If I want to trade stocks with part of my down payment savings should I still stick with Vanguard? I like Vanguards ETFs for the long-term, but also want to do some day trading on the side as well.

3) Is the fact that I have an account open with Robinhood going to affect anything?

4) Am I really limited to $5500 for a Traditional IRA? That seems like a huge drawback from the $18,000 I can contribute to a 401K. Maybe I am not understanding this right.

Last edited by nikkeiS2K; 03-14-2017 at 04:31 AM.
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Old 03-14-2017, 09:11 AM   #4
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Originally Posted by nikkeiS2K View Post
Good info. Just a few questions:

1) Would I be able to move my retirement savings to a 401K if I change companies again and find that I like the new company's 401K plan?

2) If I want to trade stocks with part of my down payment savings should I still stick with Vanguard? I like Vanguards ETFs for the long-term, but also want to do some day trading on the side as well.

3) Is the fact that I have an account open with Robinhood going to affect anything?

4) Am I really limited to $5500 for a Traditional IRA? That seems like a huge drawback from the $18,000 I can contribute to a 401K. Maybe I am not understanding this right.
https://www.irs.gov/retirement-plans...mparison-chart

You are limited to $5500 for your total IRA contributions. Roth or not.
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Old 03-15-2017, 05:26 AM   #5
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Originally Posted by nikkeiS2K View Post
Good info. Just a few questions:

1) Would I be able to move my retirement savings to a 401K if I change companies again and find that I like the new company's 401K plan?

2) If I want to trade stocks with part of my down payment savings should I still stick with Vanguard? I like Vanguards ETFs for the long-term, but also want to do some day trading on the side as well.

3) Is the fact that I have an account open with Robinhood going to affect anything?

4) Am I really limited to $5500 for a Traditional IRA? That seems like a huge drawback from the $18,000 I can contribute to a 401K. Maybe I am not understanding this right.
1. You can rollover an IRA into a 401k. Though I doubt you'll find a 401k plan with "better" offerings than you would find available at Vanguard (I'd say the chance was 0%, but there might be an outlier somewhere).

2. Day-trading with money that is "needed soon" is a pretty bad idea. That said, you can trade stocks at Vanguard.

3. It shouldn't impact your ability to rollover a 401k or invest money elsewhere.

4. Yes, IRA contributions are limited to $5,500 per year and 401k contributions are limited to $18k per year (from you). For most people, you can contribute to both. I maxed out my 401k last year and contributed $5,500 to my Roth IRA for example. There are various limits for determining eligibility for Roth and/or tax deductibility of contributions to tIRAs however.


*note: contribution limits do NOT include money rolled over into an IRA.

Edited the first bullet for accuracy thanks to JJ's noticing it was incorrect.

Last edited by Wraisil; 05-03-2017 at 11:35 AM.
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Old 03-16-2017, 01:56 AM   #6
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Originally Posted by Wraisil View Post
2. Day-trading with money that is "needed soon" is a pretty bad idea. That said, you can trade stocks at Vanguard.
I take that back. I won't be day trading with my down payment savings, but I will be investing in more riskier investments for the first 2-3 years since I am looking at a 5 year timeline until I purchase a home. As I close in buying a home I will kick it back a few notches and invest in safer investments.

I just opened up my Vanguard Roth IRA and "General Investment" account. Cannot wait to get the ball rolling on investing.

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Old 03-16-2017, 09:28 AM   #7
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I take that back. I won't be day trading with my down payment savings, but I will be investing in more riskier investments for the first 2-3 years since I am looking at a 5 year timeline until I purchase a home. As I close in buying a home I will kick it back a few notches and invest in safer investments.
As someone who did just that, I have some advice (feel free to ignore it). Just throw the down payment money in some mutual funds and let it grow there. Of all the stocks I played I maybe broke even. All the time spent checking the account and researching companies was a pretty poor use of my time.

But as always your luck will vary.
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Old 03-17-2017, 01:21 AM   #8
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Quote:
Originally Posted by wallaby13 View Post
As someone who did just that, I have some advice (feel free to ignore it). Just throw the down payment money in some mutual funds and let it grow there. Of all the stocks I played I maybe broke even. All the time spent checking the account and researching companies was a pretty poor use of my time.

But as always your luck will vary.
Good to know. Ya, I wouldn't waste my time researching into companies in this case. The plan is to pick a few ETFs and throw everything in there then come back a few years later and select safer ETFs and pray I have a good return in 5 years. My reason for doing all this is I wanted to find a good home for my money to grow instead of LOSING money sitting in my back account, which it was doing for the first 4 years...

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Old 03-17-2017, 09:19 AM   #9
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Good to know. Ya, I wouldn't waste my time researching into companies in this case. The plan is to pick a few ETFs and throw everything in there then come back a few years later and select safer ETFs and pray I have a good return in 5 years. My reason for doing all this is I wanted to find a good home for my money to grow instead of LOSING money sitting in my back account, which it was doing for the first 4 years...
Ya I hear you. A good bond or index fund should at least allow you to keep up with inflation. I was pretty happy with Vangaurd's ETF.

The housing market is another wacky thing.
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Old 05-01-2017, 03:04 PM   #10
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I'm currently in on Vanguard ETF - VTI. It indexes the market. For now I am all in on that fund, but I am under $20k with my Roth, so not too concerned. When I have a higher balance I work to create a more diversified portfolio. My 401k is also with Vanguard and has been doing very well. Seeing a lifetime return of 11.4%...knock on wood.
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Old 05-01-2017, 07:51 PM   #11
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I'm currently in on Vanguard ETF - VTI. It indexes the market. For now I am all in on that fund, but I am under $20k with my Roth, so not too concerned. When I have a higher balance I work to create a more diversified portfolio. My 401k is also with Vanguard and has been doing very well. Seeing a lifetime return of 11.4%...knock on wood.
I also went all in on VTI (starting today).
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Old 05-02-2017, 11:58 AM   #12
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I also went all in on VTI (starting today).
Sounds like a good plan, plus VTI has a very low expense ratio. When you amass greater dollars in your Roth, look to add international diversification such as VXUS or VEU. I've looked into them, but for now my account balance is not large enough for me warrant that level of diversification.

