vania-janet/multiturn-rag-retrieval-data huggingface dataset:
The time horizon for your 401K/IRA is essentially the same, and it doesn't stop at the day you retire. On the day you do the rollover you will be transferring your funds into similar investments. S&P500 index to S&P 500 index; 20xx retirement date to 20xx retirement date; small cap to small cap... If your vested portion is worth X $'s when the funds are sold, that is the amount that will be transferred to the IRA  custodian or the custodian for the new employer. Use the transfer to make any rebalancing adjustments that you want to make. But with as much as a year before you leave the company if you need to rebalance now, then do that irrespective of your leaving. Cash is what is transferred, not the individual stock or mutual fund shares. Only move your funds into a money market account with your current 401K if that makes the most sense for your retirement plan. Also keep in mind unless the amount in the 401K is very small you don't have to do this on your last day of work. Even if you are putting the funds in a IRA wait until you have started with the new company and so can define all your buckets based on the options in the new company.
Once you roll the money from the 401K into a rollover IRA don't mix it with new funds. The money from the 401K will be treated differently depending on if the funds are pre-tax, post-tax, Roth, or matching. (Yes, Post-tax and Roth are not the same thing). In the future an employer may allow you to roll IRA or 401K money into their program. They don't have to allow it, and they can put restrictions on the types of money they will accept.
If you are making regular periodic investments (e.g. each pay period into a 401(k) plan) or via automatic investment scheme in a non-tax-deferred portfolio (e.g. every month, $200 goes automatically from your checking account to your broker or mutual fund house), then one way of rebalancing (over a period of time) is to direct your investment differently into the various accounts you have, with more going into the pile that needs bringing up, and less into the pile that is too high. That way, you can avoid capital gains or losses etc in doing the selling-off of assets. You do, of course, take longer to achieve the balance that you seek, but you do get some of the benefits of dollar-cost averaging.
"I wrote the whimsically titled ""The Density of Your IRA"" to discuss this exact issue.  In the 25% bracket, your pretax 401(k) would have $18,000, with a future tax due. But the Roth effectively took $24,000 in pretax dollars, and put the $18K in post tax money in the account. Since the limits are the same, the Roth is a denser account."
Also, almost by definition rebalancing involves making more trades   than you would have otherwise; wouldn't the additional trading fees   you incurred in doing so reduce the benefits of this strategy? You forgot to mention taxes. Rebalancing does or rather can incur costs. One way to minimize the costs is to use the parts of the portfolio that have essentially zero cost of moving. These generally are the funds in your retirement accounts. In the United States they can be in IRAs or 401Ks; they can be regular or Roth. Selling winners withing the structure of the plan doesn't trigger capital gains taxes, and many have funds within them that have zero loads.  Another way to reduce trading fees is to only rebalance once a year or once every two years; or by setting a limit on how far out of balance. For example don't rebalance at 61/39 to get back to 60/40 even if it has been two years.  Given that the ratio of investments is often rather arbitrary to begin   with, how do I know whether I'm selling high and buying low or just   obstinately sticking with a losing asset ratio? The ratio used in an example or in an article may be arbitrary, but your desired ratio isn't arbitrary. You selected the ratio of your investments based on several criteria: your age, your time horizon, your goals for the money, how comfortable you are with risk. As these change during your investing career those ratios would also morph. But they aren't arbitrary.  These decisions to rebalance are separate from the ones to sell a particular investment. You could sell Computer Company X because of how it is performing, and buy stock in Technology Company Y because you think it has a better chance of growing. That transaction would not be a re-balancing. Selling part of your stock in Domestic Company A to buy stock in international Company B would be part of a re-balancing.
To me it depends on things like your net worth, debt, and how other assets are invested.   Currently you have 25K invested in the company you work for.   If you have 100K in student loans, are a renter, and 12K in your 401K, then I would recommend exercising almost all of your options.  In that case you have a much to large part of your world wrapped up in your company. If you have 250K in your 401K, own a home and have an emergency fund with no debt then you are fine with letting it ride.  You can afford to absorb a loss of 25K without wrecking your net worth. More than likely, you are somewhere in between (just statistics speaking there).  So why not exercise some of them now with the purpose of improving your financial situation?  Say do a 1/3 now and when they come available.   When 401ks were first invented people put almost all of their money in their company stock.  They lost just about everything when the company went down in value and were often a victim of layoffs exasperating the issue.  This is akin to the same situation.  Most financial advisers recommend against putting any 401K money to company stock, or at least limiting the amount.
