Home Forums Hunting & Shooting Hunter's Campfire Advice on retirement accounts and disbursements

Before I start, yeah, I know, the advice here is worth what I pay for it. That said, I'm thinking maybe someone can come up with a way of looking at this I hadn't thought of or often times just explaining something to someone makes things clearer in your own head. In a nutshell, I have two retirement accounts from old employers and now that I'm about to turn 65 the plan holders have contacted me asking what I want to do about them. These are retirement plans paid for by companies I worked at for 4 and 6 years respectively so the amounts aren't that great, mid-5 digit range for each of them, but it's "free" money earning a 3% fixed rate which is better than the CD rates I'm seeing.

Three or four main options. I don't need the money right now so I'm thinking option number one is to just let the accounts sit there at 3%. I have other stock funds, both my "private" stocks and bonds fund which I contribute to monthly and a 403b with matching funds from my current employer - and at my age it's time to start converting even those to a less speculative mixture.

Option two is to take the money out as a lump sum and invest it in the market or elsewhere where it is likely to earn more than 3%, but Uncle Sam will take a big wet bite out of that money so I've lost a good bit of current value up front.

Option three is to take a monthly annuity. One plan is a lifetime annuity and would send me monthly checks until I die, the other would make me pick a fixed period and amortize the monthly payments over that time period with the balance still earning 3%. The total monthly amount isn't that much, a bit over 10% of my current monthly net pay, but unless I invested that extra money at >3% I'd always be behind where the total value would be if the gross amount was left earning a fixed rate. But part of me is thinking, F it, spend the monthly checks now anyway since it's all disposable income and because the future is unknown.

Option four is to open an IRA and roll both plans into that. My current employer's 403b won't allow that so it'd have to be a private IRA. As I understand it I'd have to pay taxes on that rollover sum now but that's part of tax law I'm not 100% sure of.so see option 2 where I take a set back and have to catch up versus just leaving it alone. I wouldn't pay any tax rolling the money into a non-IRA investment fund but would pay taxes when the money is withdrawn at whatever future tax rate may apply.

So, what say the financial minds? If someone just wants to brag about how great you're doing with your money, please be my guest, but for those with advice or another option to consider I'd love to hear it.


P.S. My current 403b and commercial investment funds are my main nest eggs so I'm not relying on these two leftovers from old jobs to keep me in bread and peanut butter after retirement, just trying to figure out how to handle them for now.

If you roll into a conventional IRA, you won't have tax implications until you start taking it out. I just rolled a 6 figure pension into a Morgan Stanley IRA and paid nothing in taxes.

NoCAL

You're about the same age as me. I went the locked rate at a bank. Too old to start over when the market tanks. You don't have to draw your IRA's until age 70. Then the Fed's make you start taking money out.

What tax rate are you at now? Would you consider it a low tax rate or a high tax rate? That information may be important. My understanding is that you can pay the taxes now (might be good if you are in a low rate right now) and put them in Roth IRA's. If you are in a high rate now because you are still working and earning a high amount, you should be able to transfer them to standard IRA account and not pay any taxes now, but pay taxes later when you withdraw. Getting these accounts into the market now is the right move if you want to leave them to others in the future. If you want to spend them, a different method might be best.

I'd roll it over to an IRA and take the maximum distributions without paying taxes then put those into another investment.

3% is a very decent rate for a safe fixed account and at retirement that is where you should have part of your money. What would be the benefit in rolling these over now?
I'm in the same situation; when I left my job I split my 457 account and left half in 3% fixed account and moved half to an IRA index account.
I'd leave them alone for now.

open up an traditional ira with a mutual fund company like vanguard and roll these over into it. you can do all the speculating you want within the ira and there will be no tax owed until you start to withdraw. i would suggest doing some research on an age appropriate mix of mutual funds. vanguard is good because they are very low fee. you can also buy individual stocks, ETF's etc all within a vanguard IRA. morningstar.com has ratings on all funds and is a good site to get stats.

that said, it all depends on your tolerance for loss. 3% after tax is a good return these days for a low/no risk investment. sucks but its true. thats like 5% before tax.

This, though I am a fan of Fidelity.

Open a rollover IRA at your broker (ie Fidelity.) They will help you transfer your holdings (either equities or cash) into your rollover IRA. Re-invest as you see fit. You must start taking withdrawals, known as “required minimum distributions,” by April 1 following the calendar year in which you turn 70 ½. We are in a bull market that could last another 5-7 years, so you can do much better than 3%.

^^^^^^^^^^^^
What he says. Just watch it like a hawk. Some brokers don't want to mess with smaller accounts and need to be told when to rebalance them.

Although there were a couple of really bad years, I made 6% during the Obama presidency. I rebalanced in January and am finally starting to make up for some of the worst financial policies is history.

I'm in the roll-over camp.

But why ON EARTH would you settle for bonds? At age 65, you have an average life expectancy of over 20 years, and a potential of 30 years. If your spouse is a little younger than you, then she's looking at a realistic remaining life span of 30 years. If not more.

