500K coming

[lrodptl]

I'm retiring due to a neck injury at 54 years old and will be rolling over 340K from my 401K and 160K lump sum pension payout. Should I roll this over into 1 IRA or should I fund 2 at different banks.

[autoxer]

Does the pension payout have early withdrawal penalties like the IRA? Do you need to access some of this money right away?

I would consider rolling the 401k into an ira and put the pension payout into a taxable brokerage account, so it can be partially invested. That would depend on how much you need access to in the next 5 years, before you can draw from the ira without penalty. I would also keep the two different accounts at the same bank for simplicity and I would choose one like Vanguard for the low fee structure.

[bjl584]

As stated above, unless you have some other source of income to live off of, then you probably shouldn't roll it all into an IRA.

Can you provide more details on the rest of your financial picture?

[lrodptl]

There are early withdrawal penalties. My 401K pension and early buyout bonus will be approx 577000,my wife has about 300k in her 401K and we have about 350K invested in MFs and stocks. She will continue to work and her income is very erratic going from 30K to 180K in the last 10 years with an average of about 70K. We have brokerage accounts with TR Price and TD Ameritrade with the investments evenly divided. We have no mortgage but we do have a 29K loan we are paying off and 2 girls 13 and 14 I was hoping to help through college. They presently have 10K each in 529 Funds. I have filed for SSDI and if approved that payment added to my Long Term Disability insurance would be about 90K annually til 65 then the LT Disability goes away.If not approved we will fight it and if we do not succeed I do have a plan which would earn me about 30-40K annually. Does it make sense to continue with 2 brokerages which came about because of fear during the crisis 5 years ago? If not,would anyone have a preference between those 2 I have.If it makes any sense to keep both should I divide into 2 separate IRAs as we have with the investment money? Thanks.

[disneysteve]

I believe disability is an exception to the early withdrawal rules for IRAs so if you have been declared disabled from your injury, that might apply. In that case, rolling into an IRA might still be the way to go even if you do need to start drawing on that money now.

[autoxer]

There are early withdrawal penalties. My 401K pension and early buyout bonus will be approx 577000,my wife has about 300k in her 401K and we have about 350K invested in MFs and stocks. She will continue to work and her income is very erratic going from 30K to 180K in the last 10 years with an average of about 70K. We have brokerage accounts with TR Price and TD Ameritrade with the investments evenly divided. We have no mortgage but we do have a 29K loan we are paying off and 2 girls 13 and 14 I was hoping to help through college. They presently have 10K each in 529 Funds. I have filed for SSDI and if approved that payment added to my Long Term Disability insurance would be about 90K annually til 65 then the LT Disability goes away.If not approved we will fight it and if we do not succeed I do have a plan which would earn me about 30-40K annually. Does it make sense to continue with 2 brokerages which came about because of fear during the crisis 5 years ago? If not,would anyone have a preference between those 2 I have.If it makes any sense to keep both should I divide into 2 separate IRAs as we have with the investment money? Thanks.

It sounds like you have money for the next five years, between your wife's income and your brokerage account, so you can probably roll your windfall right into an IRA. Do you have a plan for how much you spend each year?

Regarding the two brokerage accounts, I don't know much about the specifics of those two, but I think the actual investment choices within those accounts are far more important than which brokerage you use. Things like being diversified, keeping the fees low, and having an appropriate amount of risk for your age, will have a big impact on how well your investments do.

[lrodptl]

It sounds like you have money for the next five years, between your wife's income and your brokerage account, so you can probably roll your windfall right into an IRA. Do you have a plan for how much you spend each year?

Regarding the two brokerage accounts, I don't know much about the specifics of those two, but I think the actual investment choices within those accounts are far more important than which brokerage you use. Things like being diversified, keeping the fees low, and having an appropriate amount of risk for your age, will have a big impact on how well your investments do.

I have yet to figure out the annual budget but there will be some trimming,thanks.

[JustBill]

Sorry to read of your injury and subsequent employment status.

Your state of residence will dictate this, but you should evaluate the relative safety from civil judgements of leaving your money in the 401k, versus a IRA rollover. You have two teens who will eventually drive, you may have unexpected medical costs too high to pay, a tree from your yard could fall on a group of Girl Scouts selling cookies. Typically a 401k provides better asset protection than an IRA in certain situations.

[disneysteve]

Sorry to read of your injury and subsequent employment status.

Your state of residence will dictate this, but you should evaluate the relative safety from civil judgements of leaving your money in the 401k, versus a IRA rollover. You have two teens who will eventually drive, you may have unexpected medical costs too high to pay, a tree from your yard could fall on a group of Girl Scouts selling cookies. Typically a 401k provides better asset protection than an IRA in certain situations.

Of course, for a couple hundred dollars per year, you could just get an umbrella liability policy.

[kork13]

I believe disability is an exception to the early withdrawal rules for IRAs so if you have been declared disabled from your injury, that might apply. In that case, rolling into an IRA might still be the way to go even if you do need to start drawing on that money now.

Steve has it correct -- Disability is one of the IRS' exceptions that exist for early withdrawal from retirement accounts.

I would recommend that you just roll everything over into an IRA, consolidate into a single brokerage house (Vanguard is a very good option). Assuming your injury is deemed a "disability", you will be able to draw from your IRA without penalty (regular income taxes will still be due).

On the note of lawsuit vulnerability, check your state's individual laws. Texas, Arizona, and Washington, for example, protect IRA's from lawsuits. New Hampshire & New Mexico provide no IRA protections. Based on your state laws, you just might consider an umbrella insurance policy, which can be prudent in many situations anyway.

[JustBill]

Of course, for a couple hundred dollars per year, you could just get an umbrella liability policy.

Certainly, unless somehow someone convinces a judge you were negligent by not having the proverbial rotten tree removed and the umbrella insurance provider won't cover the negligence award.

[llckll]

What about purchasing some ETFs or stocks that can pay you dividends monthly or quarterly? Might be some passive income to help with living expenses.

Charlie