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401K  

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Author: Set it and forget it!   Date: 7/14/2021 2:12:57 AM  +16/-0   Show Orig. Msg (this window) Or  In New Window

Wish someone had given me this advice 30 years ago. I've had to make up for lost time.


Roll it into a self-directed IRA. Then you control it and have many more (and better) investment choices to select from that pay you, instead of paying excessive fees to your former company's brokerage. Typical employer provided 401(k) plans and their limited fund choices are set up to benefit the employer and that brokerage, not you.


No tax or penalty hit if you do a direct rollover to an IRA. I recommend determining your risk tolerance (expressed as an asset allocation....stocks vs bonds) and then invest in low-cost index mutual funds tracking an appropriate financial index (S&P500, etc.) accordingly. (VTSAX (0.04% ER) and VBTLX (0.05% ER) are a very popular example).


Vanguard was the pioneer and most well known brokerage for this type of self-directed index approach and can help you make the rollover. Fidelity is another good one if you don't like Vanguard.


Runs on autopilot, just check in and rebalance to your chosen asset allocation ratio once or twice a year. No need to stress about the daily ups and downs. You're in it for the long run.


You won't "beat the market" (because you are buying a mutual fund that mimics "the market"), but full-service fee-based brokers rarely do, either. Not over time, anyway. So why pay their fees? And "only" matching market returns is really not that bad. Somewhere around 10% for the S&P500 since inception, for example.


Good luck!

 
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