Author Topic: Any compelling reason not to roll a small Safe Harbor IRA into current 401K?  (Read 684 times)

lilactree

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I have this IRA with <$3,000 hanging around from a job years ago that I have to do something with... the annual fees are way more than the tiny bit of interest it collects. I think I can simply roll it over into my 401K with my current employer, probably the easiest thing to do. The fees on this 401K are not bad, I think.

I have a ton of more important to-dos and would like to just get this over with... but if anyone easily thinks of a major reason not to do this, I'd be very interested to know! 

We are probably very far off from FI, if that makes a difference.

Thanks for reading :)

Sibley

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1. Employer may not allow you to roll it over. Check on that.
2. If you roll it over into the employer one, then you're stuck with fund options they give you.
3. Not positive you can put an IRA into a 401k (you can do the opposite for sure)

Just open an account at your brokerage of choice, roll over this account, and in future put any other accounts into the same place. Honestly, it's probably easier than figuring out if you can put it in the employer account.

WanderLucky

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Any compelling reason not to roll a traditional IRA into current 401K?
« Reply #2 on: December 30, 2019, 04:15:44 PM »
Replying to this old thread because I'm currently researching doing the same thing.

I am thinking of rolling over my traditional IRA (currently held with Vanguard and all in VTSAX) to my company's traditional 401k, which is managed by Guideline, also offers VTSAX (and other Vanguard funds), and allows traditional IRA rollovers into their plan. The original reason I wanted to do this is because I want to clear out my traditional IRA in preparation for a backdoor Roth conversion for 2020. In addition, I learned that by rolling the IRA into my traditional 401K, I'll be able to take money out of the 401K penalty free if I leave the company at age 55, which is a likely scenario for me.

Here's an article on the pros/cons: https://www.nerdwallet.com/blog/investing/rollover-ira-to-401k/

Does anyone have any other cons to consider? Do I have to do anything special for federal tax purposes (I assume this is not a taxable event) or does timing on when I do this matter at all? I'd love any more insight into this if anyone else here has researched this.

Thanks!

secondcor521

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3. Not positive you can put an IRA into a 401k (you can do the opposite for sure)

You can if the employer's plan allows incoming rollovers.  Mine did; not all do.

Does anyone have any other cons to consider? Do I have to do anything special for federal tax purposes (I assume this is not a taxable event) or does timing on when I do this matter at all? I'd love any more insight into this if anyone else here has researched this.

Thanks!

You don't need to do anything, and you're correct that it is not a taxable event.

Timing-wise, there is something about your account balances at the end of the calendar year on Form 8606, so if you can get the rollover done before the end of the calendar year that's probably a good thing.  Difficult to do given what day it is, of course.

The only other thing I know of to consider is if you have a basis in your traditional IRA, which is usually from making non-deductible contributions.  If that is the case, then things get more complicated.  I haven't dealt with that situation personally so I don't know what the options are exactly, but it might be possible, for example, to rollover the non-deductible portion into a Roth 401(k) at work.

reeshau

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Re: Any compelling reason not to roll a traditional IRA into current 401K?
« Reply #4 on: December 30, 2019, 07:20:30 PM »
Does anyone have any other cons to consider? Do I have to do anything special for federal tax purposes (I assume this is not a taxable event) or does timing on when I do this matter at all? I'd love any more insight into this if anyone else here has researched this.

Thanks!

The other direct con is that your 401k plan may have additional fees.  Is the expense ratio for VTSAX in the 401k the same as you get through Vanguard?  Is there an explicit maintenance / recordkeeping fee?

For illustration, I have a 401k with a Fortune 500 company.  It's through Fidelity, and includes the BrokerageLink option so that I can invest with the full options of a regular Fidelity account.  Because they can't embed their fees in this option, they charge an explicit .11% fee on the balance.  To be clear, that fee really applies to the whole account--it just typically is rolled into the annual fee of funds, or otherwise "implied" somewhere in the plan.

WanderLucky

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Quote
The only other thing I know of to consider is if you have a basis in your traditional IRA, which is usually from making non-deductible contributions.  If that is the case, then things get more complicated.  I haven't dealt with that situation personally so I don't know what the options are exactly, but it might be possible, for example, to rollover the non-deductible portion into a Roth 401(k) at work.

Thanks! I think I'm good with this one as my IRA was all from deductible contributions, but I will be sure to check with my CPA on this before I move forward. Thanks for bringing that up.

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The other direct con is that your 401k plan may have additional fees.  Is the expense ratio for VTSAX in the 401k the same as you get through Vanguard?  Is there an explicit maintenance / recordkeeping fee?

I'm pretty sure there are no other fees that I have to pay through Guideline. I checked my statements and read their fee disclosures. It looks like my company, who the 401K is through, pays any management and maintenance fees, and the expense ratios are the same as listed on my Vanguard account (and Guideline is clear that all expense ratios are set and charged by Vanguard directly, not them), so I'm about 97% sure that I'm good on that too, although it's possible that I missed something. Thanks!