"Holding pure cash is a problem for 401K companies because they would then have follow banking rules because they would be holding your cash on their balance sheets. They don't want to be in that business. Instead, they should offer at least one option as a cash equivalent - a money market fund. This way the money is held by the fund, not by 401K administrator. Money Market funds invest in ultra-short term paper, such as overnight loans between banks and other debt instruments that mature in a matter of days. So it is all extremely liquid, as close to ""Money"" as you can get without actually being money.  It is extremely rare for a money market fund to lose value, or ""break the buck."" During the crisis of 2008, only one or two funds broke the buck, and it didn't last long. They had gotten greedy and their short term investments were a little more aggressive as they were trying to get extra returns. In short, your money is safe in a money market fund, and your 401K plan should offer one as the ""cash"" option, or at least it should offer a short-term bond fund. If you feel strongly that your money should be in actual cash, you can always stop contributing to the 401K and put the money in the bank. This is not a good idea though. Unless you're close to retirement, you'll be much better off investing in a well diversified portfolio, even through the ups and downs of the market."
The biggest issue is your lack of diversification.  Your real estate investments have performed quite well so far, but you have also likely enjoyed a period of unprecedented growth that is not sustainable. In the long term, stocks have always outperformed real estate investments, which tend to track more closely to the inflation rate. You need more balance for when when the real estate market cools off. You don't mention tax-deferred retirement savings accounts. You should prioritize your attention to these to keep your income tax low. Consider selling one of your investment properties if you can't adequately fund the 401k.
In addition to George Marian's excellent advice, I'll add that if you're hitting the limits on IRA contributions, then you'd go back to your 401(k). So, put enough into your 401(k) to get the match, then max out IRA contributions to give you access to more and better investment options, then go back to your 401(k) until you top that out as well, assuming you have that much available to invest for retirement.
What makes you think anything would change? If they allowed Match money to be distributed tax free, they are missing out on a future tax revenue opportunity.  I think the more likely way they would stick it to us is to sunset the Roth 401(k) all together and make plans go back to the old school pre-tax and after-tax only, where even the earnings on after-tax are taxed at distribution.
"On #1: One way to make it less painful is to ""split"" your raises between yourself and your 401k. That is, if you get a 2% raise, increase your contribution to the 401K by 1% and keep the other 1%. Keep doing this until you are maxed out. You won't miss money you never had nearly as much as money you were used to living on. On #2: Yes, go with the Roth. Another consideration: If you are ever going to max out your 401K it is best to do it early even if you have to cut back later than to wait. Take advantage of the extra investment time while you are young."
Depending on the volatility of the specific market, and the various slices, using re balancing can get you a pretty reasonable 'lift' above the market average, for relatively low risk. generally the more volatile the market, (such as say an emerging markets portfolio) the more opportunity for lift. I looked into this myself a number of years back, the concensus I came was that the most effective method was to rebalance based on 'need' rather than time. Need is defined as one or more of the 'slices' in your portfolio being more than 8% above or below the average. So you use that as the trigger. How you rebalance depends to some degree on if the portfolio is taxable or not. If in a tax deferred account, you can simply sell off whatever is above baseline and use it to buy up the stuff that is below. If you are subject to taxes and don't want to trigger any short term gains, then you may have to be more careful in terms of what you sell. Alternatively if you are adding funds to the portfolio, you can alter how your distribute the new money coming into the portfolio in order to bring up whatever is below the baseline (which takes a bit more time, but incurs no tax hit) The other question is how will you slice a given market? by company size? by 'sectors' such as tech/finance/industrial/healthcare, by geographic regions?"
To be clear, a 401K is a vehicle, you make investments WITHIN it, if you choose poorly such as say putting all your money into company stock when working for the next Enron, you can still get hurt badly.  So it is important to have diversity and an appropriate risk level based on your age, tolerance for risk, etc. That said, as vehicles go it is outstanding, and the 'always max your 401K' is very very common advice for a large number of investing professionals, CFA's, pundits, etc.  That said there are a few priorities to consider here. First priority, if there is some level of company matching, grab that, it's hard to beat that kind of 'return' in almost any other case. Second, since you never want to tap into a 401K (if you can at all avoid it) before you are ready to retire, you should first be sure you have a good 'emergency fund' set aside in the event you lose your job, or some other major catastrophy happens.  Many recommend setting aside at least 6 months of basic living expenses.   Third, if you have any high interest debt (like credit card debt) pay that stuff down as fast as you can.  You'll save a ton of interest (it's pretty much the same as investing the money you use to pay it down, and getting a return equal to the interest rate you are paying, with zero risk.. can't be beat.  You'll also end up with a lot better cash flow, and the ability to start saving first and spending out of savings, so you earn interest instead of paying it. Once you have those things out of the way, then it is time to think about fully funding the  401K.  and keep in mind, since you don't pay taxes on it, the 'felt effect' to you pocket is about 80% or even less, of what goes into the account, so it's not as painful as you might think, and the hit to your take home may be less than you'd expect.  Contributing as much as you can, as early as you can also lets you benefit from the effect of compounding, and has a far larger affect on the balance than money put into the account closer to retirement.  So if you can afford to max it out, I surely would advise you to do so.
