CIT and Rollover

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Topic Author
ikowik
Posts: 147
Joined: Tue Dec 23, 2014 6:52 pm

CIT and Rollover

Post by ikowik » Sat May 23, 2020 8:34 am

I have a rather sparse selection of investment options that are low-cost in my Deferred Compensation (457b) plan. This is a governmental 457b. Recently they changed the few index mutual funds they had to Collective Investment Trusts (CIT) which track the same stock and bond indexes. I have been hesitant to use these as information about them is hard to come by, but what I have read here and elsewhere indicates they are a good, though somewhat opaque, substitute for index mutual funds.
I have read the wiki on CITs, and am aware they do not have ticker symbols and NAVs are available only on the website; and they roll dividends into the NAV.

My question: Is there a problem in rollover of CITs into and IRA when I leave employment? A few reports (including Wikipedia on CIT) state rollover into IRA is difficult. Does this mean that they cannot rolled over "in kind" only? One report suggests talking with a tax consultant for rollover of CITs!
Any ideas on what they are talking about?

retired@50
Posts: 2591
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Location: Living in the U.S.A.

Re: CIT and Rollover

Post by retired@50 » Sat May 23, 2020 9:22 am

ikowik wrote:
Sat May 23, 2020 8:34 am

My question: Is there a problem in rollover of CITs into and IRA when I leave employment? A few reports (including Wikipedia on CIT) state rollover into IRA is difficult. Does this mean that they cannot rolled over "in kind" only? One report suggests talking with a tax consultant for rollover of CITs!
Any ideas on what they are talking about?
When you roll assets from a 401k into an IRA, they will likely come as cash. In other words, the assets will be sold inside the 401k plan, turned into cash, then sent to your new IRA custodian.

I've never heard of any difficulties in doing this sort of a rollover, other than the fact that your money will be "out of the market" for a few days to a few weeks, depending on how long the rollover transfer process takes.

Regards,
This is one person's opinion. Nothing more.

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anon_investor
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Joined: Mon Jun 03, 2019 1:43 pm

Re: CIT and Rollover

Post by anon_investor » Sat May 23, 2020 9:32 am

retired@50 wrote:
Sat May 23, 2020 9:22 am
ikowik wrote:
Sat May 23, 2020 8:34 am

My question: Is there a problem in rollover of CITs into and IRA when I leave employment? A few reports (including Wikipedia on CIT) state rollover into IRA is difficult. Does this mean that they cannot rolled over "in kind" only? One report suggests talking with a tax consultant for rollover of CITs!
Any ideas on what they are talking about?
When you roll assets from a 401k into an IRA, they will likely come as cash. In other words, the assets will be sold inside the 401k plan, turned into cash, then sent to your new IRA custodian.

I've never heard of any difficulties in doing this sort of a rollover, other than the fact that your money will be "out of the market" for a few days to a few weeks, depending on how long the rollover transfer process takes.

Regards,
+1. I have rolled 401k plans that were invested in CITs into IRAs before, this is exactly what happens.

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JoMoney
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Joined: Tue Jul 23, 2013 5:31 am

Re: CIT and Rollover

Post by JoMoney » Sat May 23, 2020 9:35 am

ikowik wrote:
Sat May 23, 2020 8:34 am
... Does this mean that they cannot rolled over "in kind" only? ...
Yes.
They can't be transferred "in kind", likely can't even be purchased outside of a workplace retirement account that is setup like a trust. You wouldn't be able to hold a CIT in a brokerage account. They're trusts, and the SEC is not the regulatory body that looks over them.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Horton
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Joined: Mon Jan 21, 2008 3:53 pm

Re: CIT and Rollover

Post by Horton » Sat May 23, 2020 10:08 am

There’s no need to transfer assets “in kind” when doing a rollover. Just pick new funds in your IRA. By using a CIT, your employer is likely doing you a favor - providing lower cost investment options.

Topic Author
ikowik
Posts: 147
Joined: Tue Dec 23, 2014 6:52 pm

Re: CIT and Rollover

Post by ikowik » Sat May 23, 2020 11:09 am

Thanks to retired@50, anon_investor, JoMoney and Horton. That makes sense.

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