All questions and no answers at the moment...

[Guest 007webgod]

I recently quit my job to stay at home with my kids. I have about $10,000 in a 401K plan, 100% vested. As I understand it I basically have three options at this point.

1) Rollover to a retirement account. (Lots and lots of questions here!!)

2) Leave account in plan. (Not sure on this one.)

3) Single sum payment. (Definetly not.)

I don't plan on going back to work for atleast two years, maybe more. I do not need or do not plan on touching this money till I'm old 'n gray, which doesn't "feel" that far off sometimes. BTW, I'm currently 33 years old.

Anyhoo, I'm thinking I probably want to go with option #1 but I've got tons of questions. Obviously I don't expect someone on here to plan my retirement but can someone recommend a good website that explains, in layman terms, Roth IRA's, conventional IRA's, and the process involved in a rollover from a 401K. Of course any and all suggestions, advice, and explanations are most welcome.

Thanks.

[WDIK]

IRS publication 590 may be of some help. You can find it at the IRS website.

[John G]

The rollover option is a well worn path because you can choose your custodian and through that selection give you almost unlimited investment choices. Taking the lump sum make all of these assets taxable and you will not only pay immediately, but everytime you make a buck on the remaining assets for the rest of your lifetime. You also need to check with your former employer about what their "plan" allows for rollovers.

You ask some very big questions. Rather than try to respond to all your options, I would suggest that you do a few things to get up to speed. First, get the IRS pub 590 - its boring, but it covers the basics. Second, pick a few potential custodians (Vanguard, Schwab, Etrade, a local bank, etc) and ask them for general information on investing and rollovers. You may also want to check their web sites. There is too much info.... use the pieces that seem to match your level of experience. You will find good info in Kiplinger Financial mag and the March issue each year of Consumer Reports.

At age 33, this money will probably stay invested for a long time. If you invest broadly in the stock market at about 10% a year, this lump would grow to about $160,000 by age 61 and $320,000 by age 68. Yes, inflation will erode some of this buying power - but it is an awfully good start towards a retirement nest egg.

Reading between the lines and considering that you have about $10k - broadly based NO LOAD mutual funds may be the best option for you. You might be letting these funds grow for 30+ years, so the year to year flucuations should not be a big issue. The fund option may be just fine for a decade while you raise your family (my presumption). When your funds grow to 30 to 50k and your knowledge grows, you might want to consider individual stocks. Some folks never go that route, partially because they don't have the time requirement or feel comfortable with their skills at picking investments.

Post again with additional questions.