13k Retirement Acct from old job, want to start gaining passive income...LOST

[aurylian]

I am so lost right now. I have a retirement account with an ex employer, and I want to put it somewhere with a trusted company that will help it grow. I don't know who to go with, who to look for outside A.G. Edward's (family used them in the past and was the only company name I remembered). I just want to direct my money to a new account and have someone else manage it for me. I don't know if I'm looking for financial planner, wealth manager, or what. I have tried googling company names, wealth managers (apparently I'm too poor for those people), and I'm just drawing a blank.

40/f, state employee, 55k job, automatically get 9% taken for retirement from current employer. My reasons for doing this, I want to see if I can make my retirement funds grow and hopefully be able to get some dividends to help with living expenses. I am married but my spouse gets non-taxable income from the VA for his disability. I manage the finances and work full time. We are tired of being good broke, where all your essential bills are paid but you have not a lot of money left for fun things. I'm also working at rebuilding our savings account that I started with the 2020 stimulus payments. Since I get paid once a month, it's difficult but we manage to get by.

 

[ctct123]

@aurylian Head over to /r/personalfinance and read the whole wiki, especially the Prime Directive flowchart, which tells you exactly what to do with your money and in what order.

Roll the retirement account into an IRA with Vanguard, Fidelity, or Schwab. You don't need to hire anyone. Put it in a total stock market index fund or an S&P 500 index fund or a target date fund. Then don't mess with it until you retire.

 

[aurylian]

@ctct123 You rock kind stranger. Thank you so much!

 

[jackdcat]

@aurylian A $13,000 investment will generate about 5% annually in dividends, about $50/month.

 

[aurylian]

@jackdcat It's a start. Gotta start somewhere I guess.

 

[matthewsjc1]

@aurylian Your money is in a retirement account. Unless you want to pay significant penalties, roll it into another retirement account such as IRA. Then invest it all into VTI or VT. When you retire in a few decades, it may be a decent chunk. You can also add to it every year to make it more than decent.

I would strongly advise against trying to access this money now, specifically for dividends. That isn’t a good idea.

 

[aurylian]

@matthewsjc1 Why not? It grew to the size it was after it was invested in my retirement account.

 

[obsession]

@aurylian Taxes and penalties for accessing it.

 

[benarandres]

@aurylian Yeah they'll eat all that profit in penalties.

 

[aliciaew]

@aurylian How old are you?

Passive income is better, later. You don't want to start pulling dividends until you really REALLY need to.

The reason is two-fold:

1. It increases your taxable income so you will lose some of it to taxes. Later in life, when you're not working at all, your taxable income will only be the dividends, instead of the dividends + your salary.

1. Every time a dividend is not re-invested, it's missed growth. In other words, if the dividend is put into your bank account instead of buying more stock with it, you will have less shares, which while growing, won't be as large as it could have been later if you had reinvested it.

I hope these make sense. TL;DR - the longer you can hold off on withdrawing cash from the market, the better you will be.

 

[aurylian]

@aliciaew By asking my age, I assume you missed the first part of the second paragraph, 40. I'm mid-life so far. And the advice makes sense.

 

[billy54]

@jackdcat In the retirement account…

 

[niqhtcore]

@aurylian I agree that you should absolutely keep the money in a tax advantaged retirement account until you retire unless it is absolutely necessary for your survival.

Leaving the money invested for retirement and letting your investment earnings compound will have the greatest positive impact in your life.

 

[aurylian]

@niqhtcore But if I'm not employed there, then isn't the money no longer invested? I don't know how that works, but it makes sense to me that if an employee leaves, then their retirement would be put into an account for drawing at retirement thus no longer being invested by the employer.

 

[niqhtcore]

@aurylian Ok, I get the question now.

So, you can roll your money over into another retirement account and then invest in a lot of different kinds of assets using that new account.

A lot of the advice your getting about IRAs is great. You can invest the money in your IRA and continue to grow it without paying taxes until you pull it out in retirement.

 

[aurylian]

@niqhtcore Thank you for helping clarify things for me.

 

[niqhtcore]

@aurylian No problem. I feel like sometimes the answers here start at advanced mode without giving people a tutorial!

 

[zech1210]

@aurylian I’m not too familiar with 403b accounts, but for 401k the money is still invested in the fund selected. It’s just no longer being contributed.

There is an a easy way to check. Look at the balance from 2021 and 2022. For it fluctuate? Look at the current status and see if it moved up or down, number of shares and/or the find it’s invested.

All else, call the company managing the 403b

 

[aurylian]

@zech1210 That means I have to.... use my phone to... place...a...call...to...another... person... lol! I can do that! Just kidding about being call averse.

 

[zech1210]

@aurylian Some questions to help guide you better.

1. Is the 13k from an old 401k or IRA?
2. If it’s from an IRA then convert this to an rollover IRA and then convert to Roth IIRA. Then invest in funds like SCHD, VTSAX, VOO
3. If it’s from 401k then rollover to current 401k and invest.

As far as savings account go, open an online account from Ally or Marcus. The rates are high so get good return back.