Convert 401K to IRA

[Trudie]

A big chunk of our retirement portfolio is in a 401k/403b with TIAA.  We have all of our other assets parked there as well in my IRAs and brokerage accounts and like the service and streamlined approach. (I like having a person to go to with paperwork, and we have a very convenient local office.)

That said, I’m considering the pros and cons of rolling over my husband’s assets into an IRA.  This would mainly save on fees and still give us an endless array of options.  (Vanguard, index funds, etcetera).  Although we can start drawing down these accounts, we haven’t yet.  I see mostly advantages, but am wondering if I’m missing something.  We have a cushy cash position (inheritance) we’ve used as a market buffer and to minimize income and taxes while I go about converting my traditional IRA to Roth.

[tarheeldan]

I think mostly advantages too but of course there are disadvantages:

https://www.kiplinger.com/article/retirement/t032-c000-s002-pros-and-cons-of-rolling-your-401-k-into-an-ira.html

[cool7hand]

As I recall, most of the cons apply to those still working 55 and after. If that's not you, save on the fees!

[seattlecyclone]

This is probably the right decision.

A few reasons you might not want to do this that I can think of:
* Your husband left the employer during or after the year he turned 55, will not yet be 59½ by the end of this year, and wants to withdraw some of the money before the year he turns 59½.
* You have institutional-grade index funds available in your 401(k) with lower fees than you can get in an IRA.
* You have Roth funds in the 401(k) that you might want to roll into a future 401(k) for some reason. Once money is in a Roth IRA it really can't be rolled into anything else.
* You have plans to have high enough work income in the future that you'd want to do backdoor Roth IRA contributions.

Those are all pretty niche circumstances though. 401(k)->IRA is the right call for most people.

[AccrualWorld]

The major reason why I did not roll my 401k into a traditional IRA is because of the income limitations of the ROTH IRA (~140k MAGI). I chose to just keep the balance with my original employer's 401k.

Since I have to do a backdoor Roth IRA contribution in order to make my contribution, it would be problematic to have a balance in a traditional IRA. Since the backdoor Roth requires a conversion of your traditional IRA balance, if you had gains, you would need to realize them when you do the conversion of amounts from traditional to Roth.

[PDXTabs]

I think mostly advantages too but of course there are disadvantages:

https://www.kiplinger.com/article/retirement/t032-c000-s002-pros-and-cons-of-rolling-your-401-k-into-an-ira.html

Every time I read this list I see mostly disadvantages of rolling a 401k into an IRA. But every situation is different, and fund choices and fees at a bad 401k can be really bad. But fund choices and fees at my 401k from a prior employer are actually really good (Fidelity).

EDITed to add - if you keep it a conduit IRA you get rid of one disadvantage: bankruptcy protection: https://www.mygenfcu.org/what-is-a-rollover-ira-and-do-i-need-one/

[tarheeldan]

Ah, for me it's all about the Roth conversion ladder