Where to put retirement money

SixPapaCharlie

SixPapaCharlie

May the force be with you
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So the current job is great. Only 1 downside. No 401(k)

I have two 401(k)s from prior employers. Is is best to just leave them as they are, merge them into one, put them into an IRA?

I am not sure what to do but you are pilots which means masters of managing money right?
 
Is your income below Roth limits? If yes, open a Roth. If no, a regular IRA.

Do you still have self employment income?

Whether it makes sense to roll the existing 401ks depends on lots of factors. Key one whether you are happy with the available investments and whether the admin fees are bearable. Most of the time a Fidelity or Vanguard account is going to be better in both of those categories.
 
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Try betterment.com or a Vanguard index fund. I think those are the safest easiest bets in my opinion. Have both...
 
You know, I see that as an upside. You can manage your own IRA and Roth IRA...
 
At a minimum, roll them over into a single IRA. Less to manage, less worries about plan changes made by your previous employers, and probably more investment options.

The part you should discuss with your tax adviser is whether you want an IRA or a Roth-IRA. You could pay tax now (when you're in your thirties with 3 dependents) and have more flexibility to use the money for some college tuition and such. Or if you go the standard route you'll be relocking the money until your 60.

Pros and cons are there so figure it out with a professional.
 
SixPapaCharlie said:
So the current job is great. Only 1 downside. No 401(k)

I have two 401(k)s from prior employers. Is is best to just leave them as they are, merge them into one, put them into an IRA?

I am not sure what to do but you are pilots which means masters of managing money right?
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btw.....I have mine in three separate accounts and they're all doing bout the crappy same. Never really recovered much above the 2007-2008 highs.

and the forth account is in the Bonanza. I figure I'll be an invalid one day....and that's my wheel chair fund. :D
 
weilke said:
Is your income below Roth limits? If yes, open a Roth. If no, a regular IRA.
Whe
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No but it looks like there is a way to get the IRA and then convert it to Roth. The fact that this is possible suggests to me that Roth is preferred?
 
^^ Agree with rolivi. Roll them both over into a single self-directed IRA. And, then stick them into a low cost index fund, or ETF index fund. Then, learn how to manage your money yourself. Stay away from the 2 and 20 guys unless you come into hundreds of millions and don't want to be bothered. Stay away from the Edward Joneses, they are salesmen, not money managers.
 
Roth is a good idea because its pre-taxed. At this point in time, taxes are low. But consider having both and maxing them out.
 
Roll them into a single IRA and convert to a Roth.

Or buy a plane...
 
Funny, I have a similar dilemma. My whole business unit recently got sold to a new company, so I have my old 401k and new 401k. I think I'm gonna roll over the old 401k to an IRA. Fidelity is the new 401k admin, so I'll have the IRA and new 401k with Fidelity. Easier to manage/oversee.
 
Cavorter said:
This is the LAST place you should be asking that question. :D

The obvious and bad advice is NONE OF THE ABOVE, go buy a plane instead. You only live once after all.
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my plane fund is sitting in AAL right now. Dumb luck I got into @ $27 3rd qtr earnings call is Thursday. Closing in on $40
 
I can offer you a very solid investment to put your money into:

Cessna-421.jpg


In all seriousness, I have left my 401(k)s from my previous employers alone and just changed investment options as appropriate for the times. My current employer has another 401(k). This is a bit annoying in some ways since I have 3 401(k)s to keep track of and manage, but as the investments are different, it also helps diversify my portfolio a bit. On top of that, I have a separate, independent brokerage account that I have money in and invest as I see appropriate, mostly in equity stocks.

If your current employer doesn't have a 401(k), I would put X% of your money (whatever you consider appropriate) into a brokerage account of your choosing and invest it per your preferences. You can keep it for retirement, but it also has the benefit of being easier to move money around, more investment options (basically unlimited) and make changes as you see fit.

If you want to simplify things, you could put the extra money towards paying off your house. The problem I have with that is that it makes the money less accessible should you have something come up that requires a big check (new HVAC, etc.). But if you have a car payment, it might make sense to pay that off depending on the interest rate.
 
I bought Bombardier for $0.75 about a year ago and sold half of it yesterday for $1.50. Not bad for a whim purchase of a penny stock.
 
