good time to roll over 401Ks?

American Funds is pretty expensive, as they usually come with a hefty load one way or the other.

As it looks like you don't want to manage the account, ou'd be miles ahead with a Vanguard account and pick a representative Target Retirement fund. That will have an asset allocation that is automatically rebalanced and adjusted as time goes by.

I'm not sure what the dollar has to do with it. Without knowing what your current holdings are, it's hard to say much about selling them.

Where is this fee coming from? Is your prospective manager going to charge that for a few rollovers?

Brian

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What's your current holdings in? What does the dollar have anything to do with it?

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"Mike" wrote

Do you mean you no longer hold employment with the companies that originally held the 401(k)s, and so you want to roll them all over to a Traditional IRA?

What is your current asset allocation among large caps, small caps, domestic, bonds, etc.? What funds do you hold now?

If you do not understand asset allocation, then please consider experimenting (over a few hours on a weekend) with the free, interactive, online asset allocation tools linked at

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When you ask "good time", I don't really know what you mean. Whether the market is high, low, or in between, the rollover should be based on other issues which you don't address.

My 401(k) happens to contain an S&P index choice which has a 5 basis point (i.e. .05%) overhead. It would cause me some pain to move that to an IRA with even VFINX at 15 basis points. Yet, since most 401(k)s do not offer a lower expense ratio, the VFINX is exactly what I recommend for one's S&P indexing. You can search through older posts here for the comparison between IRA and 401(k). There are a number of advantages to one over the other depending on one's situation.

I'd think twice about moving to funds with such a large overhead, that

Regular poster here, Elle, has a list of asset allocation tools listed neatly at

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Probably very good advice, though there are certain assumptions going with it (ie. it doesn't take into consideration any other assets/investments he may have). In theory, his 'advisor' is taking all that into consideration. Perhaps the OP would post more details about his situation here.

If he's buying American Funds mutual funds, he's paying a load. American Funds class A shares carry a 5.75% sales fee. That's money right out of the OP's pocket, and that's a lot of money.

I'd rather see him spend some cash out of pocket on a real financial planner - a full-blown financial plan, or at least a few hours of consultation with a planner - should cost a lot less than that (actually on $50k, it'd be $2875), and should give the OP advise that he can use in the future for future contributions, too.

Maybe, but I wouldn't bet on a guy pushing American Funds. A good idea would be for the OP to go over his situation. That includes time until retirement, breakdown of current investments, approximate portfolio size, debt, dependents, etc. etc.

That's definitely what we need.

I know, that was in my original message. However, I don't know if the fee the OP was talking about was the fund loads or additional management fee to do the rollovers. Important information.

That's worth considering. If there are significant assets, a manager working for a percentage of AUM is a possibility. There are also hourly planners that work up a plan that the client has to implement (might not be what is needed here though).

Brian

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The answer is "NO", it is never a good time to pay a fee of $2250 for anything. IRAs and roll-overs are free. Don't pay for that service. An IRA should cost $50 a year max to manage, do pay anyone any loads or fees for what should be free.

-john-

I concur with one caveat: it is not uncommon to charge a fee for closing a 401(k) or IRA account. That said, of course $2250 would be an exhorbitant fee for that purpose. So I that it is.

My suspicion is that it might be a back-end load for the investment(s) within the 401(k). If that's the case, the OP should consider whether his target IRA investment (American Fund or whatever) is expected to do significantly better than the 401(k) investment(s) over the long term. (Emphasis on "long term".) The OP provides insufficient information for any intelligent discussion of that here.

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Hi, all. Thanks much for the advice so far. Here are some answers to your questions:

I'm 38 with about $50k saved up in retirement funds. Not a lot, I know, but I'm making a lot more money this year and should be able to contribute more. I have the following accounts:

Fidelity $19k FID Freedom Fund 2040

Morgan Stanley $15k different funds

Vanguard $16k Target Retirement 2045 Fund Roth IRA

I think that all breaks down into 66% US stocks, 19% non US stocks, and 10% bonds. I'd like to combine them all into one account and have someone with more time/knowledge manage it for me and help me get the amount to where it should be.

