Retirement Accounts – I Forgot About My Rollover IRA Account and Found Money

In my financial journey that began with this blog in November 2015, I started with zero in retirement savings. That’s $0.00 on the old retirement statement.

Well, not quite zero, but it was damn close. I had $500 left in my Roth IRA account. I say “left” because I liquidated the account a couple years ago.

I took out about $29,000 in early distributions to help us get rid of an underwater mortgage situation. We were losing about $700 per month while renting out the house and we had to bite the bullet on selling the house to avoid losing our shirts any further.

This was one of the many painful financial disasters in my life. There wasn’t much money in the account when I liquidated it (in terms of retirement savings), but the 10% penalty for taking the early distribution (before retirement age) was very painful in addition to losing all retirement savings.

I completely forgot that I had any money left in the Roth. I thought it was all gone. I looked at the account in early July and saw the $500. I promptly purchased some stock, two dividend paying companies…

Verizon (VZ) – dividend yield about 4% at purchase
Gramercy Property Trust (GPT) – dividend yield about 6.25% at purchase

It was depressing to see only $500 in retirement savings, but I was happy to put it to work on some dividend paying stocks.

Depression is also the reason I never checked the account and assumed there was no money in there. I took a major hit by liquidating the account and it was very depressing. Why would I want to go back to the scene of the crime? Add to that the fact that I could not afford to fund the account, and I didn’t want to log in at all.

Company Retirement Accounts – The 401k

I had also contributed to my company provided 401k retirement account when I was younger, but that was many years ago. I only contributed when the company provided a matching contribution, and that was only for a few short years in my early earning years.

I moved on to other companies and they did not provide a matching contribution. I haven’t contributed to a 401k account since about 2009.

What I’m saying is that I didn’t put much into my company provided retirement account. For one thing, I was only doing it for the free money in matching contributions. For another thing, I didn’t like being forced into certain investment vehicles, which were mostly fee based mutual funds. I liked my Roth better, where I controlled the investments and could pick individual stocks and even options.

I took out a distribution on the 401k account at one point to use for a house down payment. At least that’s what I recall, but my memory isn’t the best, as evidence by the title of this post…”I Forgot About…”

Anyway, I assumed that account was zero as well. Boy am I forgetful. Turns out that I have $2,600 in a rollover IRA. Who knew?

The rollover account was part of my 401k that got rolled into the IRA when I changed companies and had to close the 401k account. I learned that the rollover IRA has the same rules and requirements as a traditional IRA.

What To Do With $2,600 in Found Money

The $2,600 in found money is sitting in the rollover IRA, in what amounts to a money market fund. It is earning about $0.33 per month in dividends, which probably doesn’t even cover the annual fee for the fund.

Point is that this money is basically losing value each year. Time to take action and do something with it.

Here’s the plan…transfer the funds to my Roth IRA. I will have to pay taxes on the $2,600 because it is in a rollover IRA, which means I contributed money before paying taxes. The Roth IRA is all after tax money.

I’m okay paying the taxes on found money. It’s better than having to pay a 10% early distribution penalty AND the taxes.

The benefit by moving the money to my Roth is that I can invest in whatever vehicle I desire, like dividend stocks, options, etc. Those are infinitely better options than having to pick from a bunch of mutual funds. I hate mutual funds, except for index funds with very low fees, and avoid them at every opportunity.

On top of that, I have found room in my budget allowing me to add $100 per month to retirement savings. It’s something that gets me started. As I accelerate my financial recovery, I will accelerate the retirement savings.

To Recap in Bullet Form

• Bought house at top of market…moved away 3 years later for new job…underwater with mortgage, decided to rent out the house.
• Losing about $700/month after collecting rent on underwater house.
• Couldn’t take the cash flow loss, sold house for a loss.
• Used retirement account to cash out of underwater house.
• Went into financial depression at sight of losses…never checked retirement accounts.
• “Found” money in retirement accounts in July 2016…$500 in the Roth, $2,600 in a rollover IRA.
• Decided to move rollover IRA into the Roth…will have to pay taxes on $2,600…benefit is flexibility with investment ability.
• Now adding $100/month to Roth IRA and investing in dividend stocks.
• Happy again!

And that, kids, is how I operate…Make a series of good decisions, followed by a series of bad decisions, get hit with financial disaster, pout for years, find money, and then come up for air and start over.

Where do you invest for retirement? What type of investments do you use in your retirement accounts?

Thanks for reading my financial ramblings. Leave a comment to add to the discussion or give your thoughts your own retirement investing.

Follow me on Twitter as well for more ramblings.

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  • Love that your last bullet point is “happy” – that’s what’s important.

    Forget about past decisions. They’ve been made and can’t be changed, so screw em. Learn and move on. Focus instead on making progress each day, month, year.

    I’d put that found money, and your recurring $100 into a total stock market index fund. I own and use 2 funds: VTSAX (or VTSMX) at Vanguard, and VINIX with Fidelity. That’s it.

    Good luck!

    • I definitely live in the present and future in my head. I don’t dwell on the past, not my thing. I would have been a great baseball player…never dwelling on the last at bat because I can’t remember what happened. Just pure “see the ball, hit the ball.” I had to think hard to remember details for this post. The only thing I want to remember the past for is just what you said, to learn from mistakes. Otherwise, I move on quickly, ready for the next thing. Glad that came across.

      Thanks for the suggestion on the found money. Solid thought process there…index fund is cheap and you get some dollar cost averaging with the $100 per month added to the account. Fire and forget investing.

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