So I guess that begs another question. The 401 accts have grown in value consistently even though I'm not contributing. let's say I put $1 in an IRA, $1 in a 401k, $1 in a Roth IRA. And never touch them or added to it would one grow faster than the other?
 
rolivi said:
I bought Bombardier for $0.75 about a year ago and sold half of it yesterday for $1.50. Not bad for a whim purchase of a penny stock.
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that is great. I have lost on 100% of the penny stocks I have invested in. I'm really consistent at that.
 
I've always been a fan of taking it with you. Rollover from the old 401(k) into an IRA. Your IRA account can have mutual funds inside it that are enough of a variety to find something you like. And make sure it's a true rollover or you'll get hit with taxes and possible penalties.

There are some catches if you want to retire early, there are ways to withdraw from a 401(k) before you turn 60 and avoid the 10% penalty. But those rules are confusing enough that you'll need to do some research on your own. If you quit working after you turn 55, you can withdraw early from a 401(k). I'm not sure if that can be ANY 401(k) or ONLY the 401(k) from the last company you worked. I think it's called Rule 72(t)?
 
I'd roll over into a single IRA. I like vanguard and their low cost index funds. Put any current/future investments into a Roth if you qualify.
 
SixPapaCharlie said:
So I guess that begs another question. The 401 accts have grown in value consistently even though I'm not contributing. let's say I put $1 in an IRA, $1 in a 401k, $1 in a Roth IRA. And never touch them or added to it would one grow faster than the other?
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I think the growth rates should be the same, the difference will be in the taxes you have to pay when you withdraw. Either you paid the taxes up front, or you pay when you withdraw.
 
SixPapaCharlie said:
No but it looks like there is a way to get the IRA and then convert it to Roth. The fact that this is possible suggests to me that Roth is preferred?
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If you convert, you have to pay taxes on the principal. From there on out, it grows tax free and you withdraw tax free. This is great if:
- for some reason you pay in a low bracket during the conversion year (e.g. If you have some business loss to offset income).
- you have a long time to retirement and you benefit from the compounded interest remaining untaxed
- you benefit from some special deals the feds run occasionally (e.g. during the economic crisis)

Simplified:
IRA you don't pay tax now but you pay upon withdrawal.
Roth you pay now but withdraw tax free.
 
SixPapaCharlie said:
So I guess that begs another question. The 401 accts have grown in value consistently even though I'm not contributing. let's say I put $1 in an IRA, $1 in a 401k, $1 in a Roth IRA. And never touch them or added to it would one grow faster than the other?
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The Roth IRA would be worth more because your already paid taxes on the money before you put it in. So that post-tax dollar might have really cost you $1.50 pre tax. The growth rate will depend solely on your investments and fees of each account.
 
Merge everything into a Vanguard target date fund.
 
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Do you guys have people actively managing your retirement accounts? My 401(k) is with Fidelity, just hanging out in a target date fund that's probably costing me ton of money in fees. I've thought about having them actively manage my account (for something like 0.3 - 1.4%), but just haven't gotten around to pulling the trigger on it.

FWIW, I also have an IRA over at Betterment. Not sure what to do with that either.
 
Something to think about with those target date funds. They generally switch automatically to more conservative funds the closer you get to your retirement age. If you plan on retiring for 30 additional years, you might want to think about staying in a more aggressive fund longer.
 
Roth IRA and traditional IRA are the same if your tax rate is the same when working as when retired. If your tax rate is higher when working, then it favors traditional IRA. If tax rate is higher when retired, then it favors Roth IRA.

Example Roth:
Taxable Income when working 50,000, tax rate 15%, tax 7500
Growth of Rothed 10000, 100% over the years grows to 20000 not taxed when taken out.

Example Traditonal IRA
Taxable income when working 40000, tax rate 15%, tax 6000
Growth of Traditional 10000, 100% over the years grows to 20000, 10000 taxed at 15% = 1500 tax when taken out

In both cases you pay taxes of 7500 and have 10k invested and 20k taken out.

Bottom line, if you are working, since you don't know your tax rate when retired, it doesn't matter. Some people do one of each type.

Stock market is the place to put long term money (more than 10 years), IMO.
 
cockpit: NOUN
  1. a compartment for the pilots in an aircraft or spacecraft to sit to talk about their portfolios......:idea:
 
rolivi said:
Pros and cons are there so figure it out with a professional.
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Just make sure your expert doesn't line his pockets by pushing your money into funds that pay him a kickback that your investment then has to earn.
 
Two words:

Vegas, baby!

