401k at Ex-Employer - Pull money out?

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huskiesinct
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401k at Ex-Employer - Pull money out?

Post by huskiesinct »

When I left GE 4 years ago, my 401K had approx. $120k. I never transferred the money and because of the market issues and the performance of GE stock, its value at one point dropped to $30k. Now, it is back around $90k, so it is still $30k less then 4 to 5 years ago.

50% is still in GE stock and the other 50% is a combination of the GE International Fund, GE Small Cap Equity Fund, and US Large Cap Equity Index.

My current company 401K is performing well, but GE stock has been performing well too, which is why my 401k value has increased again. My question is, do I continue to leave it in the old GE 401K, do I leave it there until it gets back to $120k, do I roll it over to my current company and just shrug my shoulders about the $30k less value? What should I do?

Thanks
grberry
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Post by grberry »

Normally, these decisions should be made in the context of your entire portfolio. You didn't tell us about anything else, which makes it hard.

But, generally speaking, having a major fraction of your portfolio in any one stock is a very bad idea. It was an even worse idea back when you also worked for the company. I think you should get out of that stock.

Personally, I would recommend strongly that you roll it over, almost definitely to a rollover IRA not to a 401(k) plan. But if you have amazing superstellar options in your current plan, or have other IRA related moves (perhaps a Roth conversion) planned that this would affect, there could be a reason to leave it in a 401(k) plan until those moves have been made.

This thread says how to post your portfolio so that we can do a better job giving advice.
FedGuy
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Post by FedGuy »

Your should log in to the GE 401(k) website right now and re-allocate your portfolio. First, as Grberry said, you shouldn't have a significant fraction of your portfolio in any one stock. As it stands now, your portfolio could take a major hit from something as trivial as Immelt saying something stupid to a reporter. I'd get out of GE entirely. You may want to do this in increments (say, 1/12 at a time on the first day of every month for the next year) so your assets aren't too dependent on what value the stock happens to be trading at on the day of a hypothetical one-time, all-in conversion.

If there's one thing the people on this website can agree on, it's that you should invest in passive (index) funds (taking advantage of their low expense ratio) and not the more expensive actively managed plans. The "U.S. Small-Cap Equity Index Fund, " for example, will give you small cap equity exposure at less cost than the GE Institutional Small-Cap Equity Fund. The GE 401(k) website lets you review the various fund options and compare expense ratios; you should move exclusively into the cheaper funds. Generally speaking, the fund names that begin with "U.S." instead of "GE" are significantly better values.

Whether you roll it over into an IRA is another question, but it's worth noting that the GE 401(k) plan is pretty good compared to many other 401(k) plans: there's a nice mix of low-cost options, and the plan is pretty flexible in permitting partial withdrawals to separated employees and so on. You may want to keep money in the 401(k) if, for example, you're considering doing Roth conversions. In any case, rollovers can take several weeks, so in the meantime you really should start re-allocating your funds within the 401(k); you can do it right from the website, and your changes will take effect within one or two business days.
Bob's not my name
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Post by Bob's not my name »

Does your GE 401k allow loans even after you're no longer an employee? Some 401k's do, and this is one reason to keep the 401k where it is.

I agree with the above posters that you should get out of GE stock in any case.
jimkinny
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Post by jimkinny »

I think you should figure out what you going to do for the next 20 or 30 years. Buy a book via the Wiki link at the top of this page. If you go the Wiki page you will find some recommended books. I think the Boglehead investing guide is the one for you. The cost of the book and the time spent reading it will be insignificant when compared to the time it took you to accumulate the money in GE's 401 plan. If after spending 2-3 hours with that book you want to know more, buy some of the other recommended books.
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Sammy_M
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Post by Sammy_M »

Another reason to leave it where it is is that your state may offer better creditor protection for plans subject to ERISA. I'd suggest that you get out of that GE Stock right how too. Perhaps you'd want to follow Merriman's advice on which fund options to use in that plan.
http://www.fundadvice.com/401k-help/401 ... ctric.html
YDNAL
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Re: 401k at Ex-Employer - Pull money out?

