What to do with 401K from previous employer?

[mabinogi]

My husband has a 401K from his old job with about $32,000 in it. It's at Vanguard, which is good, since all of our other investments are also at Vanguard, but we'd like to have a little bit more flexibility / control over it if possible. What can or should we do with it? Can we roll it over into an IRA? What are the costs / benefits to doing so, and what's the process? Thanks so much!

[forummm]

It's really easy to roll it over to an IRA at Vanguard. There should be no costs. The benefits are easier control. Info on Vanguard's website can tell you how to initiate the rollover.

[johnny847]

If you need to use the backdoor to get money into a Roth IRA, then I probably wouldn't roll it over because you have a Vanguard 401k and it should have low expense ratios (as long as there aren't additional expenses tacked on to the underlying funds, which I doubt).

If this doesn't apply to you, then I would just roll it over to a IRA at Vanguard.

[mabinogi]

Thanks, folks. Johnny847, what do you mean by needing to use the backdoor?

[johnny847]

Thanks, folks. Johnny847, what do you mean by needing to use the backdoor?

If you make too much you can't contribute directly to a Roth IRA. But there is a workaround.
https://fiby40.wordpress.com/2015/01/16/retirement-accounts-part-2/

[mabinogi]

Thanks. Our income is only $86k so we should be fine on that front. So, if we roll it over, it would be rolled into a Roth IRA, or some other IRA? If a Roth, how does that work with husband's existing Roth?

[johnny847]

Thanks. Our income is only $86k so we should be fine on that front. So, if we roll it over, it would be rolled into a Roth IRA, or some other IRA? If a Roth, how does that work with husband's existing Roth?

If this is a traditional 401k, you will rollover to a traditional IRA. If this is a Roth 401k, you will roll over to a Roth IRA.
If you want to move the money from a traditional 401k to a Roth IRA, you will owe income taxes on the amount that that is converted.

I assume you're still in your wealth accumulation phase, so you shouldn't do a conversion.
You can rollover 401k money to an existing IRA.

[mabinogi]

Thanks again. It's a traditional 401K, so it looks like we'll be rolling it over into a traditional IRA. I'll have hubby give Vanguard a call to get the process rolling. I appreciate your help! And yes, we're definitely still in the wealth accumulation phase!

[sb_NoVA]

You might not want to roll over if you have access to 'institutional' funds from Vanguard in your husband's 401k.  These funds have unbelievably low expense ratios.  As an example, my Vanguard S&P 500 index fund at a previous employer has an ER of 0.01 which is 5 times less than VTSAX. 

[johnny847]

You might not want to roll over if you have access to 'institutional' funds from Vanguard in your husband's 401k.  These funds have unbelievably low expense ratios.  As an example, my Vanguard S&P 500 index fund at a previous employer has an ER of 0.01 which is 5 times less than VTSAX.

Oh right. Forgot to mention that. It's easy to forget because so many 401k's have terrible expense ratio funds =(

[mabinogi]

Thanks, sb_NoVa. Everything in his 401k is in one of Vanguard's targeted retirement funds, for which the expense ratio is much higher than VTSAX, so that shouldn't be an issue here. I'd like to put it all in VTSAX when we roll it over.