Author Topic: Multiple 401k  (Read 3115 times)

OneDollarAtATime

  • 5 O'Clock Shadow
  • *
  • Posts: 86
Multiple 401k
« on: August 05, 2015, 06:49:25 AM »
I have 3 different 401k plans from previous employers (originally 4, but rolled one).  My logic behind keeping them separate is that it somewhat 'diversifies' my 401k's through different companies.  I do see some impact where 1 plans returns higher than the others in some quarters and lower in others, but overall I'm not sure the difference is material.

Is there a good reason I should continue to keep these separate or does it make more sense to combine these into my current 401k?

forummm

  • Walrus Stache
  • *******
  • Posts: 7358
  • Senior Mustachian
Re: Multiple 401k
« Reply #1 on: August 05, 2015, 08:58:37 AM »
You aren't "diversifying" anything. There isn't a good reason to keep them separate. Unless you need to use the backdoor Roth IRA method, you can just roll them all into a Vanguard IRA. Then you can do real diversification by having a couple broadly diversified low-cost index funds (like VTSAX and VTIAX that own about 9800 companies around the world).

iowajes

  • Walrus Stache
  • *******
  • Posts: 5221
  • Location: United States
Re: Multiple 401k
« Reply #2 on: August 05, 2015, 09:14:16 AM »
I keep my 403bs separate because somehow as I've gotten new jobs the fees charged at each place have been higher.  I don't want to roll a lower fee account into my new higher fee one.

They are all with the same company though, so I can view and manage them easily.

G-dog

  • Walrus Stache
  • *******
  • Posts: 5734
Re: Multiple 401k
« Reply #3 on: August 05, 2015, 09:17:49 AM »
I thought you rolled an old 401/403 into a new separate account. Not into your new employer's 491/403. So the fees are completely under your control by your choice of vendor.

iowajes

  • Walrus Stache
  • *******
  • Posts: 5221
  • Location: United States
Re: Multiple 401k
« Reply #4 on: August 05, 2015, 09:18:57 AM »
I thought you rolled an old 401/403 into a new separate account. Not into your new employer's 491/403. So the fees are completely under your control by your choice of vendor.

I didn't realize that.  That might be worth looking into.

Mississippi Mudstache

  • Handlebar Stache
  • *****
  • Posts: 1540
  • Age: 34
  • Location: Danielsville, GA
    • A Riving Home - Ramblings of a Recusant Woodworker
Re: Multiple 401k
« Reply #5 on: August 05, 2015, 09:20:24 AM »
I keep my 403bs separate because somehow as I've gotten new jobs the fees charged at each place have been higher.  I don't want to roll a lower fee account into my new higher fee one.

They are all with the same company though, so I can view and manage them easily.

Can't you roll your 403b into an IRA as well?

I realize that may not be cheaper. My husband's employer subsidizes his 401k so much that it's cheaper to buy Vanguard funds within the 401k than outside it, so we're never rolling that over.

I'm in the same position. I have $60,000 in a Vanguard 401k from my last employer that I have no intention of moving because the fees are lower than I can get with an IRA. The only reason it makes sense to roll old 401ks into a new one is for lower fees and/or better funds. Otherwise, just roll them into an IRA or leave them where they are if the fees are lower than you can get elsewhere.
Never. Give up.

My Woodworking Blog

mskyle

  • Pencil Stache
  • ****
  • Posts: 687
Re: Multiple 401k
« Reply #6 on: August 05, 2015, 09:25:28 AM »
I am in the process of rolling over all my old 403bs into my Vanguard IRA. The fees are in the "adequate, but not as good as I am getting at Vanguard" range, and the available funds are OK but not great, and it's just a pain in the ass to have five different accounts with three different institutions. (Well, six and four, I guess, when I consider my current employer-sponsored plan.) I don't think it's going to make a big difference to my overall financial picture but it will be easier to manage.

G-dog

  • Walrus Stache
  • *******
  • Posts: 5734
Re: Multiple 401k
« Reply #7 on: August 05, 2015, 09:31:55 AM »
I thought you rolled an old 401/403 into a new separate account. Not into your new employer's 491/403. So the fees are completely under your control by your choice of vendor.

