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#1
10-18-2006, 04:20 PM
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Being Outsourced...what to do with 100K in 401k/Pension?
My department is currently in the process of being taken over by an outsourcing company. As of now I have about 70K in my 401K and 30K in my pension plan.
I'm currently 33 and will not be using this $ for about 30 years. I will continue to add to my 401k in my new job. My question is what is the best place for this money at the moment. My initial plan was to put about 50% in Vanguard 500 Index fund, 10% in a bond fund, 25% emerging markets fund, 15% REIT fund. Does this sound about right? 
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#2
10-18-2006, 04:22 PM
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Re: Being Outsourced...what to do with 100K in 401k/Pension?
That sounds fine. You can do better by reducing your stakes in Vanguard 500, emerging markets, and REIT, and adding international and small value exposure. Also, commodity funds are great diversifiers.
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#3
10-18-2006, 04:23 PM
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Re: Being Outsourced...what to do with 100K in 401k/Pension?
Why not just transfer the current 401K funds to your new 401K plan? Or am I confused?
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#6
10-18-2006, 06:23 PM
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Re: Being Outsourced...what to do with 100K in 401k/Pension?
[ QUOTE ]
My question is what is the best place for this money at the moment. My initial plan was to put about 50% in Vanguard 500 Index fund, 10% in a bond fund, 25% emerging markets fund, 15% REIT fund. Does this sound about right? [/ QUOTE ] Vanguard is a great company to work with. I definitely recommend you use them. Open an IRA rollover account at Vanguard, and work with your old company to get the 401(k) rolled over. Your allocation is 90% stock and 10% fixed. That's pretty aggressive but as you are young, that might be a good stock/bond ratio. I like the Total Stock Market index better than the S&P 500 because it is more tax efficient. I like to overweight small companies and value companies more than you are. I like emerging markets and REITs, but not quite as much as your allocation. My standard 90 stock/10 fixed allocation would be: 18% Total Stock Mkt Idx Inv 18% Value Index Fund Inv 9% Small-Cap Index Fund Inv 9% Small-Cap Value Index 9% REIT Index Fund Inv 9% European Stock Index Inv 9% Pacific Stock Index Inv 9% Emerging Mkts Stk Idx Inv 10% Short-Term Bond Index Inv After this is set up, you might only need to monitor it once per year to rebalance, and it might only take 1 hour per year. This post was about rebalacing a 401(k), but it is similar to rebalance an account at Vanguard. Good luck! -Tom
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#7
10-18-2006, 07:12 PM
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Re: Being Outsourced...what to do with 100K in 401k/Pension?
NO, THIS DOES NOT SOUND FINE. You will get hit with a big tax bill if you cash out and invest in mutual funds. You don't want to cash out your 401K/pension (unless you have a reason to do so) because you want to preserve tax-deferred status of that money. As such, you want to roll it over to another 401K or IRA account. Your HR department will walk you through the steps. The important thing to remember is that at no point should you get a check for your money. It needs to be rolled over directly from one tax-deferred plan to another tax-deffered plan.
Once you roll it over, you can think about different investment strategies based on the choices you have.
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#8
10-18-2006, 09:07 PM
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Re: Being Outsourced...what to do with 100K in 401k/Pension?
[ QUOTE ]
NO, THIS DOES NOT SOUND FINE. You will get hit with a big tax bill if you cash out and invest in mutual funds. You don't want to cash out your 401K/pension (unless you have a reason to do so) because you want to preserve tax-deferred status of that money. As such, you want to roll it over to another 401K or IRA account. [/ QUOTE ] My post did say this was a 401(k) rollover and an IRA. I did mention tax efficiency, so I did forget about that when I suggested the Total Stock Market index fund. The S&P 500 is fine too, as well as Vanguard's other Large Cap index fund. -Tom
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#9
10-19-2006, 09:56 AM
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Re: Being Outsourced...what to do with 100K in 401k/Pension?
As a general guideline, I would never roll 401(k) monies from one company's plan to another company's plan. The choices of each plan are usually very limited. By rolling over your current 401(k) plan to an IRA, you can then choose from just about every investment vehicle out there, rather than the 10-15 funds your new employer offers.
OP, your breakout looks fine. I have rolled over several 401(k)'s to both my and my wife's Vanguard IRA accounts. For the passive investor, this is an easy, cheap choice.
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#10
10-19-2006, 11:58 AM
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Re: Being Outsourced...what to do with 100K in 401k/Pension?
[ QUOTE ]
My post did say this was a 401(k) rollover and an IRA. [/ QUOTE ] Actually if you read your OP below it said nothing of the sort, this is why at least two of us were confused with your question. [ QUOTE ] My department is currently in the process of being taken over by an outsourcing company. As of now I have about 70K in my 401K and 30K in my pension plan. I'm currently 33 and will not be using this $ for about 30 years. I will continue to add to my 401k in my new job. My question is what is the best place for this money at the moment. My initial plan was to put about 50% in Vanguard 500 Index fund, 10% in a bond fund, 25% emerging markets fund, 15% REIT fund. Does this sound about right? [/ QUOTE ]
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