To rollover 401(k) or not?

[ysette9]

I’m about to switch companies. I presumed that I would just roll over my old 401(k) into a couple of Vanguard IRAs, however it just got through my thick head about the possibility of doing a backdoor IRA. That means I would want to keep from rolling over in order to not have any funds in a traditional IRA to avoid pro rata such-n-stuff when doing the conversion. (Details are a bit fuzzy as I haven’t actually done this before).

Question: I haven’t actually done a backdoor IRA before as I was asleep at the wheel. Both of us will be able to do the in-plan Roth conversion to fill up the entire $55k 401(k) space this year, so in comparison the backdoor Roth IRA seems like less of a priority. Should I roll over my old 401(k)?

Considerations:
The overall choices and fees are not the best. I am in three index funds which are very low fee but all of the other choices are high fee

If I consolidated at Vanguard it would push us over into the first class of Special People status with $1M invested with them

My new company’s 401(k) will be with Vanguard (yay!)

There is probably something else to consider but it is past my bedtime

[MDM]

My new company’s 401(k) will be with Vanguard (yay!)

Roll the 401k from the old company to the new company?

You might have access to institutional class funds in the 401k, even lower cost than admiral funds.

Backdoor Roths are simple enough if you can complete Form 8606 yourself (to double-check what TurboTax, etc., generate based on Q&A).

[ysette9]

Good point. Is it fairly common to be able to roll an old 401(k) into a new one? This isn’t something I have experience with.

[onlykelsey]

I don't know how common it is, but in my data set of 1, it was possible 100% of the time :)

[ysette9]

Does that even count as anecdata? :)

I’ll put that on my list of things to find out as soon as I get all of the gory plan documents. I am such a nerd that I find this kind of stuff exciting. This is almost as much fun as showing my husband how to do after-tax contributions to his 401(k) to do an in-plan Roth conversion.

[PDXTabs]

Depending on the company you can just leave your old 401k where it is. I have one like that, for exactly the same reason (and the new 401k has less fund choice and higher fees).

[ysette9]

I could do that and it wouldn’t be awful. I’d prefer to move it because it would be simpler to manage to have everything in one place. A bit illogically I also want to move it because I waged an unsuccessful campaign to get the fees lowered in the investment options. I want to put my money where my mouth is, which is Vanguard. I’ll look into whether my new Vanguard 401(k) will accept the rollover because that would be perfect.

[PDXTabs]

I’ll look into whether my new Vanguard 401(k) will accept the rollover because that would be perfect.

I'm sure it will. They want the $$$ under management.

[robartsd]

I could do that and it wouldn’t be awful. I’d prefer to move it because it would be simpler to manage to have everything in one place. A bit illogically I also want to move it because I waged an unsuccessful campaign to get the fees lowered in the investment options. I want to put my money where my mouth is, which is Vanguard. I’ll look into whether my new Vanguard 401(k) will accept the rollover because that would be perfect.

I've never heard of a 401k that wouldn't accept rollovers. I also don't think that a former employer's plan can prevent you from doing a rollover (some plans require you to rollover funds if you didn't work for the company long enough or have too low of a balance). If your new company's 401k is at Vanguard, rolling over there is likely your best option.

You mentioned in-plan Roth conversion. This is not quite the same as a mega-backdoor Roth (which requires an in service rollover - not allowed by many plans). https://forum.mrmoneymustache.com/investor-alley/in-plan-roth-conversion-same-as-mega-backdoor-roth/

[ysette9]

Yes, I am aware that the in-plan conversion is not the same as the mega backdoor Roth conversion. I am planning on sticking with the in-plan. I was separately asking about an IRA backdoor.
I just did my first in-plan Roth conversion of my after-tax contributions. What fun these tax loopholes for the rich are! ;-)