Author Topic: noob question on what to do with 401k after leaving company  (Read 523 times)

Case

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I have recently switched companies.  My old company's 401k is at Fidelity.  My non-taxed advantaged investments are in Vanguard.

I am thinking to convert my old-company 401k funds into a IRA there.  This is the simple logical thing to do, right? 

My new company 401 is at Merrill Lynch.  I do not want to roll my old 401k into the new one (unless there is some benefit I am not thinking of). 


GizmoTX

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Re: noob question on what to do with 401k after leaving company
« Reply #1 on: June 10, 2019, 10:11:36 AM »
Yes: Roll your old company 401K into a tIRA at Fidelity or Vanguard. You don't want to leave it at your old company or roll it into your new one because a tIRA gives you total control of your investments there. Let your fiduciary of choice handle the transfer for you.

Car Jack

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Re: noob question on what to do with 401k after leaving company
« Reply #2 on: June 10, 2019, 11:40:31 AM »
Hold the bus there.....  First, look at the costs at Fidelity for your 401k.  The first page in netbenefits will show you any costs that YOU pay.  If you have a really good company plan, where they pay the costs, keep it there.  For backdoor Roths, you want NO pre-tax money in an IRA.  In many states, 401k's have better legal protections.  Every turn of the new year, be sure to log in and check the costs.  My wife had a Fidelity 401k and for 10 years, there was no cost to her to leave it there.  Then, one year, an administrative fee of 0.5% showed up.  No big deal, but you will want to know about it and decide.

Having rolled a bunch of 401k's into IRAs myself, I now sort of regret it.  I cannot do backdoor Roths without a LOT of trouble, including my wife taking a different job since she has no 401k at her work and several hundred $k in an IRA.  I've got well over a Million in an IRA.

PDXTabs

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Re: noob question on what to do with 401k after leaving company
« Reply #3 on: June 10, 2019, 02:33:31 PM »
If your old Fidelity 401k is anything like my old Fidelity 401k I would just leave the money there. My expenses are plenty low and I can still do a backdoor Roth.

Case

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Re: noob question on what to do with 401k after leaving company
« Reply #4 on: June 11, 2019, 06:46:10 AM »
Hold the bus there.....  First, look at the costs at Fidelity for your 401k.  The first page in netbenefits will show you any costs that YOU pay.  If you have a really good company plan, where they pay the costs, keep it there.  For backdoor Roths, you want NO pre-tax money in an IRA.  In many states, 401k's have better legal protections.  Every turn of the new year, be sure to log in and check the costs.  My wife had a Fidelity 401k and for 10 years, there was no cost to her to leave it there.  Then, one year, an administrative fee of 0.5% showed up.  No big deal, but you will want to know about it and decide.

Having rolled a bunch of 401k's into IRAs myself, I now sort of regret it.  I cannot do backdoor Roths without a LOT of trouble, including my wife taking a different job since she has no 401k at her work and several hundred $k in an IRA.  I've got well over a Million in an IRA.

Thanks Car Jack.
In terms of not wanting any pretax money in a tIRA... I need to review all the rules/etc on roll overs.  I typically roll over once a year for the Roth backdoor; this is usually money from a regular personal account (not tax advantaged).  Then, I do a mega-back door via my employer.

I don't remember if you can roll over pretax money in a tIRA into a roth, but if you can then that would be a nice way to make it completely tax free... unless it is taxed once you roll it over.... which it probably is.

ctuser1

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Re: noob question on what to do with 401k after leaving company
« Reply #5 on: June 11, 2019, 07:36:43 AM »
Fidelity rollover IRA has zero costs. I have one.
Expense ratios can also be zero if you use one of their zero funds.

If you value BofA Preferred Reward’s Plat Hons status (cc cash back, free trades, free safe deposit box at a bofa branch) then also consider Merrill Edge. Just buy vanguard ETFs there. To get the highest tier you need 100k.

oldmannickels

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Re: noob question on what to do with 401k after leaving company
« Reply #6 on: June 11, 2019, 07:56:03 AM »
Hold the bus there.....  First, look at the costs at Fidelity for your 401k.  The first page in netbenefits will show you any costs that YOU pay.  If you have a really good company plan, where they pay the costs, keep it there.  For backdoor Roths, you want NO pre-tax money in an IRA.  In many states, 401k's have better legal protections.  Every turn of the new year, be sure to log in and check the costs.  My wife had a Fidelity 401k and for 10 years, there was no cost to her to leave it there.  Then, one year, an administrative fee of 0.5% showed up.  No big deal, but you will want to know about it and decide.

Having rolled a bunch of 401k's into IRAs myself, I now sort of regret it.  I cannot do backdoor Roths without a LOT of trouble, including my wife taking a different job since she has no 401k at her work and several hundred $k in an IRA.  I've got well over a Million in an IRA.

Thanks Car Jack.
In terms of not wanting any pretax money in a tIRA... I need to review all the rules/etc on roll overs.  I typically roll over once a year for the Roth backdoor; this is usually money from a regular personal account (not tax advantaged).  Then, I do a mega-back door via my employer.

I don't remember if you can roll over pretax money in a tIRA into a roth, but if you can then that would be a nice way to make it completely tax free... unless it is taxed once you roll it over.... which it probably is.


If that's the case, you're probably talking about big dollars moving to an tIRA, which if you want to do more backdoor Roths is an issue and you should leave it in the 401k.

Financial.Velociraptor

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Re: noob question on what to do with 401k after leaving company
« Reply #7 on: June 11, 2019, 11:22:52 AM »
If the investment options are good with low cost, it sometimes makes sense to stay with the 401(k).  You may be able to roll the 401(k) money into your new employer's 401(k) as well if it offers better options.  A tIRA is subject to RMD rules and your earliest penalty free withdrawal date is later. If you keep in 401(k), you can probably withdraw at 55 without penalty under the "rule of 55" under tax code section 72(t).  So if you need the money sooner than 60-something (the age will probably go up over time), 401(k) can be a superior option.

If you aren't going to need to live off the money such that earliest withdrawal date does not matter, go with the lowest cost investment whether with your company plan or rolling into Vanguard or similar tIRA.

See this for Rule of 55/Section 72(t): https://www.goodfinancialcents.com/rule-of-55-early-withdrawal-401k