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Rolling over a 401 (K) into an IRA a viable idea

April 15, 2011

Question: I'd like to know whether it's a viable idea to roll the 401(K) I had with my former employer into an IRA. This fund has not performed well in recent years.

The reason I'd like to do this is because I'd like to have investment flexibility with this money. I understand that with an individual retirement account I can elect to use a portion of the money to buy the stocks directly. Is that true?

The present value of the fund is $8,000.

I can tolerate some risk and would like to get into the stock market. Is this a good idea?

- P.T.

Answer: Yes, it is a viable idea to roll your 401(K) from your previous employer into an IRA. You are correct that you would increase your investment flexibility as you would have most stocks, bonds and mutual funds at your disposal.

The first question I would ask is what are the possibilities of going back to work full-time with 401(K) benefits? If you are totally retired, it doesn't matter. But if you return to work as a full-time employee, you may be able to roll your 401(K) into a new employer's plan.

If you are not returning to the work place, I would you roll your 401(K) into an IRA roll over account, through a brokerage. In a brokerage account, you may buy and sell stocks, bonds, mutual funds and other investments. How you invest your money is probably a critical decision.

Don't be turned off by mutual funds because of poor performance of your 401(K). There are many good choices, and mutual funds reduce investment risk.

With an account valued at $8,000, I am not sure you should be in individual stocks. Your age is also an important consideration. If you are in retirement years, you should be decreasing risk as you get older.

Finally, how you are otherwise invested would also dictate if you should purchase stocks with your 401(K) funds. You want a balanced, risk-moderated portfolio-not a speculative one.

Researching this was very interesting.


Have a real estate question? Write, call, fax or e-mail:

Bob Jeffries, Realtor,

Century 21 Birchwood Realty, Inc.

4040 Del Prado Blvd., Cape Coral, FL

239-549-5724 Office

239-542-7760 Fax



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