The person I'm working with is a financial and investment planner, and she's somewhat of a friend of the family. She wants to put the money into American Funds; I was ok with that. I like AF's management and incentive structure because I think it reduces the motivation for cheating on the part of its personnel; and it has a low stock turnover rate, which I assume means they probably aren't prone to knee-jerk reactions to the market.

Anyway, AF charges a one-time sales fee to purchase their funds, and it has to be done through a financial advisor. For amounts over $50k, the charge is 4.5%. The financial planner gets a portion of that, for which she'll manage my account and any future contributions until the end of time.

As for my concerns about the importance of the value of the dollar, that may be ignorance on my part. I had assumed that a depressed dollar would reduce the value of my investments, such that if I purchased $10,000 worth of shares of some company back when the dollar was high, those same shares might be worth only $8000 or so now. If I sell them now, then, so that I can combine all my money into one account, I had assumed that I'd be losing money.

Or am I missing something basic here? Is moving money to a new account not the same as selling?

Thanks!

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First find out if you can actaully roll the two 401K's into IRA's. If you are still working at the company that sponsors the 401K's you may not be able to roll them over to an IRA.

To a lot of people that's a hefty sale charge to pay, then again others are OK with it. Since you already have a Vanguard acct., you'd know that Vanguard funds are very low cost and there are funds that would do what American funds do for you, and you save 4.5%.

This is only true if you are buying Euro based investments.

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My advice, designed to maximize your retirement savings:

1. Pick Fidelity or Vanguard to hold everything.

1. Figure out an asset allocation using the aforementioned tools. This is not an exact science. E.g. continuing with the 66 dstocks/19 fstocks/10 bonds/5 whatever breakdown you have is probably fine at your age. You have a 20-year time horizon or so until you draw from your retirement, and, historically speaking, that's been long enough to warrant being in all stocks or have a conservative (= high grade) bond allocation to smooth out the volatility of stocks. I strongly suggest you start a new thread to get suggestions on an allocation and funds to fill it. Meanwhile, continue with these steps here.

2. Tell F or V (whichever you chose) that you want to rollover both 401(k)s to Traditional IRAs (TIRAs). Have them open the necessary TIRA account.

1. Ask F or V what retirement planning services they offer, especially (a) what is free online and (b) how much they charge to talk to an adviser. Report back here with questions as needed.

2. Sell and buy as necessary to achieve your desired asset allocation. Buy only low cost ETFs or mutual funds.

1. Plan for this year. Start a new thread laying out your retirement investment options (Roth IRA, TIRA, 401(k)?) and figure out about how much you want to put in each. Give the amount of the match on any 401(k) you have with your current employer along with investment choices in that 401(k).

2. Review your financial standing. How much do you need to save for retirement (start a new thread as needed)? Do you have an emergency fund of six months or so of living expenses? Do you plan to buy a house? What, if any, are your debts? Are you going to marry and have kids?

1. In the coming months, consider whether converting (over several years, say) the Traditional IRAs to Roth IRAs makes sense for you.

You need to be willing to dig in on the homework a bit here. A person who has command of his finances is a person who is more likely to have enough saved for retirement. Your retirement savings in your TIRA will be in autopilot within a couple of months, and you can forget about it, for the most part.

You might like the people at AF but they are robbing you relative to what other mutual fund etc. companies offer. AFAIC, find a charity to whom you can give your money, instead.

Do not sweat losing some money as you sell to get to your desired asset allocation. In the long run, a proper asset allocation will pay you the difference.

