O/T 401 K money

Hey I am really sorry for this being a O/T question, but I need some help. I can tear my 13" south bend down to the leveling screws, but when it comes to investing, I am in the dark. I retired after 36 years with the Unisys computor co. I need to take my money from my 401 K. I am going to put it in Mutual funds. I need to make a choice between A funds,(front load) or C funds, (no front load) Any info. appreciated. Stan

Couple of things, all free advice you should not take.

After 36 years of working (I am guessing at your age) you might want to go a little more conservative on a percentage of your 401 rather than dump the entire thing to mutuals. But this choice is entirely up to you.

Next, I'd research the past performance of both funds and see if the "load" is justified by higher performance. Sure, past performance is no guarantee...you know the drill, but you can at least get some quantitative info to back your decision.

My 2 cents, if don't do alot of buying and selling of shares a no load is better, they charge you for each purchase and sale on share. If you don't buy or sell theres no cost to you directly for leaving your money in their care. A load fund charges you X% per year to keep your money in their care. At your age these are not the best questions to ask. You should plan on where to invest you money, ie: fixed income bonds, income not growth mutual funds, cds these types of things, load no load is just details. A diversified group of investments is more important then the slight difference in yield between load and no load funds.

Depending on the amountyou have, you may well be served by calling a financial planner, Banks also do this, I'd suggest you start at a commercial bank.Ask lots of questions, sign nothing until you have come up with a plan. No sense cutting the steel until you know the size.

my wheels don't slow me down

A no load alternative to mutual funds are tracking stocks. The one for the Dow Jones is traded under the symbol DIA (Diamonds) and trades lockstep with the Dow. Each share is 1/100 of the Dow, and can only be purchased in units of 100. There is a similar one for the Nasdaq 100 that trades under QQQQ. Still 1/100 of the Nasdaq 100, but can be purchased in individual shares.

Guaranteed, your broker will try to steer you away from them, as the commissions are the same as stocks. The mutual fund commissions are much higher.

I suspect the total sum involved here is substantial. Unless you like reading and studying this stuff (which you don't, since you posted here), I recommend finding a fee only financial advisor. They will charge some percentage of your money. However, they receive no funds on commission. They are less likely to steer you wrong based on personal financial gain.

You spent 36 years on the job, now is the time to invest a little more effort and learn about investing -- your local Community College is a good place to start. (Stay away from those free "investment seminars" offered by so many brokerage firms ultimately trying to pedal their deal-of-the-day!)

For what it is worth (and remember you aren't paying anything for this), a portfolio of diverse no-load mutual funds specializing in equity income stocks would probably be your best bet -- conservative, yet still has some potential for growth.

BTW -- make investments you can sleep with. If you are going to invest in something that keeps you up at night worrying about it, you are in the wrong investment.

(When I was in my Junior and Senior years of engineering college, I had to take two non-techical electives. I went over to the Business School and took Investing Theory and Personal Finance -- both easy A's and, over the years, those classes have paid back in spades over the required Differential Equations and Open Channel Flow classes I had to take!)

HI Stan -

If you're thinking about paying loads, it sounds as if you are dealing with some sort of broker or financial planner - probably not a good idea since anyone who claims to give objective advice but is compensated, even in part, by comission has a major conflict of interest and cannot be trusted to put your best interests first. No one else has your interests at heart as much as you do.

I'm a self taught investor and am reasonably happy with my portfolio's results over the last twenty years - have always bought only no-load mutual funds and individual bonds. I have only once paid attention to the advice of a broker and it was the most expensive mistake I have ever made.

Suggestions:

1 - Don't be in a rush to move your money from your 401k unless there is a compelling reason to do so. If there is and/or when you do, move it to a discount broker like Schwab or Fidelity (I have had long experiences with both of them) and put it into a money market fund in a rollover IRA while you carefully figure out where you want it invested long term.

2 - Talk to friends who have managed their own investments and whose judgement you respect, but always keeb your BS detector on the alert.

3 - Check out Morningstar Mutual Funds (a twice monthly fund evaluation service) at your local library, and look over books on mutual fund investing at any large book store. "Bogle on Mutual Funds" is a particularly good one. Also, read financial investment columns in the business section of your daily newspaper.

