New job, don't know what to do with old 401k

[Rusoarmo]

Facts:
- 23 years old
- MBA student (have some loans)
- Own a house
- Employed making appx. $73k base salary
- Getting married in 2016, fiance' makes ~$55k
- Plan on growing salary with completion of MBA in June.
- Have appx. $12k in old employer 401k through Fidelity
- New employer offers 401k program through "The Standard" with no corporate matching
- Chose to keep the standard 3% enrollment. Chose a mix of 20% Vanguard Large-cap, 30% Vanguard Mid-Cap, 10% Dodge & Cox and 40% in Vanguard 2055 retirement.
- Decided to keep the 3% enrollment because I know I wouldn't use the extra 3% in paycheck in my best interest.

I'm not too happy with Fidelity. I've paid $103 YTD in fees.

What should I do with my old 401k?
- Roll into a Roth IRA? Open at Vanguard or keep at Fidelity? I think I have to pay taxes on my $12k then.
- Roll into Traditional IRA? Open at Vanguard or keep at Fidelity?
- Any other suggestions?

[MDM]

What are the fees for the current 401k vs. the old 401k?

What is your current marginal rate, and what marginal rate do you expect (best guess is ok) when you will be withdrawing from your tax-advantaged investments?

Why aren't you contributing the $18K/yr maximum to the 401k and the $5500/yr maximum to an IRA?

[lthenderson]

I would most definitely roll it over into an IRA of some sort at a place like Vanguard where you have full control over it for the rest of your life. (Roth or Traditional depends a lot on your personal situation and where you expect to be in the future.)

[Frankies Girl]

If you move a 401k to an IRA it is automatically classified as a Rollover IRA - it acts as a traditional IRA but shows that it was originally some form of company sponsored account previously. I think turning this into a Roth (which would be extra steps involved) would be a very wrong move. You would pay taxes on the entire amount as if you earned it along with your current salary for this calendar year, and pay out lots more in taxes. So don't turn this into a Roth!

Definitely go for a rollover IRA, and then invest in whatever you'd like. You don't even need to move it over to Vanguard if you don't want to; Fidelity is actually a pretty good company as long as you stay away from their managed funds, which is likely what you were restricted to with the 401k. Once you turn it into an IRA you can invest in any Fido fund including their stellar Spartan series, which is what I have. Spartan offers many equivalent index funds similar to Vanguard. In some cases, they offer slightly better expense ratios.

And no, you don't pay any taxes on 401k/IRAs until you withdraw the money from them; selling off funds to purchase different ones inside a401k/IRA or performing a rollover general aren't taxable events to my understanding (and I've done both). Paying taxes later when actually drawing on the account is possible, but that is also contingent on your taxable income bracket (if you are in the 15% bracket or below - you may pay no taxes on dividends/cap gains).


https://www.bogleheads.org/wiki/Fidelity


There are a few reasons not to turn it into a rollover IRA - if you're in a state like California, 401ks have better protection against judgements and bankruptcy than an IRA, or say if you are getting institutional shares only available by being in the company's 401k program (unlikely in this situation, and anyway the Spartan series probably offers better choices).

I weighed the benefits of rolling over, and decided it was in my best interests to, so really you just need to confirm the same for your situation, and do a bit of reading like the bogleheads link above to see if all of that makes sense for you. Do confirm the info I've given here with a rep to make sure (the pros/cons of rolling to an IRA). ;)