Author Topic: 401k rollover  (Read 3384 times)

undrtow

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401k rollover
« on: December 16, 2016, 12:36:30 PM »
I have recently changed jobs and was wondering what I should do with my old 401k. I have been researching my options with my old 401k (T RowePrice) and am probably more confused now than before I started. My old 401k is about 50k, mostly invested in Vanguard VIIIX. My options as I understand it are to 1) leave it T RowePrice 2) roll it into an IRA of some sort 3) cash out 4) roll it into my new 401k (fidelity)

Background- Im 32, married with 2 kids, currently make about 97k a year, have about 30k in student loans at 6%. No mortgage. As an aside, I really love jlcollinsnh and subscribe to his investing mantra of picking total stock market funds with low fees and ignoring the market.

Option 1- leave it with T RowePrice
    Again, most of the money is in VIIIX (large cap or S&P 500) which has a low exp ratio of .02%. I can leave it in VIIIX, but I can't contribute anymore, correct? If I moved it to Vanguard, I'm guessing I wouldn't have access to VIIIX and I would likely move funds, probably to VTSAX, which is more of a total stock market fund, but the exp ratio is .05%. Seems like it makes more sense to leave it in VIIIX with T RowePrice, assuming I can?

Option 2- Roll it into an IRA of some sort (Would probably use Vanguard)
     Regarding this option, I really don't know if I should go with a traditional IRA or a Roth IRA. Either way, it would most likely go into VTSAX with Vanguard.

 Option 3- roll it into my new 401k (fidelity)
   I need to double check the available funds, but if VIIIX is offered, it might make sense to rollover the old 401k here just for simplicity's sake. Otherwise, if the funds I want aren't available or have high fees, I probably shouldn't roll it into here.

Basically, I'm just thinking with my keyboard and looking for any advice or input. If anyone wants more info, please let me know. Thanks in advance.

NoStacheOhio

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Re: 401k rollover
« Reply #1 on: December 16, 2016, 12:38:50 PM »
You need to find out if there are any fees for keeping the account.

Going from 0.02 to 0.05 isn't really a big deal either though.

Moving it to a Roth would be a taxable event, while a tIRA is a qualified rollover, and thus not taxable.

Frankies Girl

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Re: 401k rollover
« Reply #2 on: December 16, 2016, 12:57:25 PM »
Do not roll over to a Roth IRA unless it is advantageous to you to pay all the taxes up front on the amount to do so. Traditional IRA for the rollover is likely the best solution in your case.

If it was me, I would do the following:

Create a rollover (traditional) IRA account with Fidelity (since that is where you have your current 401k). You can talk to a rep to get them to help you out (they are great at customer service and you should have no issues with getting all this done as painlessly as possible).

Roll the TRowe 401k to that Fido IRA. If there are any fees (transfer or closing account) assessed by TRowe, ask rep at Fido to credit you. I was able to get a $90 credit for the transfer fees when I did similar, but they couldn't offer anything towards closing. Even if I hadn't gotten credit, it never hurts to ask and the fees were small enough to be made up for within a month for my accounts.

Every Vanguard fund has a Fido equivalent for the same if not cheaper expense ratio. Once the funds were in the new account, then take a look at the Bogleheads Fidelity funds here and figure out your AA based off of this:
https://www.bogleheads.org/wiki/Fidelity


You can absolutely do low cost index investing at Fido, in some cases, it is a better deal than Vanguard as they have superior customer service and many of their index funds are slightly cheaper. I have all my portfolio with Fido and have been very happy. I'm not knocking Vanguard at all, but they are not able to offer as many perks as Fidelity, and it would make sense to take advantage of Fido if they're trying that hard to stay competitive. So use them to your own advantage and you'll still be able to follow the easy index investor approach with some bells and whistles thrown in for free.  ;)

« Last Edit: December 16, 2016, 01:01:24 PM by Frankies Girl »

JDsNova

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Re: 401k rollover
« Reply #3 on: December 16, 2016, 03:44:45 PM »
Ok.  Slight hijacking on this thread as well.  I changed jobs earlier this year.  Former employer 401k and new employer both use schwab.   Should I roll the old 401k into the new 401k or move the old 401k into a vanguard tIRA?   I currently have vanguard Roth IRAs. 

Thanks, apologies to the OP.   

