Ask Dr. LJ

[bluegargantua]

Hey Dr. LJ (economy degree)

I've got this IRA with my bank. I opened it when I switched jobs and dumped my paltry 401(k) money into it. It was worth about $500.

Today, the bank started charging "maintenance fees" and pulled $40 out.

So, here's the deal. Obviously, I need to do something with the money. It will never earn enough to offset the fees. In the past, I've been told that I can't roll this cash into my current 401(k) -- and consolidating my retirement savings this way is what I'd really like to do.

I don't want to just cash it in because first they tax you 20% for early withdrawal and what's left over gets taxed again as income which probably means I'd get nothing out of it.

What can I do with this stupidly small sum of cash?

Thanks
Tom

Comments

probably not helpful

[invader-haywire.livejournal.com]

I would ask again, I believe you should be able to roll it over at least when the CD matures. Otherwise try and find a place that wont fee you.

Re: probably not helpful

[z-gryphon.livejournal.com]

Yeah, failing the "into current 401k" strategy, I would go with "another retirement account, only this time at a bank that doesn't suck," but don't go by me. I have no track record at all as regards intelligent handling of retirement funds.

[missionista.livejournal.com]

Have you called the bank to ask why they did that, and maybe contest the charges? Why did this suddenly happen if they've never done it before? You can always tell them you are going to take your money elsewhere if they don't give you back that $40.

Also, I don't understand why you can't roll that into your current 401K. If it is not a ROTH IRA, can you convert the $500 IRA into a ROTH? That way, you can take out the money without penalty for certain things such as first time home purchase, or educational expenses.

[insegnante.livejournal.com]

Well, if you want to move it to another bank, you could check out www.ingdirect.com

[sla.livejournal.com]

As long as you have not added anything to the IRA then you should be able to roll that into another 401k. Like the others said I would double check this and call the bank to ask about the maintenance fee.

-steph

[foxtown.livejournal.com]

Are you sure that $40 is due to fees? Could some of it be due to the loan issues? If the money was in Money Markets then that is a chance.

401K to 401K is fine to roll-over, but there is a time limit and as I recall IRA is totally seperate from 401Ks, so I think you are screwed there.

Also Roths are completely different from regular IRAs so no roll over there either.

So the best option is to find a better bank, and I hath heard good things about ING Direct, but I am sure there are others. Just make sure that you put it in index funds (Vanguard has good ones), since those are the most efficient in the long run. The Money Markets are taking a beating at the moment.

[bluegargantua]

The bill made it clear that the loss was strictly fee-related and not because the fund sucks or something.

Yes IRA != compatible with 401(k) == extremely irritating.

I have an ING account so I guess I'll check it out.

Thanks!
Tom

[foxtown.livejournal.com]

The other option is to put some more money in. A lot of places will charge extra for less money. You may want to call your current bank to see if that is what happened.

[drwex]

Even if you can't roll directly into another IRA you can make a withdrawal of the full sum and have a reasonable window (30 or 90 days, I forget which) during which you can re-invest the money. Assuming you don't have to pay early-withdrawal penalties from the current holder you shouldn't lose any money. The IRA cashout money is only taxed when you decide to keep it, not when you take it out.

[purple-dj.livejournal.com]

- 401k can roll into new 401k or rollover IRA
- rollover IRA can roll into rollover IRA only

Basically, your only choice as far as I know is to take the withdrawal with the early withdrawal and tax penalties, or move it into another rollover IRA with someone else.

If you're getting slammed with fees because the balance is too low, consider dumping a 401k into the IRA to raise the balance. I've never heard of a company charging fees on an IRA for it being too low balance, but banks have done crazier things.

If it were me, I would be looking for a different bank to keep the IRA with, or finding out if there is some way to avoid the fees with the current bank.

As a single data point, my rollover IRA is with Fidelity and they have been just fine to me (no fees). I chose them purely for the simplicity that my 401k was already with them that I was rolling out of when I first got it.