Post by YDNAL »

huskiesinct wrote:When I left GE 4 years ago, my 401K had approx. $120k. I never transferred the money and because of the market issues and the performance of GE stock, its value at one point dropped to $30k. Now, it is back around $90k, so it is still $30k less then 4 to 5 years ago.

50% is still in GE stock and the other 50% is a combination of the GE International Fund, GE Small Cap Equity Fund, and US Large Cap Equity Index.
Huskies,

The first problem with your allocation in this 401k is the undiversified risk in GE. The second problem is the undiversified risk in GE that killed your portfolio. The stock traded in the $30s from 2003-2008 and then dove to $8.50 and partly back to $21.

Others have given you input on whether to keep (or not) the 401k. Whatever you decide, get rid of undiversified risk.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
JW-Retired
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Post by JW-Retired »

huskiesinct wrote: When I left GE 4 years ago, my 401K had approx. $120k. I never transferred the money and because of the market issues and the performance of GE stock, its value at one point dropped to $30k. Now, it is back around $90k, so it is still $30k less then 4 to 5 years ago.

My question is, do I continue to leave it in the old GE 401K, do I leave it there until it gets back to $120k, .....
You lost 75% of your $120K because of not being diversified, and now you are asking should you stay that way? I think you should ask yourself why you have learned nothing from the last 4 years. Seriously.

The fact that "it is still $30k less then 4 to 5 years ago" is not relevant to any investing decision today.
JW
scubadiver
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Post by scubadiver »

I think you're mixing apples and oranges here. Whether or not you are currently carrying losses in your 401k portfolio should not be a factor in whether or not you choose to do a 401k to IRA rollover.

Reasons For an IRA Rollover
1) Potential for wider range of investment options
2) Potential for lower cost investment options

Reasons Against an IRA Rollover
1) IRAs in general do not have the same legal protections that 401ks have although they do have better protections than most non tax-advantaged savings accounts (NOTE: this is dependent upon your state of residency)
2) If you do an IRA rollover then you cannot roll the 401k into a future employer's 401k plan

IMHO, the two reasons against the IRA rollover are pretty weak. I would do a rollover and I speak from experience here having just rolled about 200K from a former employer 401k plan into a Vanguard IRA.

Scubadiver
Random Walker
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Post by Random Walker »

Agree emphatically with all above!

Get out of single stock: uncompensated risk
Roll over to IRA and take control for yourself
Only if current 401 has great options roll to that

Dave
dbr
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Post by dbr »

I would like to repeat what was mentioned by one or two replies. Being in GE stock and having the 401K at the former employer is two different issues. You should be able to diversity the stock anytime without leaving the plan.

Leaving the plan may or may not be helpful. I will defer on that, although it seems unlikely GE funds would be preferred to a better selection of cost effective funds at Vanguard (or elsewhere).

One thing you do not mention is your cost basis in the GE stock. The one exception to the fact that transactions in 401K plans to not have tax consequences is that there is a provision in rolling over 401K plans to IRAs where company stock in the IRA can be withdrawn and gains taxed as capital gains rather than as income. That provision is called Net Unrealized Appreciation (NUA). If, in spite of the recent losses in GE stock, you still have significant gains in the stock, depending on when you acquired it, you should be aware of this provision and how it works. The details are a bit complicated.

Another poster also mentioned the possible loss of some liability claims exemptions that apply in some states for non-bankruptcy liability judgments.
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Sammy_M
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Post by Sammy_M »

dbr wrote:Another poster also mentioned the possible loss of some liability claims exemptions that apply in some states for non-bankruptcy liability judgments.
I believe some states even opt out of federal bankruptcy protections and impose their own more limited protections. ERISA plans generally tend to fair better. See: http://www.creditorexemption.com/

It looks like this 401K has some great options. I'd strongly suggest leaving it there unless there are tax advantages tied to what dbr mentions above.

