Financial Options for investing money from 401K?

A direct roll over into a traditional IRA has no effect on your taxes and would be the right answer for most people. A Roth conversion would have immediate tax consequences. I would not do that without a careful analysis by a competent investment adviser. Vanguard and Fidelity are good companies to consider but I would lean toward Fidelity in your case because they have plenty of local offices and you would probably benefit with a face-to-face discussion of your options. Any Fidelity office will have someone who can help you. At some point someone (not Fidelity or Vanguard) will probably try to sell you an annuity. DON'T DO IT! It is a decision that can always be made later but is extremely difficult to undo once taken.

The best option would be to move it to another tax shielded type of account. The most common ones is an IRA, either a Traditional or Roth. Here is where it can get a bit confusing. The difference between a Traditional and a Roth 401k or trad or roth IRA, is that for traditional, you are contributing before taxes, which means, when you start withdrawing as early as 59.5 years of age, you will add your withdraw amount to your ordinary income, and pay taxes on it. If you have a Roth 401 or IRA, you are paying taxes FIRST and THEN contributing. That means when you start withdrawing as early as 59.5, you are not paying any additional taxes (since taxes were already paid). Roth is better for younger generation overall, but if you think you will be making less $ by the time you start withdrawing, the traditional might be for you. Here is what you need to do: (I did this like 8 months ago).

Find out of you have a Traditional (aka pre-tax) 401k or a Roth 401k. Most companies offer only traditional, some offer both traditional and roth.

Open an IRA account with a broker. I use TDAmeritrade, but you could use whoever, like fidelity, vanguard, scottrade, etrade, whoever. The type of IRA you open is up to you.

Here is where the steps change depending on what type of 401k you have, and what type of IRA you open.

If you have a traditional 401k, and you open a Traditional IRA at, lets say, at Fidelity (just as an example), You will "rollover" your 401k to your IRA, and pay nothing. (paying taxes for traditional is when you withdraw later on).

If you have a traditional 401k, and you open a Roth IRA, you will actually have to open a traditional IRA temporarily (Fidelity will do it for you) and "rollover" the amount into the traditional IRA, then "convert/conversion" the funds after a few days when it clears, into the Roth IRA. You will probably (depending on broker company, or everyone gives these choices?) have the option of paying your taxes for the conversion between traditional to roth NOW, or at tax time. You can then choose to either keep your traditional IRA open, or close it.

If you have a Roth 401k, and you open a Traditional IRA, I don't know what would happen there...(you would haev already paid your taxes, and you want to switch to an account where you haven't paid taxes yet?)

If you have a Roth 401k, and you open a Roth IRA, then you just "rollover". Nothing to convert, no additional taxes to pay.

The rollover process is done in 2 different ways, depending on both companies (the one in charge of 401k, and the broker you opened with - and you gotta kind of work with both of them to figure out how they do things) 1) 401k company writes check to you in the full amount in your name (you could do partial, but why not do all of it, right?) and WITHOUT OPENING THE ENVELOPE (opening the envelope might constitute as taking your 401 payout into your own hands, comes with penalties and the such), bring it to fidelity to deposit into your traditional IRA account. 2) the 401k company writes a check to Fidelity "For Benefit Of" (FBO) (your name), and sends it to fidelity. and they will deposit it into your Traditional IRA for you. Everything else you can do online or over the phone if you don't want to go in person.

I included a pdf file that covers some of this stuff, along with getting started with stocks and funds, if you're interested.

http://www.mediafire.com/view/rai0kv05jqgrg18/Fund...

This isn't a dumb question at all.

Did you contribute to the 401K on a BEFORE tax or AFTER tax basis.

Most 401ks are on a before tax basis.

you can rollitover into a ROTH IRA only if the contributions were on a AFTER tax basis.

otherwise you will have to pay taxes on it all, not good.

so you will probably need to rollitover to a Traditional IRA

Yes you can, and a Roth might be your bet choice. You'll have to pay income tax for this year on the full amount though. An IRA, Roth or traditional, has tons of different investment options.

If you roll it into a Roth IRA, you will have to pay taxes on it. Someone I know did this a couple of years ago because they were told to by a friend and he was not expecting the tax bill at tax time. There would not be a penalty but you would have to pay taxes on the rolled over amount.

However......

If you roll the 401k directly into a Traditional IRA, there would be no taxes or penalties. This is what I did and what I recommend doing to others.

There are literally thousands of places to roll over a 401k to. Vanguard and Fidelity are the two most popular ones.

https://investor.vanguard.com/401k-rollover/

https://www.fidelity.com/retirement-planning/learn...

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Do NOT "take a payout from your 401(k)" - that will trigger huge tax issues. Do a DIRECT rollover from your 401(k) account into an IRA.