The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Fishindude on July 30, 2018, 09:42:40 AM
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I retired at end of last year and have roughly $1.2 mil in 401K which we won't need for a few years. It's a well managed plan with pretty low fees, so wondering if there is anything wrong with just leaving the money there and letting it work. Reason I ask is that many people say you should roll it into an IRA. Thoughts?
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If you're happy with the investment options, then leave it in there. Good 401Ks often negotiate better expense ratios than you can get on your own.
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I hadn't thought about this before since my employer doesn't allow participation after employment ends. My initial thoughts:
The first thing I would look at is state laws pertaining to IRA's and liability suits. 401K's enjoy more protections from lawsuits(Edit: and bankruptcies) than IRA's in many states. The second would be whether or not I can allocate capital exactly the way I want in the 401K vs IRA. As you probably know good 401K's may have lower fee options than available to the general public in IRA's, but you can allocate however you wish in the IRA. Last consideration would be regarding your plans for any type of Roth conversions.
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I would keep it there if the fees are as low as you can get them, compare them with Vanguard and Fidelity. For reference, one basis point (.01%) on 1.2M is costing you $120 a year.
Keeping assets in a 401k means that ERISA laws apply to that account and give you extra protection against lawsuits, over taxable and even IRA accounts, and what is at risk if you are liable for any damages. Of course you should also have umbrella insurance if you have significant assets to protect.
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I retired at end of last year and have roughly $1.2 mil in 401K which we won't need for a few years. It's a well managed plan with pretty low fees, so wondering if there is anything wrong with just leaving the money there and letting it work. Reason I ask is that many people say you should roll it into an IRA. Thoughts?
Others have already covered the "t401k vs. tIRA" question.
Have you considered converting some to a Roth IRA? That may or may not be beneficial, depending on the rest of your finances.