Stock funds:
GE S&SP Program Mutual Fund (GESSX 0.19%)
GE Institutional International Equity Fund (GIEIX 0.57%)
GE Institutional Small-Cap Equity Fund (GSVIX 0.93%)
GE Common Stock fund (0.00%)
U.S Large-Cap Equity Index Fund (tracks S&P 500 Index, 0.016%)
U.S. Mid-Cap Equity Index Fund (tracks S&P MidCap 400 Index, 0.056%)
U.S. Small-Cap Equity Index Fund (tracks Russell 2000 Index, 0.047%)
Non-U.S. Equity Index Fund (tracks MSCI All Country World ex-US Index, 0.106%)


Bond funds:
GE S&SP Income Fund (GESLX 0.19%)
GE S&SP Short Term Interest Fund (0.00%)
U.S. Aggregate Bond Index Fund (tracks Barclays Capital Aggregate Bond Index, 0.047%)
U.S. TIPS Index Fund (tracks Barclays Capital U.S. TIPS Index, 0.055%)


Other:
GE Institutional Strategic Investment Fund (balanced fund) (GSIVX 0.36%)
GE S&SP Money Market Fund (0.00%)
U.S. Series "EE" Savings Bonds (For after-tax contributions only, 0.00%)
Default User BR
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Post by Default User BR »

scubadiver wrote:2) If you do an IRA rollover then you cannot roll the 401k into a future employer's 401k plan
Plans are allowed to accept rollovers of taxable funds from traditional IRAs, and many if not most do.


Brian
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LadyGeek
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Post by LadyGeek »

dbr wrote:One thing you do not mention is your cost basis in the GE stock. The one exception to the fact that transactions in 401K plans to not have tax consequences is that there is a provision in rolling over 401K plans to IRAs where company stock in the IRA can be withdrawn and gains taxed as capital gains rather than as income. That provision is called Net Unrealized Appreciation (NUA). If, in spite of the recent losses in GE stock, you still have significant gains in the stock, depending on when you acquired it, you should be aware of this provision and how it works. The details are a bit complicated.
Wiki article link: Net Unrealized Appreciation - NUA
Sammy_M wrote:It looks like this 401K has some great options. I'd strongly suggest leaving it there unless there are tax advantages tied to what dbr mentions above.
If you take a look at the top of that article, you'll see that BlackRock has replaced Vanguard's S&P 500 index with their own. Fund manager greed, as my employer has done similar.

As for keep or transfer, my vote is to move the money to an IRA under your control. It's not your money until that happens. Unplanned circumstances by a former employer can put this at risk.

Wiki article link: 401(k) The wiki mentions this consideration in the Rollover section.
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leonard
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Post by leonard »

Roll the 401k over to an IRA at your favorite financial institution that offers low cost index funds, cheap or no cost (index) ETF trades, no account fees. etc.

Vanguard, Fidelity, WellsTrade, Bank of America are names that come up here periodically. But, research the institution to ensure you will not get hit with hidden fees and you can access all the index mutual funds/ETF's to fill out your asset allocation.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
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Sammy_M
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Post by Sammy_M »

LadyGeek wrote:
Sammy_M wrote:It looks like this 401K has some great options. I'd strongly suggest leaving it there unless there are tax advantages tied to what dbr mentions above.
If you take a look at the top of that article, you'll see that BlackRock has replaced Vanguard's S&P 500 index with their own. Fund manager greed, as my employer has done similar. 401(k) The wiki mentions this consideration in the Rollover section.
Yep, but according to that article, those are the expense ratios for the Black Rock index funds. I wish my employer would be that "greedy" and give us those options.
retcaveman
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Post by retcaveman »

Not a major consideration, but wondering what the short term interest fund is paying? I kept my 401k at my former employer in part because of the SVF. I use that for a good part of my "safe" money. Earning more than the 10 year treasury rate without locking your money up for that long.

Of course that depends on your overall AA and what other accts you might have eg IRA's and taxable accts.
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