Vanguard - Roll 401k into IRA?

[The 585]

I have an old employer 401k through Vanguard where the majority of my investments are held (containing both pre-tax and roth amounts) and was wondering if it would be beneficial to roll this into my Vanguard IRA. I currently have a Vanguard Roth IRA but no Traditional... so I'd need to have a Trad IRA opened also. But looking into this, it seems there's a difference between Traditional IRAs and Rollover IRAs, any benefit either way?

My Vanguard 401k has institutional funds, but I need to slice and dice my IPS into several different funds which makes rebalancing more complicated. If I roll it into IRAs, I can simplify it into the ETFs I want.

Among other considerations, for future early retirement I believe I'd need to roll this into an IRA anyways to make Roth withdrawals and do a conversion ladder from Trad IRA into Roth, right?

Lastly, is there any difference in legal protections between 401k and Roths? I'd like to also consider which is best protected from lawsuits, creditors, and potential marriage/divorce.

Any input highly appreciated, thanks in advance!

[boarder42]

as long as you dont plan to back door roth any time soon your plan is great.

[dandarc]

as long as you dont plan to back door roth any time soon your plan is great.

And depending on how the legislation shakes out, backdoor Roth might not be a thing much longer anyway. Of course the big-money lobbyists are working hard on a lot of the "tax increase" parts, so who knows how that's gonna go.

[PDXTabs]

Lastly, is there any difference in legal protections between 401k and Roths? I'd like to also consider which is best protected from lawsuits, creditors, and potential marriage/divorce.

401k has full ERISA protections at the Federal level.

IRAs only have a patchwork of protections at the state level.

https://www.equifax.com/personal/education/covid-19/creditors-protected-retirement-accounts/

EDITed to add: basically the only person that can get your 401k is the person that you marry. The best way to avoid this is to not get married. The second best way is to get a good attorney for your prenup.

[Ladychips]

as long as you dont plan to back door roth any time soon your plan is great.

Would you explain this a little more please?

[boarder42]

as long as you dont plan to back door roth any time soon your plan is great.

Would you explain this a little more please?

as said above this may not matter depending what congress does in the next month or so.  But if you have a Trad IRA with money in it you need to transfer this money to a 401k or you cannot do the backdoor roth IRA.  Since the money sitting in your existing IRA has likely had earnings on it.  The way the IRS calcs this is the rollover takes into account any earnings proportionally.  So if you had put 6k into a Trad IRA or 401k that was now sitting in a trad IRA and that money had grown to 18k.  When you go to put another 6k in and do the rollover, half the rollover will be earnings since half your account is contribution - 12k, and the other half earnings.  You'll have to pay taxes on those earnings as income for this year at your marginal rate.