Better 401k Lemonade
Posted: Tue Jan 04, 2011 9:10 pm
A tip o' the hat to Medium Tex for suggesting that I be persistent with my 401k administrator about other investment options than those listed in the brochure.
Most of my savings is in my 401K and I was struggling for a way to buy enough long bonds to build a PP from the options available. Medium Tex suggested that I ask about a direct brokerage window. This does not exist in my plan, but I've fond there is something half as good that basically solves the problem for me, and may for you.
In some 401k plans (for example some of those Fidelity administers) it is possible to make an "in service" withdrawal of some funds from a 401K directly into an IRA account without incurring taxes or penalties or quitting your job or turning 60, etc.
1) You can not move any of the money you have contributed to the 401K this way.
2) You can move money that your employer has put in your account as a matching contribution. The rules about matching money are different.
For example, in my case my employer match equals 40% of the total contributions to my account. That means that I can move about 40% of my 401K holdings to my Vanguard IRA without being penalized or paying taxes. I can not move the 60% that I contributed. I can move the employer match every month if I'm that motivated, or just periodically when I rebalance.
This option will make it possible for me to invest 25% of my assets in a long term treasury fund in my IRA and 25% in a stock fund in my 401K.
Most of my savings is in my 401K and I was struggling for a way to buy enough long bonds to build a PP from the options available. Medium Tex suggested that I ask about a direct brokerage window. This does not exist in my plan, but I've fond there is something half as good that basically solves the problem for me, and may for you.
In some 401k plans (for example some of those Fidelity administers) it is possible to make an "in service" withdrawal of some funds from a 401K directly into an IRA account without incurring taxes or penalties or quitting your job or turning 60, etc.
1) You can not move any of the money you have contributed to the 401K this way.
2) You can move money that your employer has put in your account as a matching contribution. The rules about matching money are different.
For example, in my case my employer match equals 40% of the total contributions to my account. That means that I can move about 40% of my 401K holdings to my Vanguard IRA without being penalized or paying taxes. I can not move the 60% that I contributed. I can move the employer match every month if I'm that motivated, or just periodically when I rebalance.
This option will make it possible for me to invest 25% of my assets in a long term treasury fund in my IRA and 25% in a stock fund in my 401K.