Comments on: Rollover Question: Go Cash or Keep Shares?

By: aua868s

aua868s — Sun, 07 Mar 2010 21:02:25 +0000

i would rather go for shares instead of cashing it out.

By: jim

jim — Fri, 19 Jan 2007 16:29:33 +0000

I had no choice, my 401k provider would only send me a check and couldn’t send it directly to Vanguard.

I totally agree… given the choice, definitely let them handle it.

By: Kristine

Kristine — Fri, 19 Jan 2007 16:25:00 +0000

You mentioned that you were successful in getting them to cut you a check made out to Vanguard. I’m curious as to why you requested a check instead of just having them do the rollover directly to Vanguard?

In most cases it’s best to do the rollover directly to the new institution to avoid potential problems. For example, some companies will withhold income taxes if you request a check instead of a direct rollover. If this happens, you have to take the amount that was withheld out of your own pocket in order to do a complete rollover, or face tax and penalty on the amount that was not rolled over to the IRA.

Another potential problem is that you only have 60 days to complete the rollover if you receive a check. Although 60 days seems like a long time, if something happens (check is lost in mail, you have a family emergency, etc.) and you don’t get the rollover completed in the required timeframe, you’re subject to penalties and taxes.

Just a couple thoughts…

By: TMT

TMT — Wed, 17 Jan 2007 18:09:58 +0000

A possible argument for taking company stock is something called Net Unrealized Appreciation.

For example, if you have low-cost-basis company stock, you can opt to take the stock out of your 401k and just pay income taxes on the cost basis. Now you own your stock (with original cost basis) outside of your 401k where it’s no longer subject to the 401k/IRA rules.

You can then utilize other techniques to reduce/eliminate the taxes. Or you can simply sell the stock at capital gains rates instead of typically higher income tax rates if it comes straight out of a 401k or IRA.

I’ve run this analysis for several clients in the past and have rarely seen this make sense for someone, and I always discourage people from having anything invested in their company stock to begin with, but it’s something to be aware of.

Here’s a brief explanation and java-based calculator: http://www.finance.cch.com/sohoApplets/StockRollover401k.asp

By: mapgirl

mapgirl — Wed, 17 Jan 2007 16:59:42 +0000

I always went with cash option on rollovers too, unless I rolled over with the same provider into a private IRA. (So glad I did this now that Fidelity closed some of their funds.) It’s a good opportunity to rebalance and look into some fresh investment options if you’ve been in moribund investments.