Author Topic: Rollover to current 401k vs IRA  (Read 1767 times)

MrsDinero

  • Pencil Stache
  • ****
  • Posts: 935
Rollover to current 401k vs IRA
« on: June 03, 2016, 08:12:17 AM »
I've noticed the standard on the forums is to rollover an old employer's 401k into an IRA.  I'm curious why it is not recommend to roll over into your current employer's 401k?

dandarc

  • Magnum Stache
  • ******
  • Posts: 3476
  • Age: 36
Re: Rollover to current 401k vs IRA
« Reply #1 on: June 03, 2016, 08:18:20 AM »
Because in an IRA you aren't limited to what your current employer offers.  If you like current employer's investment options and fees (maybe you can get Vanguard institutional shares, which are even cheaper than Admiral shares), then sure, go ahead and roll into there.

Also - if a backdoor Roth IRA is part of your plans due to your income being over the Roth IRA income limits, then you'll definitely want to roll any traditional money into your 401K before you do the backdoor Roth.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1771
Re: Rollover to current 401k vs IRA
« Reply #2 on: June 03, 2016, 11:29:59 AM »
There are different rules for a plan you're in currently, than one after you leave a company.  Trying to roll over your current 401(k) to an IRA may not be allowed, or may at least be very tricky to accomplish.

Some employers offer a brokerage option where you can buy stocks or ETFs in your 401(k).  In general target retirement funds do not offer ETF options, so if you want a one fund portfolio this won't work.  But if you're looking to have a 3-fund portfolio (VTI, VXUS, BND) using Vanguard ETFs, it can work.  This generally costs you an annual amount ($100 a year? it varies), and only for plans that offer a brokerage option.

PhysicianOnFIRE

  • Bristles
  • ***
  • Posts: 452
  • Location: Up North
    • Physician On FIRE
Re: Rollover to current 401k vs IRA
« Reply #3 on: June 03, 2016, 06:22:50 PM »
A good reason to roll an old 401(k) into your current employer's 401(k) is to take advantage of a backdoor Roth without any issues with the pro rata rule. I rolled both my SEP IRA and an old 401(k) into my current employer's 401(k) for this reason.

Ursus Major

  • Stubble
  • **
  • Posts: 157
  • Location: Silicon Valley, CA
Re: Rollover to current 401k vs IRA
« Reply #4 on: June 07, 2016, 11:30:18 PM »
A good reason to roll an old 401(k) into your current employer's 401(k) is to take advantage of a backdoor Roth without any issues with the pro rata rule. I rolled both my SEP IRA and an old 401(k) into my current employer's 401(k) for this reason.

And another good reason is that asset protection (from creditors/in bankruptcy) is potentially much better in a 401(k) than in an IRA, because the former is covered by a federal law (ERISA), while the latter is covered by state law, with various levels of protection depending on the state.

plog

  • Stubble
  • **
  • Posts: 214
Re: Rollover to current 401k vs IRA
« Reply #5 on: June 08, 2016, 06:58:04 AM »
Another plus for the IRA is that there is less bureaucracy to get your money. 

I'm jumping through both administrator and former employment hoops to get my 401k money from my prior employment.  Although its 2016 in most parts of the world, my administrator can only mail me roll-over forms which take 2 weeks to get.  It gets better.  Once I fill them out I have to send them to the HR of my prior employment to get a signature from my prior employer to approve the disbursement.  Then the forms (hopefully) come back to me to sign and get notarized and send back to the administrator.  So, in probably within 8 short weeks of starting the process my money will be rolled over.

No way I'm ever rolling over money to a 401k.

MrsDinero

  • Pencil Stache
  • ****
  • Posts: 935
Re: Rollover to current 401k vs IRA
« Reply #6 on: June 08, 2016, 07:52:14 AM »
Thanks for all the replies.  I decided to roll over my old 401k into my current one. I like my current fund choices but also leaving open to doing a backdoor Roth IRA.  It looks like the rollover process will take almost a month to complete, because I have to get forms signed by my HR department via snail mail.