I am retiring next week and hope you can help with apparently a stupid question. Is it true that I cannot roll over my 401K and Lump Sum Pension into a bank's IRA C-D's? The money is not needed at this time because I want to try to use only my acquired company stock dividends.
The banks investments companies want the funds rolled over into a variable annuity, or, since I refused (I already have a couple), Money Market funds--maybe CD's if I insist, but neither the bank's. I guess they must be mutual funds (?), I can't deal with the bank? Only with the banks' investment companies? Thanks so much for any information.
This is enough reason for me to not move the money to them. If I understand your situation, you want a Rollover IRA for both the
401(k) as well as the Pension. Any broker would be happy to take this money (via direct transfer, make sure the check is not payable to you) and you can then invest it appropriately.
These accounts (both 401(k) and the portable/lump sum pension) are both tax deferred, there is no benefit to paying for an annuity to hold money already tax deferred.
could pick a very short-term Gov Bond Fund which typically adjusts as short-term (1-2yr) interest rates change and it's at least 3.5 to 4.5 % per year which when compounded is not too shabby
wouldn't this also be pretty much the same as putting it into money market account? the MM account may have very similar interest rate, of course if the CD is multi-year (ie 5 yr) then the CD trumps the MM rates
In a single word: commissions. The bank, and probably the salesman, makes more money selling variable annuities than they do by selling CDs.
Let me suggest that you call Fidelity 1-800-FIDELITY, and ask them about rolling a 401(k) into CDs or something similar and see what they suggest.
Can you say why you want CDs and not, say, a mutual fund portfolio? A CD portfolio probably will not keep up with inflation over the long term, especially when you consider the taxes you will pay when you take distributions. Frequently, is is possible to put together a portfolio containing stock mutual funds, bond mutual funds, and money market funds, or ETFs (electronically traded funds, I think) that will do a good job of preserving your capital and give you an opportunity for some growth. By trading off the proportions between the fund categories, you can make the portfolio match your risk tolerance, and you might be surprised that sometimes you can increase your return and lower your risk by including stocks. Fidelity's web site has a risk profile survey that can help you match your risk tolerance with proportions. Or they could mail you a risk profile booklet if you ask for it when you call. Fidelity also has a retirement income planner, which might be useful to you. I presume that Vanguard also has these available.
I think they are not seeing that your CDs will be in an IRA. Will they let you open an IRA? Can you have any type of investment in their IRA? No, you don't want to take your 401k or pension and put them directly into CDs, else you would be paying income tax on the entire thing this year. You want to open an IRA and then choose your investment. But, as someone else asked, why CDs?
Indeed, you can roll over that 401k into an brokerage IRA account or mutual fund IRA account you like. It doesn't have to be a bank at all, and may very well be better off far away from a bank.
He may well want some cash and or short-med term bonds to offset the volatility of what sounds like a portfolio which also has substantial equity exposure. To the OP - if that "acquired company stock" is a big chunk of your assets you may want to talk to an honest advisor about how to manage that very concntrated exposure. Folks on this newsgroup will be happy to provide ideas if you fill us in a bit more on details, but sometimes dealing with acquired company stock can be a little tricky - taxes, etc, and the cost of consulting with a pro may save you a lot in the long run.
I think I'd probably find another bank altogether. First they mislead him about what he can do with the money, then they try to sell him what are very likely (okay, there's a tiny chance - teeny tiny - not) entirely inapporpriate and expensive VAs.
If they made a real case for VAs other than "that's all we have for you" I'd be curious to see how they try to justify them for this guy.
I'd probably lean towards a decent brokerage IRA account - any of which will give him access to CDs (very likely quite competitive ones) as well as a universe of other options - including MMFs, short/med-term bonds, etc, as well as other asset classes he may need to build his target allocation.
Very seriously, though - if that employer stock is more than a few percent of your net worth, some serious thought about diversification is in order.
HB - take Bread's advice now - don't wait! Your financial situation is very complex and you sound very uninformed regarding these matters. You need a professional financial planner and probably a CPA to help you. Do you have a trusted friend or relative who can help you find the appropriate professional help? If not, try elder organizations in your area for advice regarding financial professionals.
When you meet with the planner, be sure you have a complete understanding of "safe" investments. Safe from what? Safe from the ups and downs of the stock market, or safe from the ravages of inflation?
Being already retired, I suspect you and I are close in age. I know that the biggest risk in retirement is inflation eating up the purchasing power of my hard-won nest egg. Yes, I have some conservative investments, but I also have quite a bit in diversified equity mutual funds. The conservative cash-type investments are for money I'll need in the next few years, but the equity mutual funds are for money I'll need several years from now. As time marches on, I can move some money from equities to cash. You will quite likely need both types of investments, too.
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