Reverse 401k rollover?

[ZiziPB]

Hello, my FIRE plan is to retire and move abroad next year. I'm looking into my potential tax liability in the country where I will live and it appears that the tax-deferred nature of IRAs will be disregarded, making the dividends and capital gains subject to taxation. However, it is possible that funds in a 401k would not be taxed since the funds do not make any distributions.

I was planning to do a rollover into an IRA when I FIRE but now I'm considering doing the reverse: rolling my IRAs into the 401k and just leaving the money there after I stop working in order to limit my tax liability. My employer is a Fortune 500 company and the 401k fund is administered by Fidelity. The investment options are simple but adequate: I would probably just be using a Vanguard Target Fund (which we get at a discounted expense ratio of 0.06%) and a Stable Value Fund. I currently have about $400K in various IRAs and about $300K in the 401k.

What do you all think about this plan? Anything I should be concerned about?

[Acastus]

The Bogleheads have a nice chart. You can only roll group plans, such as 403b, into a 401K. You can't put personal plans into it.

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

It is well worth consolidating plans at a single mutual fund company. It really simplifies the accounting. Unless you are making use of age 55 access to 401ks, there is no real advantage to the 401k over an IRA. Choose your favorite IRA, and put everything there.

[terran]

The Bogleheads have a nice chart. You can only roll group plans, such as 403b, into a 401K. You can't put personal plans into it.

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

It is well worth consolidating plans at a single mutual fund company. It really simplifies the accounting. Unless you are making use of age 55 access to 401ks, there is no real advantage to the 401k over an IRA. Choose your favorite IRA, and put everything there.

That chart says a traditional IRA can be rolled into anything except a SIMPLE IRA or roth 401k, etc. That matches my understanding as well. It does depend on how the 401k plan documents are written, so you should check with HR and/or your plan's administrator to find out if rollovers from IRAs are accepted.

Assuming the plan allows rollovers from IRAs getting everything into the 401k sounds like a good idea as it sounds like you have access to good investments, it might help you with taxes in your new home country, and you can always roll it out into an IRA if any of that should change.

[ZiziPB]

torran, thank you (I read your response on bogleheads, too).  The plan does accept rollovers - I contemplated doing one a few years ago in order to do a backdoor Roth but ended up not doing it at the time.

I'm trying to see if there are any downsides to keeping my money in the 401k after I leave the job but all I can really think is the fact that my investment options will be limited.  But the Vanguard Target funds are a great option and I actually use them outside of the 401k as well, so I think it will be fine.

[Acastus]

That chart says a traditional IRA can be rolled into anything except a SIMPLE IRA or roth 401k, etc. That matches my understanding as well. It does depend on how the 401k plan documents are written, so you should check with HR and/or your plan's administrator to find out if rollovers from IRAs are accepted.

Yikes, I missed that. This is a possible solution to my problem of having limited spending money pre 59.5. I checked my 401(k) rules, and it says I can, indeed, roll a regular IRA into it. Thanks!

[Proud Foot]

I'm trying to see if there are any downsides to keeping my money in the 401k after I leave the job but all I can really think is the fact that my investment options will be limited.  But the Vanguard Target funds are a great option and I actually use them outside of the 401k as well, so I think it will be fine.

Read your 401k plan and get an understanding of how accounts are managed once the owner (you) is no longer a current employee. 

Are you required to transfer your funds out or is there a minimum balance in order to maintain the account? You don't want to think you are able to leave the account there and then have them mail you a check because you did not roll the account out of the plan.

 Who pays the plan fees? Do you now pay them or does your employer still cover them? Even if you are now paying a higher fee it would really help to run the numbers to see if the tax savings of keeping the 401k would be worth the additional cost.

[ZiziPB]

I'm trying to see if there are any downsides to keeping my money in the 401k after I leave the job but all I can really think is the fact that my investment options will be limited.  But the Vanguard Target funds are a great option and I actually use them outside of the 401k as well, so I think it will be fine.

Read your 401k plan and get an understanding of how accounts are managed once the owner (you) is no longer a current employee. 

Are you required to transfer your funds out or is there a minimum balance in order to maintain the account? You don't want to think you are able to leave the account there and then have them mail you a check because you did not roll the account out of the plan.

 Who pays the plan fees? Do you now pay them or does your employer still cover them? Even if you are now paying a higher fee it would really help to run the numbers to see if the tax savings of keeping the 401k would be worth the additional cost.

Thanks Proud Foot, all good points and I have already looked into them. 

I can leave the money in the account if the balance is more than $1,000.  They would only do a lump sum distribution if the balance is below that.  There is no distinction in payment of plan fees whether you are an active or former employee, so I would have no additional costs/fees once I stop working.  The company picks up the tab for some and the rest are paid through the fund expense ratios.  I can request a distribution or a rollover at any time after terminating my employment.  I can also do in-plan Roth conversions (the only downside being that they are not reversible so I would have less flexibility in tailoring the conversions to my tax liability). 

Based on this, there seem to be no downsides to leaving the money in the plan.