Spork

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Re: 401k rollover
« Reply #4 on: December 16, 2016, 03:51:44 PM »
Ok.  Slight hijacking on this thread as well.  I changed jobs earlier this year.  Former employer 401k and new employer both use schwab.   Should I roll the old 401k into the new 401k or move the old 401k into a vanguard tIRA?   I currently have vanguard Roth IRAs. 

Thanks, apologies to the OP.

To both you and the OP:  Unless there was some outrageous awesome deal, I would ALWAYS roll a 401k over to a Vanguard tIRA.  (Unless we're talking about a Roth 401k... but I assume we aren't.)  I like the control of funds.  Every place I've ever worked at juggled their 401k funds and management companies around every 2-3 years.

If you call Vanguard, they'll hold your hand every step of the way.  It will be a painless 5-10 minute phone call.  They'll bridge in your 401k provider and speak the proper financial language.  A few weeks will pass and suddenly it will be done.

(And as Frankies Girl mentions, there's nothing wrong with Fidelity either.)

Dollar Slice

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Re: 401k rollover
« Reply #5 on: December 16, 2016, 04:03:51 PM »
I would roll it into a Vanguard (or whatever you prefer) IRA as well, just in case... I worked for a company that was sold on pretty short notice (due to a severe illness of the owner) and it ended up being a giant pain in the butt for everyone to get their 401(k) rolled over because that extremely ill owner was the only one who could sign off on the forms, and he was not really available unless you wanted to go find him in his hospital bed. That sort of thing is probably pretty rare, but you might as well take control of your money while it is easy to do so rather than waiting for some complication to crop up. A few hundredths of a percent in fees is worth that peace of mind, IMO.

NoStacheOhio

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Re: 401k rollover
« Reply #6 on: December 16, 2016, 06:16:56 PM »
Worth noting that you might be able to get a bonus from Fidelity for the rollover.

edit: apparently they're doing matching, not a bonus https://www.fidelity.com/about-fidelity/individual-investing/fidelity-introduces-ira-match
« Last Edit: December 16, 2016, 06:24:56 PM by NoStacheOhio »

Frankies Girl

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Re: 401k rollover
« Reply #7 on: December 16, 2016, 07:54:58 PM »
Worth noting that you might be able to get a bonus from Fidelity for the rollover.

edit: apparently they're doing matching, not a bonus https://www.fidelity.com/about-fidelity/individual-investing/fidelity-introduces-ira-match

https://rewards.fidelity.com/offers/iramatch
I'd checked that before my post as I remembered they were doing that, but unfortunately they're not eligible for employer savings plans: See step 1. :(
Please note, rollovers from workplace savings plans are not eligible for this offer.

overwhelmed

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Re: 401k rollover
« Reply #8 on: December 17, 2016, 10:05:55 AM »
I have recently changed jobs and was wondering what I should do with my old 401k. I have been researching my options with my old 401k (T RowePrice) and am probably more confused now than before I started. My old 401k is about 50k, mostly invested in Vanguard VIIIX. My options as I understand it are to 1) leave it T RowePrice 2) roll it into an IRA of some sort 3) cash out 4) roll it into my new 401k (fidelity)

Background- Im 32, married with 2 kids, currently make about 97k a year, have about 30k in student loans at 6%. No mortgage. As an aside, I really love jlcollinsnh and subscribe to his investing mantra of picking total stock market funds with low fees and ignoring the market.

Option 1- leave it with T RowePrice
    Again, most of the money is in VIIIX (large cap or S&P 500) which has a low exp ratio of .02%. I can leave it in VIIIX, but I can't contribute anymore, correct? If I moved it to Vanguard, I'm guessing I wouldn't have access to VIIIX and I would likely move funds, probably to VTSAX, which is more of a total stock market fund, but the exp ratio is .05%. Seems like it makes more sense to leave it in VIIIX with T RowePrice, assuming I can?

Hopefully this isn't a hijack but a clarifying question

I don't see any reference on how the old 401k is performing. Assuming it is doing well, would no one suggest it be left where it is? If the ER is low, the return is good & there are no new fees or obvious downsides for keeping it with TRowe, I struggle with why you would move it. I was trying to decide what to do with mine as well & am currently comfortable leaving it, same ER, good return where it is. I might move it later as I finalize my retirement plans but for now I can't see a reason to move it.

