Author Topic: 401k, to rollover or not to rollover? With specifics.  (Read 505 times)

STEMorbust

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401k, to rollover or not to rollover? With specifics.
« on: February 04, 2020, 10:42:56 AM »
Hi MMM forum,

I'm starting a new job and looking for input on handling my 401k(s). I've read a number of threads on the subject and could not decide, so I thought I'd post my specific numbers. My target FIRE date is in 11 years. My income is about $140k pre-tax.

Previous 401k: Vanguard
- 401k: $82k (60% VTSAX and 40% Target 2055)
- Roth IRA: $7.6k
- Brokerage: $0.16 (lol)

The new 401k provider is Fidelity and has several index options. My preference would be to consolidate to a single provider for tracking purposes but don't want to compromise on growth. What's the best play?

Thank you for your time.

terran

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Re: 401k, to rollover or not to rollover? With specifics.
« Reply #1 on: February 04, 2020, 11:02:57 AM »
The only way you compromise growth by moving is if the investment options are worse (what are you're options at the Fidelity 401(k)?) or if the markets happen to go up while your funds are being moved as cash (but the could just as easily go down, so not really worth worrying about).

STEMorbust

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Re: 401k, to rollover or not to rollover? With specifics.
« Reply #2 on: February 04, 2020, 11:41:18 AM »
The only way you compromise growth by moving is if the investment options are worse (what are you're options at the Fidelity 401(k)?) or if the markets happen to go up while your funds are being moved as cash (but the could just as easily go down, so not really worth worrying about).

Thanks terran. The fidelity options include several sub-0.1% funds including VANG TOT STK MKT IS (VITSX) at 0.03% and target funds at 0.07%.

On the Reddit guide to rollovers, it says:

Quote
Roll it over into an IRA. Note: this may not be a great idea for pre-tax 401(k) plans if you have a high income that is above the Roth IRA contribution limits and are planning to do a backdoor Roth IRA in the future (due to the pro rata rule).

Does that apply to my situation given my income? I see that the MAGI cutoff is $122k, so I should be safe. Am I missing anything?

Sibley

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Re: 401k, to rollover or not to rollover? With specifics.
« Reply #3 on: February 04, 2020, 12:48:45 PM »
I personally prefer not to put control of my investment options solely in my employer's hands. I would roll over the old 401k into accounts you set up with Vanguard/Fidelity, then just have your current contributions in the new employer based plan. Which yes means 2 sets of accounts, but for me the control is more important.

EvenSteven

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Re: 401k, to rollover or not to rollover? With specifics.
« Reply #4 on: February 04, 2020, 12:56:37 PM »
The only way you compromise growth by moving is if the investment options are worse (what are you're options at the Fidelity 401(k)?) or if the markets happen to go up while your funds are being moved as cash (but the could just as easily go down, so not really worth worrying about).

Thanks terran. The fidelity options include several sub-0.1% funds including VANG TOT STK MKT IS (VITSX) at 0.03% and target funds at 0.07%.

On the Reddit guide to rollovers, it says:

Quote
Roll it over into an IRA. Note: this may not be a great idea for pre-tax 401(k) plans if you have a high income that is above the Roth IRA contribution limits and are planning to do a backdoor Roth IRA in the future (due to the pro rata rule).

Does that apply to my situation given my income? I see that the MAGI cutoff is $122k, so I should be safe. Am I missing anything?

Can you clarify where the rollover would be going to? If it is to your new 401k at Fidelity, you should have no problems.

If it is to an IRA, then it might end up being a problem if you are wanting to do back-door Roth contributions in the future.

terran

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Re: 401k, to rollover or not to rollover? With specifics.
« Reply #5 on: February 04, 2020, 02:06:04 PM »
The only way you compromise growth by moving is if the investment options are worse (what are you're options at the Fidelity 401(k)?) or if the markets happen to go up while your funds are being moved as cash (but the could just as easily go down, so not really worth worrying about).

The fidelity options include several sub-0.1% funds including VANG TOT STK MKT IS (VITSX) at 0.03% and target funds at 0.07%.

Definitely roll it over. You have few accounts to worry about and this plan has better investments options than your previous plan. VITSX is the institutional class version of VTSAX, available only to plans with at least $5 million in the investment, so it's exactly the same as VTSAX but with a (slightly) lower expense ratio.

On the Reddit guide to rollovers, it says:

Quote
Roll it over into an IRA. Note: this may not be a great idea for pre-tax 401(k) plans if you have a high income that is above the Roth IRA contribution limits and are planning to do a backdoor Roth IRA in the future (due to the pro rata rule).

Does that apply to my situation given my income? I see that the MAGI cutoff is $122k, so I should be safe. Am I missing anything?

Yes, you're near the cut off for making direct Roth contributions, so you may find it advantageous to be able to make backdoor Roth contributions. For this reason it would be wise to either leave your 401(k) where it is or roll it over into your new employer's 401(k). 

STEMorbust

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Re: 401k, to rollover or not to rollover? With specifics.
« Reply #6 on: February 05, 2020, 10:24:10 AM »
The only way you compromise growth by moving is if the investment options are worse (what are you're options at the Fidelity 401(k)?) or if the markets happen to go up while your funds are being moved as cash (but the could just as easily go down, so not really worth worrying about).

The fidelity options include several sub-0.1% funds including VANG TOT STK MKT IS (VITSX) at 0.03% and target funds at 0.07%.

Definitely roll it over. You have few accounts to worry about and this plan has better investments options than your previous plan. VITSX is the institutional class version of VTSAX, available only to plans with at least $5 million in the investment, so it's exactly the same as VTSAX but with a (slightly) lower expense ratio.

On the Reddit guide to rollovers, it says:

Quote
Roll it over into an IRA. Note: this may not be a great idea for pre-tax 401(k) plans if you have a high income that is above the Roth IRA contribution limits and are planning to do a backdoor Roth IRA in the future (due to the pro rata rule).

Does that apply to my situation given my income? I see that the MAGI cutoff is $122k, so I should be safe. Am I missing anything?

Yes, you're near the cut off for making direct Roth contributions, so you may find it advantageous to be able to make backdoor Roth contributions. For this reason it would be wise to either leave your 401(k) where it is or roll it over into your new employer's 401(k).

Much appreciated! That's the plan I'll follow.