Author Topic: Transferring old 403B accounts to Fidelity 401K  (Read 8644 times)

dodojojo

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Transferring old 403B accounts to Fidelity 401K
« on: August 19, 2014, 09:29:42 AM »
After years and years of "going to do it", I've started the process of reaching out to old employers to transfer my 403B accounts to my current 401K Fidelity account.  All my old 403B accounts are with TIAA-Cref.  My current 401K offers Vanguard and my investments are split amongst 3 index funds.  I like TIAA-Cref and they have very reasonable fees--they can't beat Vanguard.  I also just like to consolidate my retirement for ease of management.

The Fidelity representative I talked to tried to steer me towards to transferring to an IRA--but I cut him short.  Mainly because 401K's offer a little more against creditors and also possible plans to do some backdoor Roth IRA stuff in the future, I want to transfer to my 401K. 

Is there any reason why I should reconsider going the IRA route?  Or even to not do the transfers and leave things status quo?

dandarc

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #1 on: August 19, 2014, 09:40:08 AM »
If you're seriously looking to do a back-door Roth IRA, then it behooves you to avoid the traditional IRA - backdoor Roth only really works well if you don't have anything in a traditional IRA.  Sounds like the 401K you're moving to also offers investments that you would choose even if there was no restriction whatsoever (not everyone can say that).  And good for you on generating an income that makes the back-door Roth IRA necessary at all!

So assess what you mean by "possible" in regards to the backdoor Roth - sounds like the 401K is fine for your rollover either way, but if you wind up not doing the back-door Roth ever, you may have unnecessarily given up traditional deductible IRA contributions (assuming you can get your income to qualify) that might have been quite valuable.

Cheddar Stacker

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #2 on: August 19, 2014, 09:52:40 AM »
The only other reason I can think of is this: A Vanguard fund in a 401k is likely more expensive than a Vanguard fund in an IRA. You can't just look at the quoted expense ratio listed, which actually might be lower due to the institutional power of a big 401K plan. You also have to consider the 401K administrative fees, which many times are ~0.50% on all invested funds. Weigh that against the potential for the Back Door Roth and see which one makes more sense.

Dr. Doom

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #3 on: August 19, 2014, 09:58:42 AM »
Congrats on consolidating.  I think it's generally a good move and helps you manage everything more efficiently.

Another thing to consider:  Some employers have additional rules around distributions from accounts held through them.  Example:  Some places do not, under any circumstances, allow you to make withdrawals from your 401(k) while you are employed by them.   Related: some places allow you to take 401(k) loans and some do not.  I suggest you familiarize yourself with the restrictions imposed by your specific employer so you fully understand your options.

edit: clarity
« Last Edit: August 19, 2014, 10:11:45 AM by Dr. Doom »

dodojojo

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #4 on: August 19, 2014, 11:57:19 AM »
Oops,  I used the wrong terminology.  I'm not looking to do a backdoor Roth IRA.  I make too much for the traditional IRA but I do qualify for the Roth.  This started for 2013 and will continue for 2014.

What I had in mind is this Mad Fientist blog post: http://www.madfientist.com/traditional-ira-vs-roth-ira/

Which then makes it okay to transfer to an IRA...still the IRA isn't as well-protected against creditors as a 401K.

Thanks for the replies, obviously it has helped a lot already!

dandarc

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #5 on: August 19, 2014, 12:09:17 PM »
+1 on check the fees.  Some places the employer eats the administrative fees, other places they charge a higher expense ratio on the funds, still others do it more transparently - subtract it on your statement.  Done many different ways - they are required to disclose the fees, but it can sometimes be hard to find - may have to really read that plan description closely.

At my wife's place, the 457 plan takes $1.20 / month administrative fees out of the expense ratios (so we've already factored this in by looking at the ER), but the defined contribution plan has no additional administrative fees for active employees, however once separated they start taking $6 / quarter in addition to the expense ratios on the funds.  Also says that they reserve the right to charge an additional fee to the active employees.  Ratios on the target date funds in the defined contribution plan are fantastic - 0.1% - if there is sufficient money, it might make sense to leave it there even after she leaves employment and even with the $24 / year extra fees.

dandarc

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #6 on: August 19, 2014, 12:23:04 PM »
Oh, and there may be some things you can do to reduce your AGI for IRA purposes, so you can make traditional contributions - don't know how far above the deductible IRA limit that you are but a few things you can do (I was recently looking at coming up with ~10K in more above the-line deductions here for this very reason):

1.  Max traditional 401K / other plans that might be available
2.  Max HSA (If eligible)
3.  If self-employed, manage the timing of your expenses / revenue carefully to reduce business income (thanks to Cheddar for this one)
4.  If you have taxable investments, tax-loss harvest if you can

So depending on your exact numbers, you might be able to get below the cut-off for that traditional IRA.  Definitely worth at least checking, as if you're really looking at early retirement, that traditional IRA is extremely valuable - that article you link outlines how.  And if you can't get that AGI down, the Roth IRA is not a bad choice either.  This has more to do with future contributions, and not the rollover decision, as that money is already tax sheltered.

