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

[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.