4 - Look into taking investment classes at a local night school or thru the discount broker you select.

5 - Proceed cautiously and plan to be an investor, not a trader.

If you would like to contact me offline, I'd be happy to expand on these ideas. All the usual disclaimers apply - I just like to offer a little of what I have slowly learned and hate to see anyone get jerked around by "financial professionals".

Best of luck, Monoblanco

The previous posters have all given good advice. In terms of the best course, only you can really decide that, based on your level of risk tolerance. I have had a 401K account at Schwab for a while, although it is now going to be at Fidelity since my company was recently acquired. I may have the same kind of decision you are facing at some point soon. It seems that there is a huge variety of mutual funds out there, and you really do have to spend some time looking into them for your own education. It is my general observation that there is a difference between no-load/low-fee vs. other mutual funds, which is mostly that the no-load type funds are less actively managed by the fund managers (maybe). All funds of all types have varying performance depending on what the goals are of the fund managers, and what the economy might be doing in their sectors of investment.

One word of caution, just in case no one has mentioned it: Be very careful, and very aware, of the transaction when you move this money from 401K to whatever else you decide to do. Depending on how the transaction is structured and where the money goes (either temporarily or permanently), there could be serious tax implications. As others have noted, seeking some professional advice would be good clear thinking. Don't reject advice out of hand from seminars, or people who stand to make a buck off your money, just be aware what their motivations are. You can always say NO. Take your time.

You need to determine if you have been happy with the growth and choices you had available in your 401K. If you are, you could consider leaving it there, if that is an option.

If you want to move it to outside investments, you need to move it into an IRA to avoid tax consequences. You cannot handle or receive the money yourself, so talk to an investment advisor, or a banker to make sure the procedures are followed. The government is very unforgiving and they love tax money.

If you are considering a financial advisor, you should interview at least two and three is better. One of the questions you will be asked, is if you need income from this money, or if it is just for investing.

No financial person can tell you what the market is going to do tomorrow, or even next week. What the market will do in the next two years is more predictable.

Stan-

I faced a similar predicament last year when I had to withdraw my 401 money. No other options.

I may not have explored all of the options, however, most of my stocks, all of my stock funds, and all of my 401 was handled by Fidelity.

They've had problems over the last couple of years with unscrupulous traders, but the company has covered all of the misdeeds. I don't think there's an outfit out there that hasn't had problems, and a lot of them hung their customers out to dry.

I wasn't too happy with the prospect of having to change, but the 2 I finally settled on were Janus and Fidelity. The return is steady, the traders(brokers- love that term!) were upfront with me, and I know that given the situations, these 2 companies are as honest as any in the business, and the company backs all the transactions.

I needed something solid and dependable. I'm not a get-rich-quick guy, and so I steered clear of all the other offers. Your bank may offer an IRA, or not- these are also good options.

Load or no-load? They got to get their money from somewhere, it's a matter of the old saying, "pay me now, or pay me later". I chose the no- load option, where it's pay-as-you-go. I've still got 10+ years to let this thing build.

Hey- options are like a-ho's. Everybody's got one, and it suits them just fine. There's a bunch of good info on this page, but it's like someone previous said, you've got to be happy with it, so do your shopping, just like for a machine tool, and pick what suits your needs best.

Billy

Congratulations(I think).You have just parted ways with one of the the worst managed companies in American history. It was your illustrious leader, an ex-secretary of the trearury, that taught us the wisdom of saddling corporations with huge debts. The merger that created this debt was the least successful ever. Before a decade passed the merged entity was smaller than either partner in the merger. How many tens of thousands of your coworkers did you see depart prematurely? How many down sizings did you survive? The financial sector is very corrupt. Don't you find it odd that the Attorney General of the State of New York prosecutes insiders on a regular basis while the SEC finds everthing just ducky. I invested my meager funds with Robert Baird because they hadn't "churned" a small inheritance my wife received on her Dad's passing. Now I find that Northwest National Life sold Baird to a group of Baird executives. I guess I will start looking elsewhere. It is hard to find a brokerage house who hasn't been caught cheating their own small investors.