I can't even FATHOM letting money sit on the sidelines for 30 years. Yes, stocks go down occasionally, but they NEVER stay down, and certainly not for 20 years. 100 K for 30 years at 3% amounts to 247K. 100 K for 30 years at a (modest) 8% becomes just over $1,000,000.

If you need the money to live on in three years then you have to just park the money. But if you don't need it for 7, 10 or 20 years? It's almost criminal to let it molder in a bank at 3%

Ahhh, this sounds so familiar. I used to answer questions like this professionally. There is some good advice here. Without question, the people who do best in retirement are the ones who keep a substantial portion of their retirement assets in stocks.

For the record, I am a retired broker, registered investment advisor and exCFP with 35 years in the business. I used to keep an eye on 10 digits worth of other peoples money. If you had come into my office, I would have wanted to know everything about you. We would have inventoried your financial assets, liabilities and real estate holdings, reviewed your estate plans, employee handbook, insurance documents and we would have chatted about which of your children you really loved the most. I would have talked with your lawyer, your accountant,and in some cases, with your doctor. I would, in short, know a lot about you and what your goals are.

So, absent any and all that information, and given the fact that I have not kept current on any changes in IRS regs since I retired, allow me to engage in a bit of financial malpractice: Best advice is probably to roll over everything into an IRA. Actually, you should NOT do a roll over....what you want is a direct transfer to an individual IRA. Vanguard is a good choice as are Fidelity and T Rowe Price...and there are others. Any of these companies can walk you through the process.

Now before you do anything, consider this. In today's interest environment, 3% is not all that bad. It's a crummy rate of return to be sure, but it's where things are at the moment. Interest rates are most likely headed up if we can believe Ms. Yellen and the Federal Reserve. So any pension or annuity payouts you might receive now will likely, no guarantees here, but most likely, be higher with higher interest rates in the years to come. Add to that the fact that annuity payments go up as you grow older. With your money in an IRA you can always purchase an immediate annuity at some point down the road, when maybe interest rates and payouts will be higher... which is going to be pretty much the same as any payout you might get from a pension payout from an employer sponsored plan.

If you do nothing, your money earns 3%and in a few years may be earning more. The nice thing about leaving the money where it is is that there is no risk to your principal as there would be in stock or bond funds. Some employer plans will allow you to keep the money there beyond your normal retirement age and some won't. You need to ask.

Kinda sounds to me like you have not really figured out what you want out of retirement and where you will be in a few years. Interest rates are low right now and stock valuations are stretched. The Dow closed up today at an all time record. Returns on financial assets will likely be lower the next few years than they have been in the past. There just aren't a lot of bargains out there. If you were my client, I would probably have you either leave things where they are for a while or transfer your assets into an individual IRA and bide your time in a relatively conservative balanced fund. We would then go out and have ourselves a very nice lunch... on you.

So, there you have it. Free advice. Have I mentioned malpractice?

Silver and gold then hold on to it in a good safe.

Will your bank rate keep up with the Federal Reserve's current minimum inflation rate goal of at least 2%?

My wife is the director of the financial group of a very respected financial planning business. The information you provided isn't sufficient to make a suggestion as to how you should handle the investments. The money you have, and where you're at in your life, leads me to suggest you engage with a financial planner - someone with a CFP designation.

All of the comments are appreciated. My employer's 403b is with Fidelity and their representatives offer free one on one on-site planning sessions every now and then by appointment or you can always call them. Yesterday I had a phone conversation with a customer service rep from one of the retirement funds under discussion and she was very forthcoming and helpful in possibilities.

As I noted in a reply to a PM on this, I'm the kind of guy who just set up regular monthly investment programs with a mix of this and that and let those ride, rebalancing every now and then when they got too skewed. But those were set up some time ago and now I need to refresh my knowledge of the ins an outs of the various instruments and their tax repercussions. Various folks have different motives for their advice - some beneficial to me and some more beneficial to them - so like diversifying investments, I'm diversifying my advice sources hence the questions here.

Get the money out of the previous companies and under your own total control. Very weird things occasionally happen, and they are all bad. And no, even though the pension is somehow in a bank somewhere, does not mean that the courts won't rule that your previous company can default on it.

Most likely would be an IRA transfer, then figure out your risk willingness from there.

If you're in good health and plan to live a long while yet, you've got to keep some money in the markets.

No taxes yet if rolled into another form of IRA. Don't ever do an annuity. Why should one pay someone else to hold your money and dole it out? One will have to live a long long time to win in an annuity race. When withdrawals are eventually forced, put into some interest earning realm and pencil out your own withdrawal rate.

Manage it yourself, and live long and prosper.

Do the rollover, but be very careful where you put it. If the market tanks at your age,like it did in 2008 ,you will never be able to recoup your loss at your age.BTDT. I would never invest in the stock market at my age of 74 and should not have done it at 65.

Another thing, if you put the rollover in any kind of mutual fund, look at the fee involved. Their fee is based on your total dollar amount, not on the profit you make. So if their fee is 1% and you make 3%, say on100K, they get $1000 and you get $2000