From reading many of your posts, it seems quite unlikely that you'll live long enough to retire anyway, so why not blow it all? If you're worried about leaving behind an inheritance, just buy a couple of million dollars worth of term life insurance and let nature take its course.

Now, if you're looking for advice based on my personal investing experience, I'd say you should talk with three different CFPs. Each one will give you different (and conflicting) advice and different recommendations. All three will be wrong. So set up an IRA, Roth if possible, and spread it across several mutual funds. Arrange a mix of domestic and international funds. Resolve yourself to a long term view and let it ride for the next 30 years.

OTOH, given the current state of politics and civil unrest in the US, this might be a good time to invest heavily in precious metals: brass and lead.

Good luck!

(Ever considered the professional poker circuit?)
 
coloradobluesky said:
Roth IRA and traditional IRA are the same if your tax rate is the same when working as when retired. If your tax rate is higher when working, then it favors traditional IRA. If tax rate is higher when retired, then it favors Roth IRA.

Example Roth:
Taxable Income when working 50,000, tax rate 15%, tax 7500
Growth of Rothed 10000, 100% over the years grows to 20000 not taxed when taken out.

Example Traditonal IRA
Taxable income when working 40000, tax rate 15%, tax 6000
Growth of Traditional 10000, 100% over the years grows to 20000, 10000 taxed at 15% = 1500 tax when taken out

In both cases you pay taxes of 7500 and have 10k invested and 20k taken out.

Bottom line, if you are working, since you don't know your tax rate when retired, it doesn't matter. Some people do one of each type.

Stock market is the place to put long term money (more than 10 years), IMO.
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Not quite. The Roth leaves the compounded interest untaxed. Even with identical rates it is often preferable.

It all depends on what your marginal tax rates are when you pay in, how long the money remains in the account and what your rate is upon withdrawal. So, there is no 'one size fits none' explanation on what is 'better', but for most people who are eligible to pay into a Roth it is probably beneficial to do so. A couple of years ago, the feds allowed you to convert a traditional into a Roth regardless of income, for someone in a higher tax bracket the benefit picture looked mixed. It sucks to give the tax man 40% of your IRA in the hopes of getting it back in the end.

Run some scenarios through a Roth vs. Traditional calculator to see what works for you. Of course, this requires you to make a guess on your future tax rates which is a crap shoot at best. A Roth in a way is a hedge against tax rates going to european levels:

http://www.bankrate.com/calculators/retirement/roth-traditional-ira-calculator.aspx
 
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Vanguard 500 Index Fund (VFIAX)

I got lucky and bought it in February this year and as of last statement it is up 16.8%
 
Scott@KTYR said:
Vanguard 500 Index Fund (VFIAX)

I got lucky and bought it in February this year and as of last statement it is up 16.8%
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This is what the majority of my money is in. I've also got some international, small and mid cap for a bit more balance.
 
rolivi said:
I bought Bombardier for $0.75 about a year ago and sold half of it yesterday for $1.50. Not bad for a whim purchase of a penny stock.
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you better be glad I didn't buy it or it would have tanked completely!! :eek:
 
Adding a vote to pull it out of the old employers accounts, consolidate into an (R)IRA. Trade ETFs as your research warrants. Fidelity has about 100 ETFs with no trading fees. I have been doing a sector rotation deal but it hasn't quite panned out this year, so probably will throw it all back to IVV.
 
SixPapaCharlie said:
my plane fund is sitting in AAL right now. Dumb luck I got into @ $27 3rd qtr earnings call is Thursday. Closing in on $40
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I'm not gonna pry but if u bought $10k worth at 27 and sold at 40 you'd still be far off from calling that a plane fund. Maybe u should call it your avgas fund.
 
coloradobluesky said:
Example Traditonal IRA
Taxable income when working 40000, tax rate 15%, tax 6000
Growth of Traditional 10000, 100% over the years grows to 20000, 10000 taxed at 15% = 1500 tax when taken out
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It's 20000 taxed at 15% = 3000 tax when taken out. At the time of withdrawel you pay tax on both the initial investment (which was never taxed) and the growth.

Roth IRA you pay tax on the initial investment (up front) but not on the growth - ever.

But the contribution limits and cap for Roth is very low. But if you're relatively young - it may be a good idea to take a few high risk gambles in a Roth. If one of them pays off you can then set that aside to grow for you until retirement - and then withdraw it tax free.
 
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