Help! My mom's IRA is at Wamu

[AllisonC_IHB]

Hello, just found out my mom has her IRA (rollover from her job's 401k last year) at Wamu. The money is in Principal Investors High Yield Class B , I don't think it is FDIC insured, it is mostly in securities and mutual funds.

If Wamu folds, will she lose all her money?

She called Wamu and they told her even if Wamu files BK, it does not mean her investment will decrease in value because Principal is separate from Wamu. Really?

She does not want to transfer her IRA elsewhere because there will be a 4% charge of some sort.

I hope my question makes sense, I have limited info.

Thanks in advance for all your input again!

 

[awgee_IHB]

[quote author="Allison C." date=1222336302]Hello, just found out my mom has her IRA (rollover from her job's 401k last year) at Wamu. The money is in Principal Investors High Yield Class B , I don't think it is FDIC insured, it is mostly in securities and mutual funds.

If Wamu folds, will she lose all her money?

</blockquote>
No, she will not lose her money because Wamu goes BK. IRA funds are kept in trust, separate from bank funds and depositor funds.



[quote author="Allison C." date=1222336302]

She called Wamu and they told her even if Wamu files BK, it does not mean her investment will decrease in value because Principal is separate from Wamu. Really?

She does not want to transfer her IRA elsewhere because there will be a 4% charge of some sort.

</blockquote>
I have never heard of a fee charged to rollover an IRA and I doubt if this is legal because everything concerning an IRA is governed by tax code.



[quote author="Allison C." date=1222336302]

I hope my question makes sense, I have limited info.

Thanks in advance for all your input again! </blockquote>

 

[AllisonC_IHB]

Sorry if I wasn't clear, the 4% charge is because she has not put the money in Principal's fund long enough. Thank you, Awgee.

 

[awgee_IHB]

[quote author="Allison C." date=1222337551]Sorry if I wasn't clear, the 4% charge is because she has not put the money in Principal's fund long enough. Thank you, Awgee.</blockquote>Can't she find another trustee that has or will hold Principal's fund so that she does not have to move out of the fund and pay the 4%?





Anticipating a question: No, your mother does not need to liquidate her investments in order to rollover her IRA. It is best if the trustee transfers the assets directly with your mother never having received the assets or funds herself. If she actually takes delivery of the assets in the IRA, she could very likely initiate a taxable event and incur taxes and penalties.

 

[AllisonC_IHB]

[quote author="awgee" date=1222341735][quote author="Allison C." date=1222337551]Sorry if I wasn't clear, the 4% charge is because she has not put the money in Principal's fund long enough. Thank you, Awgee.</blockquote>Can't she find another trustee that has or will hold Principal's fund so that she does not have to move out of the fund and pay the 4%?





Anticipating a question: No, your mother does not need to liquidate her investments in order to rollover her IRA. It is best if the trustee transfers the assets directly with your mother never having received the assets or funds herself. If she actually takes delivery of the assets in the IRA, she could very likely initiate a taxable event and incur taxes and penalties.</blockquote>


Thank you for your detailed and helpful reply. I will call Principal today and see what they have to say. ;-)

And thanks for reading my mind for the next question. :red: