<p>Question for the finance people out there… I have some money in a cash balance pension plan through my former employer. They won’t be contributing more income based cash credits to it, but it will continue to earn it’s interest credits.</p>
<p>I read somewhere that this money can either be left where it is, or rolled over to an ira. I forget if it said Roth or not.</p>
<p>Has anyone done this before? I can’t decide where to leave it.</p>
<p>I wish I were competent to answer this off the top of my head, but I’m not. You are right that the money can be left where it is or rolled over into an IRA. The Roth or not part is either “no” or complicated.</p>
<p>What I recommend is deciding where you would have your IRA if you had an IRA (like Vanguard, or your bank, or Merrill Lynch), walk in there, and say that you are thinking about rolling over an orphaned pension plan. Bring a statement so they will know what it is. Listen to their advice, and ask questions. This is the bread and butter of their retail business, and they are very good and very competent at it (if you get a good company).</p>
<p>The interest credits are guaranteed. If you put it in an IRA, your money might lose value. If you think you can do better than the interest credits, go for it. If not, leave it where it is.</p>
<p>If you do what JHS suggests, be prepared for them to tell you that you absolutely positively should roll it over. They get paid based on how much $$$ they have under management.</p>
<p>It goes into a regular Ira if you roll it over I believe. But it is not tax deductible since it was a rollover. The thing about leaving it there, you want to be certain the company is in good financial standing and is fully funding it’s pension. If there is an question about their financial viability, move it and roll it over. There are several inexpensive ways to do that, through a low cost mutual fund like Vanguard mentioned above, or through a broker that will be paid a percentage of the amount. This percentage is ongoing, usually an annual fee they collect, with perhaps a small fee up front. Vanguard collects a fee but it is usually less than 2%. Vanguard is known for its low fees. Under vanguards umbrella are several different fund types you could choose. They are on their website. I am not a professional, just someone who does their own investments. I skip the brokers and do all the research myself saving me the higher fees. If you are not comfortable with that, you should find a broker, but certainly get all the costs fully explained. Is the interest I is earning a decent rate?</p>
<p>I have rolled several funds over. The reasons I did so were1) I didn’t want six different retirement accounts. 2) the company I left was on shaky ground financially, and 3) the fees I was being charged for management in the company fund were too high in my opinion. If you are earning a decent interest rate that exceeds the management fee for your account, that is your real return. Are you happy with that.
For instance my mom has money with a broker who earned her 6.5% which equaled $650 on her 10000 investment. But she paid $300 in fees to the broker. Her return was only 3.5%. My point, if you leave it and the interest earned is not much above the management fee you can most likely do better elsewhere.</p>
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<p>But it is not taxable, either. You roll over the entire amount.</p>
<p>If you roll it into an IRA, you can then convert it to a Roth but it will be taxed at the time. Still might be a good idea if you are at a relatively low tax bracket and you are young. It will then grow tax free forever</p>
<p>Very Happy is right. If the credit of your former employer is excellent, and the rate of interest credits is attractive, then you maybe shouldn’t roll your account into an IRA. And if you walk into Vanguard, yes they will probably sell you on rolling over, but I think (hope) not if your current plan really is a good deal. (Ultimately, you have to make that judgment.) Ain’t no free lunch – if you want independent, disinterested financial advice, you will probably have to pay for it in cash, and pay a lot relative to value unless your account is very large. Otherwise, you have to take advice from people who are trying to sell you something, and to exercise some appropriate skepticism.</p>
<p>What fordiscussion says about a Roth conversion is what I meant by “complicated”. It’s also something that the sales people can really help you with figuring out, since they want you to feel good about what you are doing, but they don’t particularly care whether you have a Roth or traditional IRA.</p>
<p>Vanguard is known for very low cost. They do not give advice. More a mutual fund offerer for those who invest on their own. </p>
<p>Fender girl, are you retired or still working?</p>
<p>If you want unbiased financial advice, search for a certified financial planner not a broker.</p>
<p>I agree that it’s a good idea to call the firm managing the account (there is generally a tollfree#) and ask what your options are. </p>
<p>If the funds in your account have never been taxed (like most employee accounts), you can often roll it over to a traditional IRA. Some employee accounts also allow you to roll traditional IRAs into them. Mine was called a 403 plan and did allow me to roll my traditional IRA into it; it is doing well there. </p>
<p>My husbands employee retirement account is a 401k and he can roll his into a traditional IRA or have traditional IRA funds rolled over into it. </p>
<p>Agree it’s important to consider the financial strength of the firm in deciding where to keep your funds, as well as costs, expected returns, etc. good luck!</p>
<p>thanks for the input. I believe it is managed thru fidelity. (that’s where I go to check on the value of it.) I’m leaving it where it is right now but will do more digging to see if a different ira would work out better for it.</p>
<p>You can always keep your funds at Fidelity but have the account retitled as an IRA. It’s easy to do – it’s a rollover from your 401(k) to the IRA, and you should be able to transfer the shares directly. (Used to work at Vanguard in the 80s and have been a 401(k) administrator for many years. We see this all the time.) Good for you for not cashing it out and using it for play money!</p>
<p>If you may want to do a backdoor IRA, it is good NOT to have any traditional IRAs. Not sure if that may be something you are or may at some point be interested in, but it was good for me to have an employer plan I could roll my traditional IRA into. Never thought a backdoor IRA would be suitable for me until one day, it was. </p>