Cheddar Stacker

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #7 on: August 19, 2014, 12:34:28 PM »
Which then makes it okay to transfer to an IRA...still the IRA isn't as well-protected against creditors as a 401K.

Are you planning on filing bankruptcy? Why is this relevant to your situation? If it's not really relevant, the IRA would likely be better (cheaper and unlimited investment options) even though it will still result in 2 separate accounts and I know one of your goals was simplicity.

3.  If self-employed, manage the timing of your expenses / revenue carefully to reduce business income (thanks to Cheddar for this one)

You're welcome, thanks for passing it along to dodojojo.

dodojojo

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #8 on: August 19, 2014, 12:58:16 PM »

Are you planning on filing bankruptcy?

Knock on wood, no.  But we live in a very litigious society, I worry about lawsuits. 

dandarc

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #9 on: August 19, 2014, 01:39:57 PM »

Are you planning on filing bankruptcy?

Knock on wood, no.  But we live in a very litigious society, I worry about lawsuits.

Guess it depends on your field and so on, but the odds of you being successfully sued into bankruptcy are pretty darn small for most people.  If you've got decent liability insurance - homeowner's, car (this is by far the most dangerous thing most people do - both in terms of personal safety, and in terms of potential liability claims), business if applicable, maybe an umbrella policy - you get access to the most important thing if you do get sued - the insurance company's lawyers.  Liability insurance is generally pretty cheap - this indicates that our society is not as litigious as you might think.

Depends on what you do though - doctor's come to mind as being more prone to having to defend a lawsuit but part of the cost of being a doctor is paying that malpractice insurance.

dodojojo

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #10 on: August 19, 2014, 01:45:26 PM »
Oh, and there may be some things you can do to reduce your AGI for IRA purposes, so you can make traditional contributions - don't know how far above the deductible IRA limit that you are but a few things you can do (I was recently looking at coming up with ~10K in more above the-line deductions here for this very reason):

1.  Max traditional 401K / other plans that might be available
2.  Max HSA (If eligible)
3.  If self-employed, manage the timing of your expenses / revenue carefully to reduce business income (thanks to Cheddar for this one)
4.  If you have taxable investments, tax-loss harvest if you can


#Maxing out #1 and 2 aren't enough for me to qualify for traditional IRA.  #3 and 4 do not apply at this point.  Trust me, last year was the first time I didn't qualify for a traditional IRA.  I was so bummed out though I knew I should have been overjoyed I was making enough dough to not qualify.  I was so used to being eligible after so many years working in nonprofit!

dodojojo

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #11 on: August 19, 2014, 01:50:34 PM »
[quote author=dandarc link=topic=22349.msg375448#msg375448
Guess it depends on your field and so on, but the odds of you being successfully sued into bankruptcy are pretty darn small for most people.  If you've got decent liability insurance - homeowner's, car (this is by far the most dangerous thing most people do - both in terms of personal safety, and in terms of potential liability claims), business if applicable, maybe an umbrella policy - you get access to the most important thing if you do get sued - the insurance company's lawyers.  Liability insurance is generally pretty cheap - this indicates that our society is not as litigious as you might think.
[/quote]

I have no insurance at all.  I rent and do not own a car.  After many years of renting cars with only credit card coverage, I do make a point of buying liability insurance now. 

I suppose if I go with the IRA route, I should look into some form universal liability coverage (that's the umbrella right?).

I just chatted with Vanguard and I'm definitely rethinking the IRA option.  It seems to be less hassle than the 401K transfer route and the money I bring over qualifies me for Voyager services!  I'm so easy...

dandarc

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #12 on: August 19, 2014, 01:58:29 PM »
There you go - less hassle, and probably lower fees FTW.

Renter's insurance is pretty cheap, and I think usually provides some liability coverage.  Most umbrella policies will require some minimums on your auto insurance and/or homeowner's insurance, so you'll want to research that aspect.

One more of Cheddar's ideas from another thread on reducing AGI - renegotiate your compensation package - trade salary for more into the 401K if your employer is willing.  Sometimes referred to as a self-matching 401k, I believe.  Certainly can't be done everywhere, but if it can at your place of employment, it is something to consider.

Cheddar Stacker

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #13 on: August 19, 2014, 02:57:06 PM »
Also if you're worried about liability and protecting yourself from creditors/lawsuits maybe consider a revocable living trust. I'm no expert, but here's how I think they work:

-Open a revocable trust-maybe legalzoom.com, but you might want an estate planning attorney for this to do it right.
-Change the name on all your accounts to the revocable trust.
-Change the beneficiary on all your accounts (401k, life insurance, etc.) to the revocable trust.
-Continue reporting any taxable income from your accounts under your social security #.
-The trust can be revoked (hence the word revocable).
-The assets can be passed on to your beneficiaries much more efficiently than via a will/probate.

