Financial Advice question
 

So, before the war starts, my wife would like to get her mutual funds out of T Rowe Price and just put them in savings. What's the procedure. Was a 401K, then changed to mutual funds, low risk, slow moving but built up well over several decades. Penalty of course for doing it, what's the percentage of that? TIA.

Moved from a 401k into an IRA?

Savings at a bank?

She says mutual fund, whatever that is. Might be an IRA, but she does'nt know for sure, as she's been ignoring it for years and I kept out of her business. Yes, bank saving account, just to stabilize it for now.

Please don't allow to withdraw, not only penalty for early withdrawal, but taxes as well.

She can easily transition to a fixed income fund at T Rowe without penalty or taxes. The folks at T Rowe will help her. Not knowing more specifics, hard to say from here. Just a few things to consider.

Hope this helps.

I bet she rolled it into an IRA at T Rowe. She should be able to roll it into an IRA at the bank with no penalty. Find out what it is at T Rowe and talk to your bank about the roll over.

If it isn't in an IRA at T Rowe there won't be any penalty to move it to the bank.

She can probably just open a T.Rowe Price money market fund within her IRA and shift the money there. She can shift it back whenever she wants, but some institutions are requiring a 30 day wait time to shift back.

+1

Fixed income fund and/or literally a "Cash" fund may be available.

What is the purpose/intent of the move... To get the funds out of the market and into cash because you are worried the market will crash? To get the funds into your savings account so you can spend it?

She is using the wrong language to describe what she wants to do, which means she doesn’t understand what she’s doing and is likely to make a life-altering mistake. There is a difference between taking her money out of the fund it is currently in and taking it out of her IRA. If she takes it out of her IRA it will be taxed as ordinary income on dollar one and she’s likely to pay a 10% early withdrawal penalty on every penny taken out. If she took out $500,000 she’d pay almost $200,000 in state and federal tax on top of the $50,000 penalty.

She almost certainly can move from whatever stock fund she is in to a money market fund and keep it in her IRA without triggering a taxable sale. Timing the market is a risky proposition, but if she insists on doing so, she should at the very least make an appointment with someone from T Rowe Price and get their direction on how to do it without triggering catastrophic taxes and penalties. What she really needs to do is hire a fee-only financial planner, not a stockbroker styled as a financial advisor, and get some real advice. She should not take advice from
Anyone who sells investments. She should only go to someone who gives advice on an hourly fee-for-service basis.

It seems an obvious question, but how old is she?

_

All she has to do is sell the funds, and leave them in T row price as money market. That way, they will be protected form a market drop as no longer invested, and there should be no tax liability if they remain in the retirement account. Unless I am missing something, that is what I would do.

She's 69. And yes, she/we know nothing, is why we're asking. Just want to stabilize the investment in case war happens and crashes lots of stuff. Not interested in spending any of it. It was rolled into an IRA @ T Rowe, i find after perusing some old mail.

She can move it into a fixed income IRA at T Rowe or into a fixed IRA at her bank if she wants to keep it local. No taxes or penalties for either move..

There's two sorts of investment money:
- taxed
- tax advantaged

401k/IRA are 'tax advantaged'. In those cases you didn't pay tax on the money before it was invested. That means more money invested so can appreciate more. When you withdraw the money from the account you pay tax on the gains as if its income.

If you leave the money in the account and just change the allocation then there's no penalty and no tax implications. You could 'sell' the mutual fund and buy a gold index, or a money market index, etc. There's no tax implications or penalties as long as the money stays in the tax advantaged account.

Sounds like what you want to do is reallocate because you think market is going to tank.

I really REALLY think you need to talk to a professional and figure out your investment goals, etc. I don't mean find someone out of the phone book or ask on pelican forums. :) There's people that you pay a one time fee and they analyze your situation and tell you what to do.

Someone here pointed me at the bogleheads web site. Really good helpful people there. Thats a reasonable place to ask.

Read the "Asking Portfolio Questions" post:
https://www.bogleheads.org/forum/viewtopic.php?f=1&t=6212

Read up on questions and answers here:
https://www.bogleheads.org/forum/viewforum.php?f=1

Theres a ton of solid knowledge about how to allocate resources during retirement. Really important thing is to not try and 'time the market', you're just gambling and can lose a bunch of money. Hopefully your current mutual fund is appropriate for you. Generally mutual funds are bad because they have higher fees which eat into your gains.

EDIT: Exactly what MRM said. Do what MRM says.

Thank you all, that's very helpful. Looks like an hourly adviser and roll the IRA into our local bank is the way to go. We'll get busy.

A professional is in order. She's past 59 1/2 so she can take money from her IRA with no penalty. Taxes will depend on whether it is in a conventional IRA or a ROTH. She's getting close to the age of needing to take a minimum distribution anyway. I believe that age is 72 now. Was previously 70 1/2. If you have a relationship with a CPA, that person should also have some helpful information.

Yes. There is no penalty to withdraw at that age, but one must pay income taxes as if it is regular income (state/local taxes may be exempt for certain retirement funds in some states). If you don't have much, it is not a big decision, but if you have a very large amount, it is critical. If it were me (at that age) and I had a lot in a 401K, I would consider taking out the difference between our income and the top of the tax bracket we are in (as I believe taxes are going up soon) ...and mandatory withdrawal is around the corner at that age leaving you with less control (amount might push you up a couple brackets).

For example, in 2022, for married, filing jointly...the 24% bracket is $178,151 to $340,100. So, if you made $200K, you could pull out up to $140K more without paying at the next bracket which is 32%. If you have done so well that mandatory withdrawals will push you into the 32% or 35% brackets, that is brutal...plus it makes Medicare payments for both to spike

Taxes are inevitable, and while paying 24% of the $140K noted above seems incredible ($33,600) at the top bracket of 37%, it is $51,800...so planning to divide it into smaller chunks can be pretty important/helpful.

Of course, you said, "Was a 401K, then changed to mutual funds"...so she might already be in a situation where there is no tax advantage...and none of this applies.

Some good advice
 

If your wife is concerned about a market drop, like others have said, just call in and have the mutual funds sold, all the funds should accumulate in an interest bearing money market account that is likely better than your bank, and fully accessible. Buys some time to do some planning, and achieves the peace of mind it sounds like is the priority here.

simple call

I'd find out of she rolled her 401k into an IRA or if she just took the lump sum out of the 401k and paid all of the taxes already.

If it's currently in an IRA, generally speaking, I would not roll the money to your local bank (unless maybe they have an IRA option). If the concern is the market tanking, then you can get out of the market, but leave the money in the IRA as "cash". That way you don't have to worry about paying taxes on it, but it's also readily available. You can pull as much or as little as you want and only take the tax hit on what you take out instead of all of it.

If she took everything out of the 401k and put it into a regular brokerage account and has already paid all of the taxes on it then do whatever you want, because there won't be any tax hit or any other hit from moving the money around.