Disclosure: I am a long-time Fidelity customer only because I started with them over two decades ago and they have become more competitive (cost wise) over the years. I am a huge Vanguard fan when it comes to their mutual funds, ETFs, web site tools, etc. I own two Vanguard ETFs at present, held in my Fidelity account. Morgan Stanley may have become as competitive when it comes to account fees, and if you think you may like MS instead of F or V, start a new thread asking for more info. But I am confident F or V will fill your needs nicely right now.

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Yes. There are funds just as good as American Funds that don't charge a sales load. For instance, you might look at Dodge & Cox, Selected American, Longleaf Partners. Or consider index funds or ETFs.

If you think you need financial planning advice, go to a fee-based financial planner, not a fund salesman.

-Sandra the cynic

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Contribute more how? Do you have a current 401(k) that you are contributing to? At what level? A common recommendation is:

1. 401(k) to the full company match
2. Max out Roth
3. Max out 401(k)

I assume both 401(k) accounts are old and eligible for the rollovers you were asking about.

There's a problem. To combine into one account, it would have to be a Roth. As 401(k)s are tax-deferred that means you'd have to pay taxes on the $34k in the two rollovers. Do you have the money to do that? Remember that the additional funds might move you up a tax bracket. It's best not to pay the taxes out the accounts themselves.

For actively managed funds, AF aren't too bad. However, you can probably do as well or better with passive funds, without the big up-front load.

First of all, where are you going to get that fee? Do you have savings, or will it come out of the assets? You would need significant outperformance to make up for that. Also, it's only one-time if you aren't adding new money, which you should be. You'll get that bite each time, I'll bet. AF waives the load for reinvestment of distributions, but not new contributions.

Manage how? What about your new or any future 401(k)s? Is she going to take that into consideration when developing an asset allocation? Is she going to recommend how you should structure that account?

I really don't understand what you mean. The dollar has dropped in value against foreign currencies. That doesn't reduce the actual amount of money you have. If you are (as is usual) buying products in the US, it little difference at all. If you want to take a trip to Europe, then it hurts. The value of the accounts are whatever your statements say they are. Stock funds go up and down in value, but it's no surprise what the value is.

It really depends. You can move assets "in-kind" or liquidate and transfer cash. Either way, you'll have the same amount of money. If you had taxable accounts, there would be concern that selling would generate capital gains taxes, but for tax-advantaged accounts that's not a problem.

This is getting rather long, and I don't want to incure the moderately rath. I like what Elle had to say.

Brian

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One can rollover old 401(k)s (where the contributions were all tax free) to a single Traditional IRA (or multiple TIRAs, if one wishes) and pay no taxes.

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What? One can rollover from a 401(k) of a previous employer into a traditional IRA. A Roth has nothing to do with it.

Of course one can convert to a Roth, but that's not part of what must be done to combine old 401(k)s. Converting 401(k) to traditional IRA has no tax consequence, if done right. Joe

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Yes, but one of the three accounts he was describing was a Roth.

Brian

He wanted to combine all the accounts, two 401(k)s and a Roth. Reread the original message.

Brian

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Indeed. Not the first post, but an update this morning I must have missed. I see it now. So Mike needs to understand that to sit in the same account, the destination has to be Roth. Fair enough. But I doubt the advisor would object to having two accounts. 4.5% is the same commission. Joe

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RED FLAG. DANGER DANGER Friends and money don't mix. Either be her friend, or her customer, not don't be a customer because you are a friend. All that means is that they polite when they screw you over.

RED FLAG. DANGER DANGER She is a captive agent. This is the single worst way to pick funds. You should be picking funds based on the companies, sectors, management, returns, or statistics, not on the fund family.

RED FLAG. DANGER DANGER There should be no change for putting money into a retirement account. In the case of loaded funds, they should have class B funds where the fees are on a sliding scale and go away totally when you have the funds in for 5 years or more. A shares are highway robbery and should be a federal crime. C shares are just as bad, except you get robbed in the future.

Overall, this plan is great for HER retirement account, not yours. Run. Find someone else. Put your money to work. Then take some of the fees that you save and take your friend out to lunch.

-john-