I understand rolling to a tIRA to have control over it but am I missing something obvious about why no one suggests leaving it where it is?

Spork

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Re: 401k rollover
« Reply #9 on: December 17, 2016, 10:14:16 AM »
I have recently changed jobs and was wondering what I should do with my old 401k. I have been researching my options with my old 401k (T RowePrice) and am probably more confused now than before I started. My old 401k is about 50k, mostly invested in Vanguard VIIIX. My options as I understand it are to 1) leave it T RowePrice 2) roll it into an IRA of some sort 3) cash out 4) roll it into my new 401k (fidelity)

Background- Im 32, married with 2 kids, currently make about 97k a year, have about 30k in student loans at 6%. No mortgage. As an aside, I really love jlcollinsnh and subscribe to his investing mantra of picking total stock market funds with low fees and ignoring the market.

Option 1- leave it with T RowePrice
    Again, most of the money is in VIIIX (large cap or S&P 500) which has a low exp ratio of .02%. I can leave it in VIIIX, but I can't contribute anymore, correct? If I moved it to Vanguard, I'm guessing I wouldn't have access to VIIIX and I would likely move funds, probably to VTSAX, which is more of a total stock market fund, but the exp ratio is .05%. Seems like it makes more sense to leave it in VIIIX with T RowePrice, assuming I can?

Hopefully this isn't a hijack but a clarifying question

I don't see any reference on how the old 401k is performing. Assuming it is doing well, would no one suggest it be left where it is? If the ER is low, the return is good & there are no new fees or obvious downsides for keeping it with TRowe, I struggle with why you would move it. I was trying to decide what to do with mine as well & am currently comfortable leaving it, same ER, good return where it is. I might move it later as I finalize my retirement plans but for now I can't see a reason to move it.

I understand rolling to a tIRA to have control over it but am I missing something obvious about why no one suggests leaving it where it is?

I'm going to over-generalize.  You've been warned.

401k administrators have historically just been awful at managing these funds with reasonable expenses.  As an employee, it's just common sense to at least put money into that plan to get the maximum possible match... but once that match goes away (when you leave the company) ... there is almost zero reason to stay.

Now: That said, I am absolutely positive that someone somewhere has a well administered plan with good investment choices and low maintenance fees.  I don't know the OP's ER at T.Rowe and I may be missing it in the thread, but I don't see it.  I suspect it costs SOMETHING above what just a plain Vanguard tIRA costs since there is another layer of management...  but it may be small enough not to matter.

Frankies Girl

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Re: 401k rollover
« Reply #10 on: December 17, 2016, 10:17:02 AM »
I have recently changed jobs and was wondering what I should do with my old 401k. I have been researching my options with my old 401k (T RowePrice) and am probably more confused now than before I started. My old 401k is about 50k, mostly invested in Vanguard VIIIX. My options as I understand it are to 1) leave it T RowePrice 2) roll it into an IRA of some sort 3) cash out 4) roll it into my new 401k (fidelity)

Background- Im 32, married with 2 kids, currently make about 97k a year, have about 30k in student loans at 6%. No mortgage. As an aside, I really love jlcollinsnh and subscribe to his investing mantra of picking total stock market funds with low fees and ignoring the market.

Option 1- leave it with T RowePrice
    Again, most of the money is in VIIIX (large cap or S&P 500) which has a low exp ratio of .02%. I can leave it in VIIIX, but I can't contribute anymore, correct? If I moved it to Vanguard, I'm guessing I wouldn't have access to VIIIX and I would likely move funds, probably to VTSAX, which is more of a total stock market fund, but the exp ratio is .05%. Seems like it makes more sense to leave it in VIIIX with T RowePrice, assuming I can?

Hopefully this isn't a hijack but a clarifying question

I don't see any reference on how the old 401k is performing. Assuming it is doing well, would no one suggest it be left where it is? If the ER is low, the return is good & there are no new fees or obvious downsides for keeping it with TRowe, I struggle with why you would move it. I was trying to decide what to do with mine as well & am currently comfortable leaving it, same ER, good return where it is. I might move it later as I finalize my retirement plans but for now I can't see a reason to move it.

I understand rolling to a tIRA to have control over it but am I missing something obvious about why no one suggests leaving it where it is?

