401k vested amount from previous employer

[BalanceLife]

Hello Everyone,

I am hooked up to this site and started learning little about personal finances - realized I knew nothing about investing and never thought about FI so far. Well now, I have started to think about it. First question that came to my mind to ask is I have around 21K vested amount in 401k from my previous employer (Fidelity) 100% in 2045 TARGET RET FUND. I wanted to check with experts on should I keep them there or move to new 401k plan from my current employer or move them to Roth IRA?

Thx,
BL
   

[seattlecyclone]

Leaving money in your previous employer's plan generally isn't the greatest idea because it's just one more account to keep track of. What are the investment options in your current 401(k)? Rolling into an IRA is often a good idea. If your current funds are traditional, you may want to roll them into a traditional IRA instead of Roth because rolling into a Roth IRA would entail paying a bunch of extra tax this year.

[Need2Save]

Factors to consider when you leave an employer:

1.  The investment choices in old 401(k) vs. your  new 401(k) vs. an IRA you could open and transfer the money to.
2.  The fees you are paying for those investments (look for management fees, if any, in addition to the expense ratio for each fund) -  larger retirement plans generally negotiate lower fees
3.  Your legal protections by keeping the money in an ERISA protected retirement plan
4.  Beneficiary rights in the event of your death
5.  Desire to simplify your accounts for easier administration/tracking

With respect to #4 - a spouse can inherit the 401(k) and treat it as their own including rolling over the balance to an IRA in their name.  A non-spouse has to either take annual distributions based on their life expectancy or empty the entire balance by the end of five years after the original participant dies.   Many 401(k) plans require the account be moved within 5 years of your death for non-spouses.   Probably not thinking about this level of detail. 

[BalanceLife]

Thanks seattlecyclone. Our current company has below investment options in 401(k):

American Funds US Government MMkt A
American Funds Bond Fund of Amer A
Vanguard Total Bond Market Index Adm
American Funds Income Fund of Amer A
American Funds 2010 Trgt Date Retire R6
American Funds 2015 Trgt Date Retire R6
American Funds 2020 Trgt Date Retire R6
American Funds 2025 Trgt Date Retire R6
American Funds 2030 Trgt Date Retire R6
American Funds 2035 Trgt Date Retire R6
American Funds 2040 Trgt Date Retire R6
American Funds 2045 Trgt Date Retire R6
American Funds 2050 Trgt Date Retire R6
American Funds 2055 Trgt Date Retire R6
American Funds 2060 Trgt Date Retire R6
American Funds Washington Mutual A
American Funds Fundamental Invs A
American Funds Growth Fund of Amer A
Vanguard Capital Opportunity Inv
Scout Mid Cap
Vanguard Explorer Inv
American Funds New Perspective A
American Funds SMALLCAP World A
American Funds Europacific Growth A

I am using American Funds 2035 Trgt Date Retire R6 and Vanguard Capital Opportunity Inv - 50% each in current. Any recommendation on distribution would be useful.

Thx,
BL

[MilesTeg]

Roll it in to a normal IRA is probably the best option.

Only do a Roth IRA if you are willing to pay taxes (at your current marginal rate) on those funds. It's probably a bad idea if you are in a high tax bracket, but not a bad idea if you are in the lowest tax bracket (say, if you are unemployed).

[HipGnosis]

Factors to consider when you leave an employer:

1.  The investment choices in old 401(k) vs. your  new 401(k) vs. an IRA you could open and transfer the money to.
2.  The fees you are paying for those investments (look for management fees, if any, in addition to the expense ratio for each fund) -  larger retirement plans generally negotiate lower fees
3.  Your legal protections by keeping the money in an ERISA protected retirement plan
4.  Beneficiary rights in the event of your death
5.  Desire to simplify your accounts for easier administration/tracking

With respect to #4 - a spouse can inherit the 401(k) and treat it as their own including rolling over the balance to an IRA in their name.  A non-spouse has to either take annual distributions based on their life expectancy or empty the entire balance by the end of five years after the original participant dies.   Many 401(k) plans require the account be moved within 5 years of your death for non-spouses.   Probably not thinking about this level of detail.

Nice post!

[BalanceLife]

Let me introduce my self:

I am 37 years old, married, stay at home wife and 2 kids (3 yrs and 2 yrs - 15 months apart), working in IT. I have come from family of frugality (my grand father and father) - good at saving, not spending money but never in to investing. For some reason I have drifted away from savings to little bit more on spending side may be after seeing extreme frugality from my father, thinking I have to live well now. But lately started realizing importance of savings, money for future - even though I touch 6 figure in salary - my expenses are on high side - 2 kids, bought new car in 2014, 2nd new car in 2015, home in 2016. I have started 529 for both kids, investing little bit into current 401K . After all this I have very little or none to save or invest into anything else. I think I fell into vicious cycle of trap where I am 100% dependent on my job and I will be broke if I don't have a job.
I want to keep these cars as long as I can (goal is to keep them at least 5 years after paid off), made 20% down on the house and also start making 1-2 payments more (if I can) per year and goal to pay off the house in 10 years. Make amendments what ever I can - to payoff soon and save more.

Thx,
BL