Author Topic: 401k liquidation: move to Portfolio Express or Schwab Self-Directed Brokerage?  (Read 5191 times)

dadu007

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Hi All,
Just asking for anyone's take on this; i.e. what would you do?

My company was recently sold. As part of the deal, our new 401K will be handled by Transamerica.
My company is NOT going to move our current 401K acccounts to Transamerica fund by fund.
Instead, the default path is to liquidate our 401K accounts and move the funds into Transamerica's Portfolio Express Glide Path

https://humanresources.prizmshare.com/view/transamerica-portfolio-express

I have a separate Schwab Roth IRA and my investments are split 50/50 dollar wise (pretty much) between the Schwab Roth IRA and my 401K.  Schwab Roth IRA is ALL equities.  The funds in the 401K are currently 50% in a "Stable Fund"  and 50% in a Self -Directed Brokerage account (All Vanguard index funds: 66% equities and 33% bonds/REITS).   
As part of the 401k account move, any current self-directed brokerage account will be moved directly into a Schwab self-directed brokerage account; funds/equities will just be re-registered to the new Schwab account.

So, finally, to my question: Would you cash out the Stable Fund in the 401k and put the cash in the current self-directed brokerage account now (Aon/Hewitt), so that it will be moved into the Schwab Self-Directed brokerage account (as cash, where I have great control), or let the Stable Fund be moved into the Portfolio Express thingy??...It's one or the other. I can't leave it in my current company's 401K.

I have a month to decide. 

Thanks for any insight...

seattlecyclone

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What are the other funds in the new 401(k)? Surely you can switch funds once the transition happens.

dadu007

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Yes. True. Sorry, I should have spoken to that....
The fund choices, in my opinion are not great.  The two lowest fee funds are Vanguard's Small Cap and Mid-Cap Index Adm funds.  Both .09% 
And those are the only two Vanguard funds...
The other funds start at .31% fee.
I will, of course, direct future contributions to the two Vanguard funds.
Also, I'm not clear on whether there will be a fee to transfer any funds from the Portfolio Express fund to the Vanguard fund...I need to find that out...
« Last Edit: March 05, 2015, 01:20:21 PM by dadu007 »

MrMoogle

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Usually when this happens, there's an option to convert to an IRA, which will obviously give you plenty of options, and keep the tax deductions.  You should be able to transfer it to Vanguard (or Fidelity or Schwab) if that's who you want to work with.

skyrefuge

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Usually when this happens, there's an option to convert to an IRA

I don't think that's true. This sounds just like one division of a company switching to the 401(k) provider used by the rest of the company, and moving assets from one provider to the other. From the perspective of both the acquiring and acquired companies, there is no severance of service for employees or anything like that which would allow a 401(k) rollover.

So it doesn't seem like the question really has anything to do with the change in 401(k) providers. I'm assuming there is currently flexibility to move money between the normal fund choices in the old 401(k), and the self-directed brokerage, and if so, I assume that flexibility will continue with the new 401(k)/self-directed brokerage. So unless I'm missing something about the rules, the question is just "how should I allocate my money within my new 401(k)/self-directed brokerage?" and that decision can be made once the money is transferred from the old 401(k).

There should generally be no fees to transfer between funds within a 401(k), so the OP may be more concerned than necessary about the default choice in the new 401(k). That's likely just the default that they put your money into, and you can do whatever you want after that.
« Last Edit: March 05, 2015, 01:59:38 PM by skyrefuge »

Another Reader

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Transamerica being an insurance company, they should offer a stable value fund of some kind.  Stable value funds are great places for cash, as long as they pay a decent rate and don't charge high fees.  If you were nearing retirement, some money in a stable value fund to reduce volatility would be a reasonable way to go.  My 457 plan offered a stable value plan that paid a hair over three percent until recently.  I left some cash in that fund when I FIRE'd.  Turned out to be a good move when the SHTF in 2008.

Cash in a retirement account when you are not nearing retirement will likely cause you to underperform over time, so that's something to consider in choosing the new investments.  As I understand your options, you have a selection of funds, the target date portfolio express (which will likely be laden with high fee funds because, hey, we are an insurance company, and that's what we do), and the Schwab self-directed brokerage alternative.  The existing self-directed brokerage alternative will map to Schwab, and the stable value fund you now hold will by default be invested into the portfolio express.

You have a month to research all the funds available to you and make decisions.  I would start by looking at the expense ratios and performance of all the available funds and all the fees Transamerica will charge you.  There may be a fee to use the self-directed brokerage option, and there will likely be a fee for the portfolio express, or at least a fund fee similar to a target date fund.  Figure out which fund/brokerage allocation you want and submit the paperwork.  Your self-directed account will map to Schwab automatically, and the stable value fund balance will be allocated per your selections.

Be sure to look for buried fees and expenses, because this is an insurance company.  If any of the fund offerings are tied to annuities, I would pass on them.  You can also evaluate a lot of common 401k plans through BrightScope.  Look under the new parent company if they use the same plan provider with the same investment options.


dadu007

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Thanks for the replies so far.

I nabbed an HR person at lunch; she confirmed there is no possible conversion to any IRA.  Just a move to a different 401K servicer (Transamerica). skyrefuge has it correctly.
I also dug through what little paperwork I have at the moment; the new Schwab self-directed brokerage account will have a fee of $50 a year, which is better than the current $80 fee for my Aon Hewitt self-directed.

I had asked in an email what the fees were for the the Portfolio Express; the response, from someone who obviously didn't understand the question, was that there were "No fees."  I just gave the HR person a heads-up that of course there are fees; it's a fund of funds that reallocates on a timeline, so we all need the prospectus on this to find out what they are.  Hopefully transferring between funds and/or the self-directed account won't incur any fees/penalties, but I need to verify.

Just posting my question has clarified for me what information I still need...so thanks to all for responding.

One thing I have discovered: most fellow staff members have very little idea of the finer points (FEES!!!!) of our 401K.  Oh brother...