Author Topic: Old 401K and where to move to next?  (Read 503 times)

dragonwalker

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Old 401K and where to move to next?
« on: April 22, 2019, 10:38:04 PM »
I left my former employer in 10/2018 to a new job. I currently have a total of $125K divided about 50/50 into a Roth 401K and traditional 401K. The money is currently in a S&P 500 index fund with a net expense ratio of 0.07%.

I'm not entirely sure what I should do with this money. My current employer has a 401K with a similar index fund but cost of funds are 0.42% so I don't think transferring is the best idea. For the time being I am still contributing to the company plan as the balances are currently very low and will make little difference.

I could transfer it to a Vanguard IRA where I have my other brokerage funds and I think VSTAX is at 0.04%. However I read somewhere that doing so might have some implication especially on my Roth 401K as it relates to resetting the clock on the 5 year rule. I could be totally off here but I thought I read something on that but now I can't find it.

The other thing I'm more sure of since I read it off the IRS website is being unable to move funds from a Roth IRA back into a Roth 401K should a future employer offer a competitive option whereas the traditional 401K permits me moving from IRA to tradition 401K.

Are there any other disadvantages of moving it out of my former employers 401k plan? I know one additional problem is I can't contribute to it but I'm probably going to have to do all contributions first to my employer plan as a minimum of 14% is what's needed to get my 8% match. I have also heard of people contributing to their 401K and then transferring immediately to their IRAs (I'm really hesitant to do that and I'm not sure if I'm subject to limitation of transfers). Thoughts and opinions please.
« Last Edit: April 22, 2019, 10:41:49 PM by dragonwalker »

jinga nation

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Re: Old 401K and where to move to next?
« Reply #1 on: April 23, 2019, 06:13:14 AM »
Options:
1. Do Nothing. You have SP500 at 0.07%. Not the lowest, but still awesomer than 90% of the funds out there. There's no significant disadvantage keeping it here.
2a. Roll-over the Traditional 401(k) to a Traditional IRA at Vanguard and VTSAX/VFIAX, to get that 0.03% discount.
2b. Keep the Roth 401(k) as-is, unless you want to convert it to a traditional IRA and pay the taxes. I know high-income earners do this as a tax-hedge strategy (I knoz nuthin'. I haz no big cheeses). Do your research and due diligence before you go down this path.

BicycleB

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Re: Old 401K and where to move to next?
« Reply #2 on: April 23, 2019, 06:51:06 PM »
I'd keep your current accounts, they seem better than your alternatives based on the low expense.

Re the new employer, I'd certainly grab that 8% match.

Will defer to wiser posters as to when to make any switch from the new employer's 401k to something else.