It isn't about control; your 401k is yours - they can't take it away from you and you are allowed to buy and sell in an old 401k just like a current employer one. You can't add to it but otherwise you're still in basic control.

Mostly converting (rolling over) to an IRA allows a much wider range of investment options, usually with much better expense ratios/trade fees since you literally can buy anything that is publicly traded instead of being restricted by that 401k's investment options (usually only a few dozen funds that are curated by the employer's chosen adviser). Some companies will start charging a management fee for non-employees as well (not all, but it does happen).

There are only a few reasons to maybe not roll a 401k to an IRA:

1. If you have access in the 401k pool to excellent institutional shares that would become unavailable if you moved the account.
2. If you live in a state that offers better protection from lawsuits/bankruptcy type of events for 401ks (some states protect assets in a 401k but do not extend the same protections to IRAs), and this is of some concern to you for whatever reason.
3. You are 100% satisfied with the current asset allocations/investments in the 401k and have no fees being charged for leaving it with the old company's setup.

overwhelmed

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Re: 401k rollover
« Reply #11 on: December 17, 2016, 11:19:26 AM »
I have recently changed jobs and was wondering what I should do with my old 401k. I have been researching my options with my old 401k (T RowePrice) and am probably more confused now than before I started. My old 401k is about 50k, mostly invested in Vanguard VIIIX. My options as I understand it are to 1) leave it T RowePrice 2) roll it into an IRA of some sort 3) cash out 4) roll it into my new 401k (fidelity)

Background- Im 32, married with 2 kids, currently make about 97k a year, have about 30k in student loans at 6%. No mortgage. As an aside, I really love jlcollinsnh and subscribe to his investing mantra of picking total stock market funds with low fees and ignoring the market.

Option 1- leave it with T RowePrice
    Again, most of the money is in VIIIX (large cap or S&P 500) which has a low exp ratio of .02%. I can leave it in VIIIX, but I can't contribute anymore, correct? If I moved it to Vanguard, I'm guessing I wouldn't have access to VIIIX and I would likely move funds, probably to VTSAX, which is more of a total stock market fund, but the exp ratio is .05%. Seems like it makes more sense to leave it in VIIIX with T RowePrice, assuming I can?

Hopefully this isn't a hijack but a clarifying question

I don't see any reference on how the old 401k is performing. Assuming it is doing well, would no one suggest it be left where it is? If the ER is low, the return is good & there are no new fees or obvious downsides for keeping it with TRowe, I struggle with why you would move it. I was trying to decide what to do with mine as well & am currently comfortable leaving it, same ER, good return where it is. I might move it later as I finalize my retirement plans but for now I can't see a reason to move it.

I understand rolling to a tIRA to have control over it but am I missing something obvious about why no one suggests leaving it where it is?

It isn't about control; your 401k is yours - they can't take it away from you and you are allowed to buy and sell in an old 401k just like a current employer one. You can't add to it but otherwise you're still in basic control.

Mostly converting (rolling over) to an IRA allows a much wider range of investment options, usually with much better expense ratios/trade fees since you literally can buy anything that is publicly traded instead of being restricted by that 401k's investment options (usually only a few dozen funds that are curated by the employer's chosen adviser). Some companies will start charging a management fee for non-employees as well (not all, but it does happen).

There are only a few reasons to maybe not roll a 401k to an IRA:

1. If you have access in the 401k pool to excellent institutional shares that would become unavailable if you moved the account.
2. If you live in a state that offers better protection from lawsuits/bankruptcy type of events for 401ks (some states protect assets in a 401k but do not extend the same protections to IRAs), and this is of some concern to you for whatever reason.
3. You are 100% satisfied with the current asset allocations/investments in the 401k and have no fees being charged for leaving it with the old company's setup.

Thanks Frankies Girl -

I realized my use of the word control was probably the wrong one. Appreciate your reply, always looking to learn.

1) According to the Fidelity rep I spoke to yesterday, the funds are specific to this plan, I still have access to all of the funds offered to current employees & there are no additional fees charged. I haven't yet done real due diligence comparing returns with Vanguard, but the Fidelity adviser, didn't see any real benefit to roll it to a tIRA with them (unless I wanted to) since the ER is so low & the return is good.
2) This is all new information to me so it wasn't a concern to me but perhaps I will read up on it
3) There is a fee record keeping of $32 per year.