Larry on lake supervisor. I will have to agree with you on your first sentence obout my former company. I can't say a lot of bad stuff, as they did put up with me for 36 years. My wife also received a small inheritance on her mother's passing, and through a lot of churning almost half of it was lost, before I realized what was going on. All the investement people I talk to have the best thing going. The person I am talking to now recommends a mutual fund called American Funds, which lools as good as any I have seen. It is just the fee's I don't understand. I guess it is pay me now, or pay me later. I think there should be a manditory class in school on investing money. Stan

Stan,

I spent 13 years in the investment business, 10 as an investment analyst and I am a CFA (Chartered Financial Analyst). I'm in computer software now. Got out of the business 10 years ago because I don't see the value added by high-priced brokers (they don't need to make you money to justify their fees - they need to make you enough beyond what you could do in a no-brainer mututal fund to account for their fess plus additional return to cover the risk). Most brokers can't beat the S&P 500.

My advice is find a CFP (Certified Financial Planner) who has no vested interest in what you do with your money, so he won't steer you in this direction or that based on his commissions. He will know the ramifications of taking money from your 401k and may be able to offer alternative ways to get the money and incur less of a penalty. If you do the wrong thing with a 401k, you could mess things up permanently (e.g. if you have a rollover account and depost $1 into it, it then cannot be put back into another 401k, as it is now "tainted")

The other thing that a CFP will do is look at your whole portfolio of assets, including real estate, insurance and other assets and give you a plan that will work for everything. They can charge a fixed fee or some scale based on the amount of assets, or they may charge an hourly rate.

I have a lot of my money in highly diversified equity funds, mostly US, but about 10 percent international. The funds I am in do not do a lot of trading (they are not what is called "actively managed"), so commissions are low. I'm 46, so my situation is different than yours.

Steve

I met a young man in Superior,WI last week. He had recently moved here(Duluth+Superior are known as the Twin Ports) from San Diego. His reason for moving was real estate prices. Even though his wages in WI are dramatically lower he will be able to easily afford a decent home. He is doing "side" jobs(auto mech) to earn extra money. He is going to maintain our cars.

My wife returned from LA last week. She was seated(wedged) between 2 men. One fellow was an immigrant from Bangladesh. He complained that his $160K income prevented his family from buying a home. He couldn"t afford $7K monthly payments. Working backwards I figured he was looking at $2,ooo,ooo.oo properties.

If I were in your shoes the door wouldn't hit me in the a** as I departed with a wad of cash. For a couple of grand a month you can rent some nice beachfront properties elsewhere. You needn't start drawing down your rollover until age 70.5. Ladder some bonds and enjoy life.

It is pure luck that for us; "LIFE IS GOOD."

After the results of the last election my suggestion would be to duck and cover so to speak. With promises of tax increases and other counter ecenomic plans being proposed. Now seems like an especially good time to keep a eye on the horizon.
I've made some minor business equipment investments that I am now second guessing. I'm conservative so I've left myself a way out that would let me break even but I am still concerned.

Stan,

I left my 401K with the company I retired from 17 years ago, and have been pleased with my choice. A bunch of stock people were very anxious to manage my funds for me, and make money from doing so. Anyway, be sure to consider all your options.

Jim

And you guys thought Unisys was bad- I worked for TYCO.

I watched as my stocks went from 90 a share to 8, and batch after batch of people were escorted out the door. I have friends who still work there, and they're all waiting for the next shoe to drop. The division I worked for recently sold off one of their subsidiaries, at a considerable loss, after tinkering with the bottom line numbers for a couple years, trying to milk the most return out of their inept management.

Leaving my money with them was not an option.

I'd still recommend the Fidelity or Janus mutual fund options. Fidelity has 4, varying levels of "risk tolerance", with payouts yielding between 3 and 8 percent a year, approximately.
Janus has a similar program, but I'm working off my memory now, as I don't have the paperwork here.

Billy

Looks like I picked a couple loosers. before woriing for Unisys I also worked for Tyco. Stan