Depends. What are the options available for the 401k? If they are low expense ratio options, that can be a great start. Otherwise, just do your own tax deductible IRA  At 40, with no retirement savings other than one 401k, you're likely behind. Its time to get serious; no reason you can't with that income.  Look into an IRA at Vanguard to start for up to 5500 a year per person if the 401(k) is no good.
"JoeTaxpayer's advice is solid - reallocating to your target asset allocation is the right move.  You should have an Investor Policy Statement (IPS) that maps out your financial objectives, risk tolerance, liquidity constraints, etc.  From the IPS, you can determine your target asset allocation and rebalance accordingly.  A few more comments: It sounds like 100% of your 401k is in US stocks.  You might have other accounts that make your overall portfolio globally diversified, but if not, you want to make sure to set a target asset allocation for a global portfolio.   Your statement ""If this were in my brokerage account I'd probably cash out some of the profits and hold onto it and buy more shares as the market eventually comes back down. But this being a 401k which has semi-monthly deposits from my paycheck, do I just leave it?"" is a bit counterintuitive.  If you are going to try to time the market (a very hard task), it is better to use a retirement account, so you don't have to realize capital gains.  Timing the market is probably a bad idea, but if you engage in market timing, it is probably better to use a retirement account than a brokerage account. If you would like to tilt your asset allocation based on the market valuation, I recommend researching Shiller's Cyclically Adjusted Price to Earnings ratio."
If it was me, I would withdraw money from savings and be debt free today.  I would then pour the $500 into building back your savings.  Then of course, never again carry a balance on your CC. At your age MSFRX is a losing game.  You can handle the volatility of better performing funds, I would have zero in there.   If it was me, I would do something totally different then you are doing: Keep in mind you are doing very good as is.  The best way to win with money is to make good moves overtime, and given your debt level, savings, and willingness to contribute to a 401K your moves are pretty darn good.   Keep in mind you will probably want to start saving a down payment for a house.  This should be done outside of your 401K. Overall good work!
$10.90 for every $1000 per year. Are you kidding me!!! These are usually hidden within the expense ratio of the plan funds, but >1% seems to be quite a lot regardless. FUND X 1 year return 3% 3 year return 6% 10 year return 5% What does   that exactly mean? This is the average annual rate of return. If measured for the last 3 years, the average annual rate of return is 6%, if measured for 1 year - it's 3%. What it means is that out of the last 3 years, the last year return was not the best, the previous two were much better. Does that mean that if I hold my mutual funds for 10 years I will get   5% return on it. Definitely not. Past performance doesn't promise anything for the future. It is merely a guidance for you, a comparison measure between the funds. You can assume that if in the past the fund performed certain way, then given the same conditions in the future, it will perform the same again. But it is in no way a promise or a guarantee of anything. Since my 401K plan stinks what are my options. If I put my money in a   traditional IRA then I lose my pre tax benefits right! Wrong, IRA is pre-tax as well. But the pre-tax deduction limits for IRA are much lower than for 401k.  You can consider investing in the 401k, and then rolling over to a IRA which will allow better investment options. After your update: Just clearing up the question. My current employer has a 401K. Most of   the funds have the expense ratio of 1.20%. There is NO MATCHING   CONTRIBUTIONS. Ouch. Should I convert the 401K of my old company to Traditional IRA and   start investing in that instead of investing in the new employer 401K   plan with high fees. You should probably consider rolling over the old company 401k to a traditional IRA. However, it is unrelated to the current employer's 401k. If you're contributing up to the max to the Roth IRA, you can't add any additional contributions to traditional IRA on top of that - the $5000 limit is for both, and the AGI limitations for Roth are higher, so you're likely not able to contribute anything at all to the traditional IRA. You can contribute to the employer's 401k. You have to consider if the rather high expenses are worth the tax deferral for you.
"To answer the first part of your question: yes, I've done that! I did even a bit more. I once had a job that I wasn't sure I'd keep and the economy wasn't great either. In case my next employer wouldn't let me contribute to a 401(k) from day one, and because I didn't want to underfund my retirement and be stuck with a higher tax bill - I ""front-loaded"" my 401(k) contributions to be maxed out before the end of the year. (The contribution limits were lower than $16,500/year back then :-)) As for the reduced cash flow - you need of course a ""buffer"" account containing several months worth of living expenses to afford maxing out or ""front-loading"" 401(k) contributions. You should be paying your bills out of such buffer account and not out of each paycheck. As for the reduced cash flow - I think large-scale 401(k)/IRA contributions can crowd out other long-term saving priorities such as saving for a house down payment and the trade-off between them is a real concern. (If they're crowding out basic and discretionary consumer expenses, that's a totally different kind of problem, which you don't seem to have, which is great :-)) So about the trade-off between large-scale 401(k) contributions and saving for the down payment. I'd say maxing out 401(k) can foster the savings culture that will eventually pay its dividends. If, after several years of maxing out your 401(k) you decide that saving for the house is the top priority, you'll see money flow to the money-market account marked for the down payment at a substantial monthly rate, thanks to that savings culture. As for the increasing future earnings - no. Most people I've known for a long time, if they saved 20% when they made $20K/year, they continued to save 20% or more when they later made $100K/year. People who spent the entire paycheck while making $50K/year, always say, if only I got a raise to $60K/year, I'd save a few thousand.