Hadn't thought of the expanded options to choose from by converting it to a tIRA which certainly makes sense. I will need to spend some time on the Vanguard site exploring. If I find a fund with a similar ER that has the same or better returns and no fees, it would make sense to move it.

That helps clarify it for me.

undrtow

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Re: 401k rollover
« Reply #12 on: December 17, 2016, 11:57:24 AM »
   Thank you all for your responses! At this point, I'm thinking of leaving all the pretax contributions in my old TRowe 401k right where it is, as I like the Vanguard fund (VIIIX- Institutional Shares) and it has an extremely low ER of .02%. This fund has performed ok, about 14.5% over 5 years 7% over 10 years, so combined with the low ER, I see no reason to move that money to a more expensive fund. I won't be able to contribute to it, but I'm still unable to fully fund my 401k so I feel its a moot point anyway.

   However, I have made some roth contributions to that old 401k, which the TRowe rep told me yesterday that I have to take out of the 401k, in which case I will likely put that in a Roth IRA in Fidelity's FSTV, or total market fund, with an ER of .045%. My current 401k is through Fidelity as well, and I am 100% in their 500 fund, the FXSIX Institutional Fund, which tracks the S&P 500, with an ER of .035%.

   This is probably opening a can of worms, but should I focus first only maxing out my 401k with pre-tax money, or should I split contributions between pre and post tax money?

overwhelmed

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Re: 401k rollover
« Reply #13 on: December 17, 2016, 12:11:05 PM »
   Thank you all for your responses! At this point, I'm thinking of leaving all the pretax contributions in my old TRowe 401k right where it is, as I like the Vanguard fund (VIIIX- Institutional Shares) and it has an extremely low ER of .02%. This fund has performed ok, about 14.5% over 5 years 7% over 10 years, so combined with the low ER, I see no reason to move that money to a more expensive fund. I won't be able to contribute to it, but I'm still unable to fully fund my 401k so I feel its a moot point anyway.

   However, I have made some roth contributions to that old 401k, which the TRowe rep told me yesterday that I have to take out of the 401k, in which case I will likely put that in a Roth IRA in Fidelity's FSTV, or total market fund, with an ER of .045%. My current 401k is through Fidelity as well, and I am 100% in their 500 fund, the FXSIX Institutional Fund, which tracks the S&P 500, with an ER of .035%.

   This is probably opening a can of worms, but should I focus first only maxing out my 401k with pre-tax money, or should I split contributions between pre and post tax money?

Strictly as a pre or post tax question, virtually all of the advice I have seen is max the pre-tax.
If you were looking to kill your student loans or save for something specific in the next few years, you may want to funnel some to after tax savings but based on the 2 options you asked about, I think the general rule is maximize pre-tax whenever you can.

NoStacheOhio

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Re: 401k rollover
« Reply #14 on: December 17, 2016, 12:27:38 PM »
   Thank you all for your responses! At this point, I'm thinking of leaving all the pretax contributions in my old TRowe 401k right where it is, as I like the Vanguard fund (VIIIX- Institutional Shares) and it has an extremely low ER of .02%. This fund has performed ok, about 14.5% over 5 years 7% over 10 years, so combined with the low ER, I see no reason to move that money to a more expensive fund. I won't be able to contribute to it, but I'm still unable to fully fund my 401k so I feel its a moot point anyway.

   However, I have made some roth contributions to that old 401k, which the TRowe rep told me yesterday that I have to take out of the 401k, in which case I will likely put that in a Roth IRA in Fidelity's FSTV, or total market fund, with an ER of .045%. My current 401k is through Fidelity as well, and I am 100% in their 500 fund, the FXSIX Institutional Fund, which tracks the S&P 500, with an ER of .035%.

   This is probably opening a can of worms, but should I focus first only maxing out my 401k with pre-tax money, or should I split contributions between pre and post tax money?