At least some 401k plans let you roll old 401ks into their plan, and some even let you roll old IRAs in too. Don't know if all do.

I did not know that! Interesting. I doubt I would trust an employer that much, but who knows, it could be a good option for some.

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 2780
  • Location: Emmaus, PA
Re: Multiple 401k
« Reply #8 on: August 05, 2015, 09:35:10 AM »
I thought you rolled an old 401/403 into a new separate account. Not into your new employer's 491/403. So the fees are completely under your control by your choice of vendor.

At least some 401k plans let you roll old 401ks into their plan, and some even let you roll old IRAs in too. Don't know if all do.

I did not know that! Interesting. I doubt I would trust an employer that much, but who knows, it could be a good option for some.

Your 401k account doesn't evaporate if your employer does. You might have to move it to another provider, but it's all still yours (except for vesting, I guess, and company stock).

Eric

  • Magnum Stache
  • ******
  • Posts: 3649
  • Location: On my bike
Re: Multiple 401k
« Reply #9 on: August 05, 2015, 12:19:59 PM »
I have 3 different 401k plans from previous employers (originally 4, but rolled one).  My logic behind keeping them separate is that it somewhat 'diversifies' my 401k's through different companies.  I do see some impact where 1 plans returns higher than the others in some quarters and lower in others, but overall I'm not sure the difference is material.

Is there a good reason I should continue to keep these separate or does it make more sense to combine these into my current 401k?

The return is based on what you're invested in.  The fact that the investments are held in a 401k account is immaterial.

I realize that there are a lot of different 401k plans out there, but I've never seen a single one that had fund expense ratios as low as Vanguard.  If it were me, I'd roll all of the old plans into a new Vanguard Traditional IRA.  And then as forummm said, you create diversification by your investment choices.  Holding investments at different financial institutions doesn't do anything for your diversity.
"Compound interest is the most powerful force in the universe."  -- Einstein

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 3911
  • Age: 33
  • Location: Seattle, WA
Re: Multiple 401k
« Reply #10 on: August 05, 2015, 12:27:11 PM »
I have 3 different 401k plans from previous employers (originally 4, but rolled one).  My logic behind keeping them separate is that it somewhat 'diversifies' my 401k's through different companies.  I do see some impact where 1 plans returns higher than the others in some quarters and lower in others, but overall I'm not sure the difference is material.

Is there a good reason I should continue to keep these separate or does it make more sense to combine these into my current 401k?

The return is based on what you're invested in.  The fact that the investments are held in a 401k account is immaterial.

I realize that there are a lot of different 401k plans out there, but I've never seen a single one that had fund expense ratios as low as Vanguard.  If it were me, I'd roll all of the old plans into a new Vanguard Traditional IRA.  And then as forummm said, you create diversification by your investment choices.  Holding investments at different financial institutions doesn't do anything for your diversity.

If you work for a gigantic corporation, it's entirely possible that your 401(k) plan will have lower expense ratios than you can get in a Vanguard IRA. Mine uses Vanguard Institutional class funds, even cheaper than Admiral. If you work for one of these companies you can benefit from rolling old 401(k) and IRA accounts into there. If (as is more likely) your old 401(k) accounts have pretty high fees, you'll be better off rolling the accounts into a single IRA with Vanguard. This gets you lower fees and more simplicity due to fewer accounts you need to track.
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

therethere

  • Bristles
  • ***
  • Posts: 455
Re: Multiple 401k
« Reply #11 on: August 05, 2015, 12:48:42 PM »
Along a similar line, I have an old 401k with both contributions and an unvested portion. I'm confused about whether to roll it over for two reasons...

1. Its 95%of major oil/gas stock that has TANKED in the last year.
2. I was not at the company long enough to be vested. However, according to the website, I am always vested in the unvested portions gains.

I'm most confused about #2. I get what it means but I'm not sure of the best path moving forward.
-Should I be rolling this 401k over once the stock goes back up?
-Should I keep it in the same 401k and just reallocate if/when the stock ever gets back to normal?