"Your retirement PLAN is a lifelong plan and shouldn't be tied to your employer status. Max out your 401(k) contribution to the maximum that your employer matches (that's a 100% ROI!) and as much as you can afford. When you leave the work force rollover your 401(k) to an IRA account (e.g.: you can create an IRA account with any of the online brokerage firms Schwab, E-Trade, Sharebuilder, or go with a brick-and-mortar firm like JP Morgan, Stifel Nicolaus, etc.). You should have a plan: How much money do you need/month for your expenses? Accounting for inflation, how much is that going to be at retirement (whatever age you plan to retire)? How much money do you need to have so that 4.5% of that money will provide for your annual living expenses? That's your target retirement amount of savings. Now figure out how to get to that target. Rule #1 Invest early and invest often! The more money you can sock away early in your career the more time that money has to grow. If you aren't comfortable allocating your investments yourself then you could go with a Targeted Retirement Fund. These funds have a general ""date"" for retirement and the assets are allocated as appropriate for the amount of risk appropriate for the time to retirement."
Buy the minimum of one fund now. (Eg total bond market) Buy the minimum of the next fund next time you have $2500. (Eg large-cap stocks.) Continue with those until you have enough to buy the next fund (eg small-cap stocks).  Adjust as you go to balance these funds according to your planned ratios, or as close as you can reasonably get without having to actually transfer money between the funds more than once a year or so. Build up to your targets over time. If you can't easily afford to tie up that first $2500, stay with banks and CDs and maybe money market accounts until you can. And don't try to invest (except maybe through a matched 401k) before you have adequate savings both for normal life and for an emergency reserve. Note too that the 401k can be a way to buy into funds without a minimum. Check with your employer. If you haven't maxed out your 401k yet, and it has matching funds, that is usually the place to start saving for retirement; otherwise you are leaving free money on the table.
As to the rollover question.  Only rollover to a ROTH if you have other funds you can use to pay the taxes you will be hit with if you do that.  DO NOT pay the taxes out of the funds in the 401k. If you don't have a way to pay the taxes, then roll it to a traditional IRA.  You never want to pay the government any taxes 'early' and you don't want to reduce the balance. beyond that, A lot depends on how long you figure you will be with that company.  If it's only a few years, or if you and other employees can make enough of a fuss that they move the fund to someplace decent (any of the big no-load companies such as Vanguard would be a better custodian), then I'd go ahead and max it out. If you figure to be there for a long while, and it looks like someone is in bed with the custodian and there's no way it will be changed, then maybe look to max out a Roth IRA instead.
It sounds like they are matching your IRA contribution dollar for dollar up to 1% of your salary. Think of that as an instant 100% yield on your investment. (Your money instantly doubles.) My 401(k) has been doing pretty well over the last year, but it will take several years before my money doubles.  So you can let it sit in cash for a year, then take some pretty hefty fees and you will probably still come out ahead. (Of course it's hard to say without knowing all of the fees.)
Yes, that's exactly what you can/should do. The only question is whether the 401(k) has good investment choices and low fees, if so, go for it.
"For easy math, say you are in the 25% tax bracket. A thousand deposited dollars is $750 out of your pocket, but $2000 after the match.  Now, you say you want to take the $750 and pay down the card. If you wait a year (at 20%) you'll owe $900, but have access to borrow a full $1000, at a low rate, 4% or so. The payment is less than $19/mo for 5 years.  So long as one is comfortable juggling their debt a bit, the impact of a fully matched 401(k) cannot be beat. Keep in mind, this is a different story than those who just say ""don't take a 401(k) loan."" Here, it's the loan that offers you the chance to fund the account. If you are let go, and withdraw the money, even at the 25% rate, you net $1500 less the $200 penalty, or $1300 compared to the $750 you are out of pocket. If you don't want to take the loan, you're still ahead so long as you are able to pay the cards over a reasonable time. I'll admit, a 20% card paid over 10+ years can still trash a 100% return. This is why I add the 401(k) loan to the mix.  The question for you - jldugger - is how tight is the budget? And how much is the match? Is it dollar for dollar on first X%?"