Don't put too much emphasis on fund performance. It's going to track the market, so if it's a down year, then it's going to perform accordingly. Buy a fund based on what's in it, not so much how it did last year (or the last five, ten years). Chasing returns generally leads you to lower overall returns over the course of your life.

undrtow

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Re: 401k rollover
« Reply #15 on: December 17, 2016, 03:48:18 PM »
Overwhelmed, you kind of reaffirmed what I was thinking. Also NoStachOhio, I completely agree. The whole appeal of total market ETF's is to track to market, which always eventually goes up. That was just a response to a question posed about not knowing how well the old 401k was performing. Anyway, thanks again.

overwhelmed

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Re: 401k rollover
« Reply #16 on: December 17, 2016, 04:14:44 PM »
I have recently changed jobs and was wondering what I should do with my old 401k. I have been researching my options with my old 401k (T RowePrice) and am probably more confused now than before I started. My old 401k is about 50k, mostly invested in Vanguard VIIIX. My options as I understand it are to 1) leave it T RowePrice 2) roll it into an IRA of some sort 3) cash out 4) roll it into my new 401k (fidelity)

Background- Im 32, married with 2 kids, currently make about 97k a year, have about 30k in student loans at 6%. No mortgage. As an aside, I really love jlcollinsnh and subscribe to his investing mantra of picking total stock market funds with low fees and ignoring the market.

Option 1- leave it with T RowePrice
    Again, most of the money is in VIIIX (large cap or S&P 500) which has a low exp ratio of .02%. I can leave it in VIIIX, but I can't contribute anymore, correct? If I moved it to Vanguard, I'm guessing I wouldn't have access to VIIIX and I would likely move funds, probably to VTSAX, which is more of a total stock market fund, but the exp ratio is .05%. Seems like it makes more sense to leave it in VIIIX with T RowePrice, assuming I can?

Hopefully this isn't a hijack but a clarifying question

I don't see any reference on how the old 401k is performing. Assuming it is doing well, would no one suggest it be left where it is? If the ER is low, the return is good & there are no new fees or obvious downsides for keeping it with TRowe, I struggle with why you would move it. I was trying to decide what to do with mine as well & am currently comfortable leaving it, same ER, good return where it is. I might move it later as I finalize my retirement plans but for now I can't see a reason to move it.

I understand rolling to a tIRA to have control over it but am I missing something obvious about why no one suggests leaving it where it is?

I'm going to over-generalize.  You've been warned.

401k administrators have historically just been awful at managing these funds with reasonable expenses.  As an employee, it's just common sense to at least put money into that plan to get the maximum possible match... but once that match goes away (when you leave the company) ... there is almost zero reason to stay.

Now: That said, I am absolutely positive that someone somewhere has a well administered plan with good investment choices and low maintenance fees.  I don't know the OP's ER at T.Rowe and I may be missing it in the thread, but I don't see it.  I suspect it costs SOMETHING above what just a plain Vanguard tIRA costs since there is another layer of management...  but it may be small enough not to matter.

Hey Spork

Somehow I missed your answer. Between your answer & Frankies Girl that actually does help me understand the general 'roll it to a tIRA' suggestions.

I am guessing that although I may have lucked out with my old 401k, it probably does make sense to roll it. I believe both undrtow & I have an 0.02% ER but thinking about how unhappy a lot of people are with the plan their employer offers, and that although there may be good or great funds it is still limited to whatever they offer instead of being able to freely choose your fund in a tIRA.

FrugalKube

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Re: 401k rollover
« Reply #17 on: December 18, 2016, 11:43:11 PM »
Ok.  Slight hijacking on this thread as well.  I changed jobs earlier this year.  Former employer 401k and new employer both use schwab.   Should I roll the old 401k into the new 401k or move the old 401k into a vanguard tIRA?   I currently have vanguard Roth IRAs. 

Thanks, apologies to the OP.

To both you and the OP:  Unless there was some outrageous awesome deal, I would ALWAYS roll a 401k over to a Vanguard tIRA.  (Unless we're talking about a Roth 401k... but I assume we aren't.)  I like the control of funds.  Every place I've ever worked at juggled their 401k funds and management companies around every 2-3 years.

If you call Vanguard, they'll hold your hand every step of the way.  It will be a painless 5-10 minute phone call.  They'll bridge in your 401k provider and speak the proper financial language.  A few weeks will pass and suddenly it will be done.

(And as Frankies Girl mentions, there's nothing wrong with Fidelity either.)

I may need to to do this, I had the same thing, changed jobs had a 401k with TransAmerica with about $25K. Might be time to call Vanguard