My wife's Roth is with Schwab. I have her in their ETF SCHB which is basically Schwab's version of VTI.

Other's opinions may vary, but always keep 3 to 5 months liquid in your local savings account to cover job loss, medical or emergency needs. Some would argue this and cite that you can remove contribution dollars penalty free from Roth, but do you really want to go through that hassle when your heat-pump gives up the ghost or for an insurance deductible?
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Old 05-02-2017, 12:35 PM   #13
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1. You can't rollover an IRA into a 401k. Though I doubt you'll find a 401k plan with "better" offerings than you would find available at Vanguard (I'd say the chance was 0%, but there might be an outlier somewhere).
Never thought i'd debate something you said since you always give spot on information, however you can in fact move IRA assets to a company sponsored plan. It is a Code G distribution out of your IRA to a new company plan.

Most company plans do not allow this in my experience, and most of all, what is the point. The cost of maintaining an IRA is cheaper and your investment options are far greater than those offered in a 401k plan. So in the event that you can transfer your IRA back to a new employer's 401k plan, logistically speaking it doesn't really make sense.
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Old 05-02-2017, 12:43 PM   #14
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4) Am I really limited to $5500 for a Traditional IRA? That seems like a huge drawback from the $18,000 I can contribute to a 401K. Maybe I am not understanding this right.
Not exactly sure what your situation is almost 2 months later but, are you still active with the company that holds your 401k?

If you are no longer employed, you cannot make eligible contributions so that $18k is out the window in the first place. If you are still there, what is the reason for moving assets over to your IRA? Do they not allow penalty free distributions for first time homebuyers? This is a common option for 401k plans, but not a default.

If no, then you have to see if they do allow you to take a distribution to roll over into your IRA. Some 401k's wouldn't really allow this until you are no longer working for the company. This eligibility also can be determined if you are fully vested in your 401k.

The issue with this is that 401k packages is like ordering dinner at a steak house. Everything is a la carte for the employer and the more options you have (vesting, distributions, hardship, rollovers, investment options, etc) are all additional costs to the company, so its hard to say exactly what you can and cannot do as it is up to your plan administrator to determine what options (expenses) the company wants to take on when opening up the plan for your company

Best thing to do (if you haven't already) is contact the 401k group and ask what options you have.

Also, as others have said before, your 401k and IRA distributions are completely different. If you are still contributing to your 401k (even pre-tax) you can still open an IRA and contribute up to $5500 a year ($6500 a year over the age of 50 1/2)
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Old 05-03-2017, 11:33 AM   #15
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Never thought i'd debate something you said since you always give spot on information, however you can in fact move IRA assets to a company sponsored plan. It is a Code G distribution out of your IRA to a new company plan.

Most company plans do not allow this in my experience, and most of all, what is the point. The cost of maintaining an IRA is cheaper and your investment options are far greater than those offered in a 401k plan. So in the event that you can transfer your IRA back to a new employer's 401k plan, logistically speaking it doesn't really make sense.
Thanks for the correction, that's actually what I meant to write (you can, but the offerings will not likely be better was what I was trying to say, obviously I screwed that up lol). Not sure how I screwed that up so badly and didn't notice

As an aside, the one time I would consider recommending moving your IRA balance to a 401k would be to get rid of the existing deductible contributions from your tIRA in order to facilitate more effective backdoor Roth contributions moving forward.

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Old 10-08-2017, 02:37 AM   #16
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Quote:
Originally Posted by JJR4884 View Post
Not exactly sure what your situation is almost 2 months later but, are you still active with the company that holds your 401k?

If you are no longer employed, you cannot make eligible contributions so that $18k is out the window in the first place. If you are still there, what is the reason for moving assets over to your IRA? Do they not allow penalty free distributions for first time homebuyers? This is a common option for 401k plans, but not a default.

If no, then you have to see if they do allow you to take a distribution to roll over into your IRA. Some 401k's wouldn't really allow this until you are no longer working for the company. This eligibility also can be determined if you are fully vested in your 401k.

The issue with this is that 401k packages is like ordering dinner at a steak house. Everything is a la carte for the employer and the more options you have (vesting, distributions, hardship, rollovers, investment options, etc) are all additional costs to the company, so its hard to say exactly what you can and cannot do as it is up to your plan administrator to determine what options (expenses) the company wants to take on when opening up the plan for your company

Best thing to do (if you haven't already) is contact the 401k group and ask what options you have.

Also, as others have said before, your 401k and IRA distributions are completely different. If you are still contributing to your 401k (even pre-tax) you can still open an IRA and contribute up to $5500 a year ($6500 a year over the age of 50 1/2)
I am no longer employed by the company for the 401K I wanted to rollover. I actually haven't taken any action on that 401K and left it as is because it has been performing so well recently. I am 18% ROI YTD. Eventually I want to move it over *somewhere* though because I no longer have access to manage my mutual funds anymore. I thought rolling it over to an IRA because my current company is a private company and they recently started their 401K program so the mutual funds are still limited. However, I think I will just rollover my ex-company's 401K contributions into my current and continue rolling over as long as I am working for someone else. I also have a Roth IRA I am maxing out at my current company.
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