Off hand I would think I keep it there forever and just reallocate. I believe that gets me more gains long-term. But I really just hate logging in and seeing that whole mess of money I lost out on (both unvested and now 12% loss on the year). I wish the sites like PersonalCapital only pulled the vested portion of the account so you don't have to be reminded on what you missed.
« Last Edit: August 05, 2015, 12:50:53 PM by therethere »
I refinanced my student loans with Earnest and cut 1% off my rate. PM me for a referral with $200 credit.

OneDollarAtATime

  • 5 O'Clock Shadow
  • *
  • Posts: 86
Re: Multiple 401k
« Reply #12 on: August 06, 2015, 10:36:08 PM »
You aren't "diversifying" anything.

To be clear, I understand how 401k's work fundamentally.  I'm aware that multiple 401k's likely all hold shares of Apple, Exxon, Boeing, Johnson & Johnson, Coca Cola, etc. in the funds within the plan, I pay an expense / operating rate (as low as possible) and I add as much as I can to it as fast as I can.

I'm more curious if there's any risk of any of the companies holding my 401k of going under?  If we have another 2008 and the bottom falls out, could I potentially lose my 401k holdings if one of the companies that holds my 401k goes out of business?  Or would my holdings be transferred to another institution? 

If I have all my 401k money in one place and that company goes under, then

forummm

  • Walrus Stache
  • *******
  • Posts: 7358
  • Senior Mustachian
Re: Multiple 401k
« Reply #13 on: August 07, 2015, 08:26:45 AM »
You aren't "diversifying" anything.

To be clear, I understand how 401k's work fundamentally.  I'm aware that multiple 401k's likely all hold shares of Apple, Exxon, Boeing, Johnson & Johnson, Coca Cola, etc. in the funds within the plan, I pay an expense / operating rate (as low as possible) and I add as much as I can to it as fast as I can.

I'm more curious if there's any risk of any of the companies holding my 401k of going under?  If we have another 2008 and the bottom falls out, could I potentially lose my 401k holdings if one of the companies that holds my 401k goes out of business?  Or would my holdings be transferred to another institution? 

If I have all my 401k money in one place and that company goes under, then

If your 401k is with Schwab, you don't own Schwab. You own shares of Coke, Ford, Microsoft, etc. So you still have ownership of those underlying shares. Those are protected by federal law even if your broker fails.

http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/
http://forum.mrmoneymustache.com/ask-a-mustachian/is-it-safe-to-keep-all-your-money-in-vanguard-(in-only-one-place)/

protostache

  • Pencil Stache
  • ****
  • Posts: 747
Re: Multiple 401k
« Reply #14 on: August 07, 2015, 08:33:22 AM »
You aren't "diversifying" anything.

To be clear, I understand how 401k's work fundamentally.  I'm aware that multiple 401k's likely all hold shares of Apple, Exxon, Boeing, Johnson & Johnson, Coca Cola, etc. in the funds within the plan, I pay an expense / operating rate (as low as possible) and I add as much as I can to it as fast as I can.

I'm more curious if there's any risk of any of the companies holding my 401k of going under?  If we have another 2008 and the bottom falls out, could I potentially lose my 401k holdings if one of the companies that holds my 401k goes out of business?  Or would my holdings be transferred to another institution? 

If I have all my 401k money in one place and that company goes under, then

A 401(k) plan is actually formed as a trust, a completely separate legal entity from the business itself. The company you work for is sponsoring the plan and they can add money to it, but they're otherwise unattached to the trust or it's associated bank or brokerage accounts. You, the employee, are listed as a beneficiary of the trust, which means the money you put in has to be managed properly and legally on your behalf. Generally, for larger companies the trustee will be a big bank like Vanguard or Fidelity, or an insurance company like Principal. Your employer doesn't hold or touch your money, the trustee does.

There's no law saying the trustee has to be a bank or insurance company, of course, so some companies will form their own 401(k) trust with them as trustee. For example, my itty bitty consulting business (just me) has me as the trustee, because that way I can decide where to open bank and brokerage accounts and decide exactly how much to contribute, etc, etc.

Basically, if your employer uses a third party to service their 401(k) trust and/or you trust your employer to not do something astoundingly illegal, then there should be no problem rolling previous accounts into your current 401(k). Assuming the fees are competitive with an IRA you can get somewhere else, of course.