Dont Want my Old 401k in Stocks Anymore, Rollover?

[axeman462]

So I have this old 401k from a company that I worked for about 4 years ago. Its not very big, but with the right growth plan it could turn into a decent amount of cash 20-30 years down the road, and i'm trying to figure out what to do with it. i am not very fond of the stock markets, so I dont really want to leave it in the 401k anymore.

I am torn between sticking it in an annuity and letting it sit for the next few decades or opening an Prosper or Lending Club IRA with it.

Any thoughts? Pros or Cons?

 

[pfg1]

Whatever you decide to roll it into, I would consider converting it to a Roth and pay the tax now while its smaller.

 

[Stephen]

So I have this old 401k from a company that I worked for about 4 years ago. Its not very big, but with the right growth plan it could turn into a decent amount of cash 20-30 years down the road, and i'm trying to figure out what to do with it. i am not very fond of the stock markets, so I dont really want to leave it in the 401k anymore.

I am torn between sticking it in an annuity and letting it sit for the next few decades or opening an Prosper or Lending Club IRA with it.

Any thoughts? Pros or Cons?

You could check to see if there is a fixed account option in your 401k and if so, what it is paying. There are quite a few 401k's with old fixed accounts in them that are pretty attractive compared to what you can find on your own.

You are young, I am curious why you might prefer investing your retirement funds into unsecured consumer loans over a diversified portfolio.

 

[scagnt83]

I would look at what Bond Fund options you have if you are risk adverse.

But you could go the IRA/Annuity route. AG has a nice 7 year IA that is uncapped with a spread, it uses an Index from Merrill Lynch. The historical lookbacks look very nice. American Equity has a nice line of new products called the "Choice" series. They have an option for an uncapped spread using the S&P 500 Dividend Aristocrats Index.

Both of those are imo the best options on the market right now.

 

[axeman462]

You could check to see if there is a fixed account option in your 401k and if so, what it is paying. There are quite a few 401k's with old fixed accounts in them that are pretty attractive compared to what you can find on your own.

You are young, I am curious why you might prefer investing your retirement funds into unsecured consumer loans over a diversified portfolio.

For the past year or so, I have invested some money in P2P lending, and received about an 8% return over the last 12 months. Less than 3% of the loans i invested in defaulted. My 401k from inception to date has a real return of only about 3% (the 401k was started in 2006).
I feel that P2P is a safer and more reliable investment than the stock market.

 

[scagnt83]

My 401k from inception to date has a real return of only about 3% (the 401k was started in 2006).

Then you are in some horrible funds that have not even come close to keeping up with the market in general. Do you know what funds you are in?

P2P lending carries a MUCH higher risk than the market statistically speaking... and for many other reasons.

 

[axeman462]

Then you are in some horrible funds that have not even come close to keeping up with the market in general. Do you know what funds you are in?

P2P lending carries a MUCH higher risk than the market statistically speaking... and for many other reasons.

the funds are irrelevent. My wife and I have another 401k through her work, and that one is performing fine. We just think it would be good to diversify more. So we are considering opening another account iwth either prosper or lending club in the form of an IRA, or rolling my 401k into an annuity. We are wanting to do this for safety and hopefully higher returns.

As for the markets being statistically safer than P2P lending...that is simply not true. If it were, than every credit card company in the country would be bankrupt.

 

[scagnt83]

the funds are irrelevent. .

Not when you are complaining about the rate of return...

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As for the markets being statistically safer than P2P lending...that is simply not true. If it were, than every credit card company in the country would be bankrupt.

Lending clubs are not credit card companies. The current environment is much safer than it was 7 or 8 years ago... but that is only because the job market has improved.

Over a 20 or 30 year period statistics are with the market. The Lending Club might disagree, but experts in economics and investing would disagree.

Im glad that you have done well with it, and as a form of diversification for a small portion of your overall assets it can be perfectly fine. But the risk/reward for true retirement dollars (which your 401k should be), is not in the same ballpark as P2P lending. The financial ratings companies will not even rate the securitized tranches of p2p loans because of the excess risk, so far only 1 has been approved... they view the rest as having more risk than junk bonds...

 

[axeman462]

Not when you are complaining about the rate of return...

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Lending clubs are not credit card companies. The current environment is much safer than it was 7 or 8 years ago... but that is only because the job market has improved.

Over a 20 or 30 year period statistics are with the market. The Lending Club might disagree, but experts in economics and investing would disagree.

Im glad that you have done well with it, and as a form of diversification for a small portion of your overall assets it can be perfectly fine. But the risk/reward for true retirement dollars (which your 401k should be), is not in the same ballpark as P2P lending. The financial ratings companies will not even rate the securitized tranches of p2p loans because of the excess risk, so far only 1 has been approved... they view the rest as having more risk than junk bonds...

thanks for your opinion.

 

[Stephen]

I feel that P2P is a safer and more reliable investment than the stock market.

If you told me that you are investing in lending club because you are not afraid to take a little more risk to get a better rate of return, then I would say that you are in the right spot.

The first risk is the risk of borrower default. The economy has been doing well lately. When we see another 2008 situation happen again, you will see your default rate increase, and anything that you lose is gone forever. You won't make any of it back during the recovery phase.

Since are not actually issuing loans, you are purchasing notes from lending club that correspond to their loans, you also have the risk that lending club could go under, and you are going to be at or near the back of the line during any bankruptcy proceedings.