Author Topic: New job and 401K advice  (Read 574 times)

dragonwalker

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New job and 401K advice
« on: October 09, 2018, 08:10:00 PM »
I started a new job today and had a look at their 401K S&P 500 fund and was a little disappointed. It's managed by Transamerica and the expense ratio is 0.42%. That's a lot higher than my previous employer that offers it at 0.09%. The new company matches 60% up to 8% plus an end of the year profit sharing match of 5.2% of my pay which for me would be about $2800. New company's match and profit sharing are not vested until after 3 years of employment. I have a balance in my old 401K plan of about $120K about 80K in Roth and 40K in traditional. I am 30 and I plan on staying for at least 3 years.

I'm thinking of a few options:
With the higher expense ratio I'm thinking of just leaving my old 401K with my old employer. Not contributing to a company 401K until the match starts and put the money instead in a ROTH IRA. I seem to recall people doing this. For any of you who have or are familiar with this procedure. How easy was it to transfer from your 401K to an IRA? What potential issues did this causes?  Difficulties? Do you think it is worth   

Taking all of the money from the old 401K and putting it into a traditional and roth IRAs. The downside being I can't put it into another 401K plan in the future.

What do you guys think? 

swinginbeef

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Re: New job and 401K advice
« Reply #1 on: October 10, 2018, 05:39:35 AM »
At that expense ratio, I'd either leave the old 401k in the old companies plan (if you're happy with the provider and the available options) or roll it into a low expense IRA with Vanguard or Fidelity or whoever. Don't roll it into your new, higher expense 401k. After that, contribute your 8% to the new 401k to get the match. Then max an IRA. Then continue filling your 401k.  Pretty much following the Investment Order thread that is at the top of the thread list.

wbarnett

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Re: New job and 401K advice
« Reply #2 on: October 10, 2018, 03:25:16 PM »
I'm taking a job at Transamerica soon, and was surprised to see how high their expenses are. And I think there's only one index fund offered. I'm keeping my existing 401k at Fidelity because it's way cheaper.

terran

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Re: New job and 401K advice
« Reply #3 on: October 10, 2018, 03:34:56 PM »
I'm taking a job at Transamerica soon, and was surprised to see how high their expenses are. And I think there's only one index fund offered. I'm keeping my existing 401k at Fidelity because it's way cheaper.

I hope you can, but you might find they force you to move your accounts. Some financial services companies make employees move their accounts to the firm for compliance reasons.

ILikeDividends

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Re: New job and 401K advice
« Reply #4 on: October 10, 2018, 05:48:16 PM »
How easy was it to transfer from your 401K to an IRA? What potential issues did this causes?  Difficulties? Do you think it is worth   
Brain dead easy.  I called Schwab and told the guy what I wanted to do. He opened up an IRA Rollover account for me to receive the funds, and then he initiated a 3-way conference call to my 401K provider.  Took about 5 minutes.  I was on my 2nd margarita at the time, but I don't recall having to say much more than, "yeah, that's what I want to do."

There was one snag.  The check they issued got lost in the mail.  Yeah, what are the odds of that, eh?  Like they couldn't lose my phone bill, or something else more mundane.  No one's fault on either end though.  I waited a couple weeks, called the provider, and a new check was issued, FBO my rollover account.

I walked the check into a nearby Schwab office, signed it, and that was that.
« Last Edit: October 10, 2018, 06:12:28 PM by ILikeDividends »

Cat_Race

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Re: New job and 401K advice
« Reply #5 on: October 15, 2018, 04:37:47 PM »
Not contributing to a company 401K until the match starts and put the money instead in a ROTH IRA.

You may want to check into this statement because I suspect it is incorrect.  Usually the match starts immediately.  Vesting only means if you leave before the 3 year mark, you don't get to take the employer dollars with you.  However, if you plan to be there for 3 years and you wait to start investing in the 401k until that time (any my understanding is accurate for your situation), you'll have lost out on valuable compound interest on employer dollars.

 

appleshampooid

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Re: New job and 401K advice
« Reply #6 on: October 16, 2018, 06:41:32 AM »
Not contributing to a company 401K until the match starts and put the money instead in a ROTH IRA.

You may want to check into this statement because I suspect it is incorrect.  Usually the match starts immediately.  Vesting only means if you leave before the 3 year mark, you don't get to take the employer dollars with you.  However, if you plan to be there for 3 years and you wait to start investing in the 401k until that time (any my understanding is accurate for your situation), you'll have lost out on valuable compound interest on employer dollars.
Some companies actually do have a delay on the match *starting*. At my previous employer, you had to wait 1 year before they would start matching, but all matching contributions were fully vested at that time.