Again, I'm not an expert, but it might be worth reading up on if you're worried about this stuff.

fartface

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #14 on: August 19, 2014, 03:14:56 PM »
Have you actually gotten your hands on the TIAA-CREF $$$? My husband left his employer a year ago with $80K in his 403b.

He tried rolling 100% of the funds over to an IRA and TIAA gave us a several month long run around (wanted it pulled out w/in 90 days of separation from employer). Had to have documents signed and notarized by his spouse (me). After we did hours and hours of paperwork (not my first rodeo I've rolled over his 401Ks from last two employers prior to this) and in the end they only released ~$1500. We were told he'll have ~$1500/year for the next ten years rolled over. The rest is held hostage with TIAA-CREF until he is eligible retirement age.

In my opinion TIAA-CREF are a bunch of CONS. Fees in TIAA funds are triple or more what Vanguard offers. These scammers should be investigated my FINRA and the IRS.

I googled TIAA CREF scams and read several testimonials from others who aren't able to roll their funds over. Anyway, just wondering if your experience was different.

dodojojo

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #15 on: August 19, 2014, 03:19:11 PM »
Thanks Cheddar.  Estate planning (so grand a term for so little in assets...) is something I have long neglected too.

I checked with Fidelity.  No fees outside of the fund fees.  Three of the four funds I'd invest in--have lower fee ratios at Fidelity.

The plot thickens.

dodojojo

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #16 on: August 19, 2014, 03:24:10 PM »
Have you actually gotten your hands on the TIAA-CREF $$$? My husband left his employer a year ago with $80K in his 403b.

He tried rolling 100% of the funds over to an IRA and TIAA gave us a several month long run around (wanted it pulled out w/in 90 days of separation from employer). Had to have documents signed and notarized by his spouse (me). After we did hours and hours of paperwork (not my first rodeo I've rolled over his 401Ks from last two employers prior to this) and in the end they only released ~$1500. We were told he'll have ~$1500/year for the next ten years rolled over. The rest is held hostage with TIAA-CREF until he is eligible retirement age.

In my opinion TIAA-CREF are a bunch of CONS. Fees in TIAA funds are triple or more what Vanguard offers. These scammers should be investigated my FINRA and the IRS.

I googled TIAA CREF scams and read several testimonials from others who aren't able to roll their funds over. Anyway, just wondering if your experience was different.

Jesus, that sounds awful.  I have only started inquiries and am still on the fence on whether to go the IRA or 401K route.  So no, I haven't dealt with TIAA Cref yet.  Hmmmm...this may be painful then.  I know my first employer set up a lousy plan with TIAA CREF and locked us into some type of annuity.  I think my contributions went to the regular TIAA CREF funds, but the employer match went to GRAs (Group Retirement Annuity). 

dodojojo

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #17 on: August 20, 2014, 11:25:57 AM »
Just talked to Tiaa-cref and the process they laid out seems pretty straightforward.  And all my contracts are eligible to roll over.  Of course, those could be famous last words....

I'll receive the paperwork tomorrow, I just have to decide where I want the money to go.  Still on the fence to be honest.  Probably leaning towards the 401K since expenses are marginally lower.  I figure when I leave the current employer, I can roll it over to an IRA anyway. 

Plus, one more Roth contribution and that bumps me up Voyager status at Vanguard anway. I wouldn't need to bring my 403 money in to help with that little perk.

dodojojo

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #18 on: September 13, 2014, 09:07:49 AM »
I opted to go with rolling over into my 401K.  After talking to TIAA-CREF, the process seemed straightforward enough.  The famous last words were to instruct in writing how I wanted my checks to be processed (to comply with Fidelity's 401k rollover process).

TIAA-CREF of course ignored my instructions.  Not quite as bad as Fartface described her experience...TC can remedy the situation, but their willful incompetence really does not inspire confidence.  I can't wait to finish my business with them.

dodojojo

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Re: Transferring old 403B accounts to Fidelity 401K
« Reply #19 on: September 18, 2014, 05:17:58 PM »
Well fuck you very much TIAA-CREF and ex-employer.  Fuck you very much.

No gory details (too painful to type right now), but I may not be able to rollover about 2/3 of my assets directly into my 401K plan.

One solution proposed is to roll the 403B 2/3 assets into an IRA.  From there, roll the IRA into my 401K.  The indirect route will bypass the cooperation I need from my useless ex-employer.

My concern is that using this IRA-401K route will prevent me or limit my options when I want to roll the 401K into an IRA.  And hopefully one day convert the IRA to a Roth.

Will changing assets from 403b to IRA to 401K to IRA cause issues?