Author Topic: What to do with my 401k when I leave?  (Read 1243 times)

Jimmyjon

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What to do with my 401k when I leave?
« on: April 24, 2017, 01:12:29 PM »
I currently have a company provided traditional 401k worth 27k.  The only other account I have is a Roth IRA worth 8k.  I will be leaving the company soon to travel for a year and am trying to decide what to do with the 401k.  Should I roll it over into my Roth IRA or a new traditional IRA?

Frankies Girl

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Re: What to do with my 401k when I leave?
« Reply #1 on: April 24, 2017, 01:36:40 PM »
If it isn't charging you insane expense ratios or other management fees and you like the current investments you hold in the 401k, you can just leave it "as is" - that is, leave it as a 401k and ignore it for a while until you figure out if having an old 401k is working for you (it can be just fine).

BUT if they do not have good funds, they are high cost or will otherwise charge you anything to continue to have the account there, then just roll it to someplace like Vanguard or Fidelity as a rollover IRA (this is technically just a highflautin' name for a traditional IRA that originally was a work sponsored account like a 401k/403b etc...)

You may have to sell off the funds first before transfer, or they might allow you to transfer "in kind" and then sell them off. You'll need to check about selling fees before you move vs. after since it is possible they'll hit you with sell fees one way or the other. And there will likely be a transfer or closing account fee (or both) assessed. Usually around $75-$100, but well worth it if the actual yearly fees and expense ratios are high.

You can contact Vanguard or Fido for the instructions on how to do this, but it's basically: fill out paperwork. send in paperwork. wait weeks. transfer happens eventually. sell off crummy stuff and buy cheap expense ratio index funds.

Jimmyjon

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Re: What to do with my 401k when I leave?
« Reply #2 on: April 24, 2017, 01:53:54 PM »
If it is just sitting there without a company match anymore, would it make more sense for me to roll it over and at least put it somewhere I have control over it?

Preferably I would like to combine that with my 7k Roth IRA and have it as one account.  I wonder if that's possible w/o crazy fees?

Rather than putting it into a "rollover IRA", couldn't I just put it into the Roth?  I just don't want to lose too much in the process but it the long run I feel it might be worth it?

geekette

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Re: What to do with my 401k when I leave?
« Reply #3 on: April 24, 2017, 02:51:43 PM »
To roll a 401k (which is pre-tax money) into a Roth (post-tax money), you'd have to pay taxes on it, and most likely a penalty as well.

Civex

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Re: What to do with my 401k when I leave?
« Reply #4 on: April 24, 2017, 04:47:28 PM »
To roll a 401k (which is pre-tax money) into a Roth (post-tax money), you'd have to pay taxes on it, and most likely a penalty as well.

I'm not sure on the penalty, but if the OP has a year of low or no income from traveling-that may be an ideal time to move money from a pre tax 401k to a Roth IRA.

As was mentioned earlier, you need to look at what is offered in the account and the expense ratios. If the ERs are much higher than Vanguard, I would consider rolling them over to an IRA, or rolling it into your next employer's 401k (even if this is a year in the future, paying slightly higher ERs for a year isn't that big of a deal.) If you post your current 401k holdings, expense ratios, and desired asset allocation, you will get better advice.

NoStacheOhio

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Re: What to do with my 401k when I leave?
« Reply #5 on: April 25, 2017, 10:07:09 AM »
To roll a 401k (which is pre-tax money) into a Roth (post-tax money), you'd have to pay taxes on it, and most likely a penalty as well.

There's no penalty on a conversion, just income tax.