Retirement Money from 401k

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JanetRose

...what was the meaning of the big white glove?

Joined

Nov 8, 2003

• May 24, 2019

• #1

My friend is already maxing his ROTH IRA account.

He is going to get about $25,000 from his 401k when he retires.

Should he start a traditional IRA to put that money?

Open a money market account?

He has made a lot of financial mistakes in the past and I want him to make a smart
decision with the $25,000.

Any suggestions?

And thank you.

 

soccerdad72

DIS Veteran

Joined

Oct 23, 2012

• May 24, 2019

• #2

Your friend needs to see a financial planner, not get second-hand advice from the DIS

 

J

JanetRose

...what was the meaning of the big white glove?

Joined

Nov 8, 2003

• May 24, 2019

• #3

Is $25,000 enough to pay a financial planner for advice?

 

georgina

DIS Veteran

Joined

Apr 21, 2003

• May 24, 2019

• #4

It's really easy to roll 401k money into an IRA. Any investment firm can help with that (Vanguard, Fidelity, etc). The friend should do a trustee-to trustee transfer and not get a check sent to him. Once the money is in an IRA he can decide how to invest it. There is a lot of information based on how much risk he wants to take with it.

I wouldn't necessarily trust a financial planner, some we've seen have their own agendas and products to sell.

 

soccerdad72

DIS Veteran

Joined

Oct 23, 2012

• May 24, 2019

• #5

JanetRose said:

Is $25,000 enough to pay a financial planner for advice?

Click to expand...

Have him send it to me, I'll take care of it for him.

 

J

JanetRose

...what was the meaning of the big white glove?

Joined

Nov 8, 2003

• May 24, 2019

• #6

 

V

vacationer1954

DIS Veteran

Joined

Jun 27, 2010

• May 24, 2019

• #7

My brother and I were just going over our respective financial plans with each other. It is mind-blowing how much health insurance premiums and out of pocket medical expenses including prescriptions will add up to. Fidelity estimates that the average couple will need $285,000 in today's dollars for medical expenses in retirement over and above what's covered by Medicare. (And that doesn't include long-term care.) And that is just healthcare. I don't even think the Social Security we could get would cover healthcare, not to mention everything else we have to pay for in retirement.

JanetRose said:

Open a money market account?

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Under a lot of circumstances, the best strategy for withdrawals from retirement accounts involves pulling most of the money you need for the next year out at once (some people claim the beginning of the year; some people claim the end of year). That's what you might use a money market account for.

 

Cubbiecakes

Mr. Cakes

Joined

Sep 17, 2016

• May 25, 2019

• #8

JanetRose said:

My friend is already maxing his ROTH IRA account.
Should he start a traditional IRA to put that money?

Click to expand...

If he's maxed his Roth IRA, he can't contribute to a Traditional IRA. The contribution limit of $6,000 for tax year 2019 ($7,000 if you're over 50) applies to all individual retirement accounts one owns.

The 401(k) contribution this year is $19,000. If he wants to contribute more than the $6,000 to his Roth, he can put money in his 401(k), up to the $19,000 contribution limit.

 

tvguy

Question anything the facts don't support.

Joined

Dec 15, 2003

• May 25, 2019

• #9

Cubbiecakes said:

If he's maxed his Roth IRA, he can't contribute to a Traditional IRA. The contribution limit of $6,000 for tax year 2019 ($7,000 if you're over 50) applies to all individual retirement accounts one owns.

The 401(k) contribution this year is $19,000. If he wants to contribute more than the $6,000 to his Roth, he can put money in his 401(k), up to the $19,000 contribution limit.

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Would the fact that this a rollover impact those limits?

 

tvguy

Question anything the facts don't support.

Joined

Dec 15, 2003

• May 25, 2019

• #10

JanetRose said:

Is $25,000 enough to pay a financial planner for advice?

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Most advisers have a minimum well below $25,000. Vanguard is $3,000 according to their website, Wells Fargo has no minimum.

 

Cubbiecakes

Mr. Cakes

Joined

Sep 17, 2016

• May 25, 2019

• #11

tvguy said:

Would the fact that this a rollover impact those limits?

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Rollovers are different. Though keep in mind that you’re generally limited to one rollover per 12 month period.

 

tvguy

Question anything the facts don't support.

Joined

Dec 15, 2003

• May 25, 2019

• #12

Cubbiecakes said:

Rollovers are different. Though keep in mind that you’re generally limited to one rollover per 12 month period.

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Good to know I guess. But this seems like a classic rollover, granted with a small balance.

 

georgina

DIS Veteran

Joined

Apr 21, 2003

• May 26, 2019

• #13

Cubbiecakes said:

Rollovers are different. Though keep in mind that you’re generally limited to one rollover per 12 month period.

Click to expand...

Not true for trustee to trustee rollovers where the person does not get a check. The IRS has clarified this. (plan means retirement plan such as a 401k). From the IRS website -

The one-per year limit does not apply to:

• rollovers from traditional IRAs to Roth IRAs (conversions)
• trustee-to-trustee transfers to another IRA
• IRA-to-plan rollovers
• plan-to-IRA rollovers
• plan-to-plan rollovers

https://www.irs.gov/retirement-plan...vers-of-retirement-plan-and-ira-distributions