Author Topic: Switched jobs - 401k rollover or IRA conversion?  (Read 2281 times)

jeromedawg

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Switched jobs - 401k rollover or IRA conversion?
« on: January 01, 2016, 10:45:54 AM »
Hey guys,

I was contributing to a 401k at Fidelity with my former company and had everything invested in FSAIX. The new company has the 401k with Wells Fargo. Looks like they have an S&P Index Fund as well. Should I go ahead and roll it over? Or is it best to convert the prior 401k to IRA (Roth?) and then start fresh with the new company 401k?

JLee

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Re: Switched jobs - 401k rollover or IRA conversion?
« Reply #1 on: January 01, 2016, 01:38:55 PM »
What are the fees like at Wells Fargo?  My first thought is to send it to an IRA at Vanguard.

jeromedawg

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Re: Switched jobs - 401k rollover or IRA conversion?
« Reply #2 on: January 01, 2016, 02:25:56 PM »
What are the fees like at Wells Fargo?  My first thought is to send it to an IRA at Vanguard.

I have a bunch of accounts with Fidelity already and a Roth IRA. If not, I definitely would have gone with Vanguard. So I guess it might make sense to roll the 401k over and merge into the existing Roth I have with Fidelity?

Fees for the S&P 500 Index fund from WF are .02% Net Total Annual ($.20 per $1,000) It seems to be the lowest cost among all domestic stock options. Looks to be more or less the same cost as FXAIX.
« Last Edit: January 01, 2016, 02:29:14 PM by jplee3 »

seattlecyclone

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Re: Switched jobs - 401k rollover or IRA conversion?
« Reply #3 on: January 01, 2016, 02:27:59 PM »
Does the new 401(k) have index funds with fees equal to or lower than the Vanguard Admiral equivalents? If yes, go with the 401(k). If no, go with an IRA. Exception: if your income is too large to make non-backdoor Roth IRA contributions, go with the 401(k) unless the fees in that plan are crazy high.

jeromedawg

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Re: Switched jobs - 401k rollover or IRA conversion?
« Reply #4 on: January 01, 2016, 02:43:03 PM »
Does the new 401(k) have index funds with fees equal to or lower than the Vanguard Admiral equivalents? If yes, go with the 401(k). If no, go with an IRA. Exception: if your income is too large to make non-backdoor Roth IRA contributions, go with the 401(k) unless the fees in that plan are crazy high.

I think I might not meet the criteria for a full deduction per the IRA deduction limits, so 401k would be preferable no? I mentioned above that the 401k S&P 500 index fund is the same expense as the FXAIX I hold in my previous company's Fidelity 401k account - $.20 for $1000 and this is the advantage class, which has lower expenses than even the equivalent fund I'm holding in my Roth IRA (FUSEX). If I convert the Fidelity 401k to a Fidelity Roth IRA (and or merge with the existing Roth), will I maintain the FXAIX? We also have some FXSIX (which is at .04% in between FXAIX and FUSEX) in my wife's 401k - she's planning to quit her job end of January so we'll probably want to roll that over into her Roth as well.
« Last Edit: January 01, 2016, 02:46:15 PM by jplee3 »

Thegoblinchief

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Re: Switched jobs - 401k rollover or IRA conversion?
« Reply #5 on: January 01, 2016, 03:29:32 PM »
My preference would always be to rollover to a self-directed tIRA, just for the sheer flexibility you get versus the rigid plans offered by most employers.

As far as I understand, rolling over from 401(k) to an IRA is "invisible" as far as taxes go. It's just severing the money from your former employer. All of the past tax-deferred status stays intact. Whether you can ADD funds depends on the current tax year situation, of course.