New job: 401k/ rollover questions

[pinkfloyd4ever]

Some background:I'm less than 2 years out of school and have about $38k in student loan debt, so I'm not contributing to my retirement savings as much as I'd like to yet.

I changed jobs a few months ago and I need to roll over my 401k from my last job (only about $4k worth, but they're making me take it out of that account). My new job's 401k has a much smaller company contribution: If I put in 4% of my salary, they'll put in 1%. They don't bump their contribution up to 2% if I contribute 8%; their contribution is capped at 1%.

The plan with my new company is with some company called OneAmerica. They do have a S&P 500 index fund, but the expense ratio seems high for an index fund: 0.65%. I see Vanguard has individual plans offering the Total Market Index fund (VTSMX) with an expense ratio of only 0.16%, or the S&P 500 Index ETF (VOO) with an expense ratio of 0.05%.

So my questions are: Should I just make all my contributions to my employer plan? Or just contribute 4% of my salary to my employer plan, then the rest to an Index Fund with a lower expense ration in a Vanguard Individual account? And should I roll over my previous job's 401k into an individual Vanguard account? Or into my new employers' plan?

[solon]

You should roll your old 401k over to an IRA at Vanguard. Don't contribute anything to your new 401k. Throw whatever money you would contribute to retirement at your student loan. After the loan is paid off, then start a 401k at the new company. You'll miss out on the 1% match in the meantime, but you'll be contributing 4% (or more - hopefully more) to your debt load.

[MDM]

1% from the company for your 4% contribution is an immediate 25% return on that money.  It is likely your student loan has <25% interest.  That is why "invest up to the 401k match" sits at the top of investment priority lists.  E.g., see the 'Investment Order' tab in the case study spreadsheet for a discussion of several points raised in the OP.

Are you at all close to exceeding the income limit for Roth contributions?  If so you might consider keeping money out of tIRAs.  Otherwise, putting the old 401k into a tIRA is a fine choice.