Leaving 401K $$$ with company post Retirement

[travelover]

I rolled my 401(k) to an IRA, but now I wish I'd left it there to take advantage of the stable interest fund that pays more than bonds or CDs.

 

[jim584672]

My orphaned 401k has a fixed fund at about 2.15% which I can't get anywhere else.
It has Vanguard Institutional Index (S&P 500) and Total Bond funds.
While my state protects IRAs from lawsuits, but not all states do. So If I move I am protected.
Diversity in having an account separate outside my other accounts.
If I get another job I could roll over the 401k to the new employer preserving the "rule of 55" possibility.

 

[Big_Hitter]

When you move it, you have 100% control and more investment options. I m moving mine. Your private investment account will be larger and you may get more perks. Fees will very likely be less.

If you are worried about creditor protections, keep working or clean up your act.

and after you move the money you are paying retail, you don't get to use other participants' forfeitures to lower your fees and....you won't get the option of a full or partial annuity payout in case your plan has one

even if you purchase an annuity with your rollover, again, it will be retail

good luck finding a stable value fund outside of an employer-sponsored DC plan

I think many retirees would like to take a partial lump sum distribution and use the rest to buy an immediate annuity or QLAC from the plan if offered - why not use risk pooling?

I can't think of a good reason TO take the money out, entirely, after retirement but I'm sure many FAs suggest you move it - those TV commercials encouraging rollovers to retail IRAs are silly

I didn't read the article but I'm sure it makes those points

 

[Texas Proud]

It does depend on the company's plan and what is offered...

My old mega has a very low cost plan.... some of the funds are a couple of basis points.... their stock fund is zero cost... the selection is not as good as having your money outside, but I take this into consideration with my investments and invest in funds that I like...


BTW, I left mine there because I have money in company stock... I will be able to take that stock out of the plan and only have to pay income tax on my cost basis... all the gain will come to me and only be taxed if I sell the stock... if I rolled the whole amount over, I would have to pay regular income taxes on that gain... probably a $10K to $20K savings in taxes when I do it...

 

[rbmrtn]

I left mine in place mostly for the stable value fund. It beats most fixed income alternatives. Also megacorp was a dividend payer and the dividends from company stock can be passed through without any restrictions. The funds are mostly institutional and trust funds ( TRowe and Vanguard ) so the fees aren't bad.

 

[Big_Hitter]

I left mine in place mostly for the stable value fund. It beats most fixed income alternatives. Also megacorp was a dividend payer and the dividends from company stock can be passed through without any restrictions. The funds are mostly institutional and trust funds ( TRowe and Vanguard ) so the fees aren't bad.

my stable value fund has saved me so far this year

one of the things we need to look at is the duration of our stable value funds

if inflation ever spikes again, everyone who has a stable value fund will intimately know the definition of duration

 

[Ronnieboy]

Another reason to leave it in a 401K is if you have an IRA with after-tax contributions that you're planning to convert to a Roth IRA during early retirement. You don't want any more pre-tax money in an IRA if that's part of your strategy. And keeping it in a separate IRA won't help as the IRS treats them all as a single pool of money when calculating the tax due on a conversion, while it completely ignores whatever you have in a 401K.

+1

This is what we did with DW's old 401K, since we are doing backdoor Roth contributions. It wouldn't have worked as well if we had rolled over to an IRA.

 

[jazz4cash]

I left mine in place mostly for the stable value fund. It beats most fixed income alternatives. Also megacorp was a dividend payer and the dividends from company stock can be passed through without any restrictions. The funds are mostly institutional and trust funds ( TRowe and Vanguard ) so the fees aren't bad.

That is a great point. I forgot about that one and I don't see it mentioned often.

 

[youbet]

When you move it, you have 100% control and more investment options.

This varies. I have 100% control of my funds at the MegaCorp 401k. But, in my case, you are correct about investment options. My MegaCorp 401k only offers low cost index funds. I have to do my individual stock and bond trading, options, actiively managed MF's, etc., in my brokerage or IRA accounts at Schwab. My 401k is my boring account where I have a target AA and rebalance basic, low cost index funds once a year or so.

Also, when doing Roth conversions of my mixed pre and post tax TIRA, leaving the 401k money in the 401k kept my costs minimalized.

Your private investment account will be larger and you may get more perks. Fees will very likely be less.

Again, varies. Even with leaving my 401k at MegaCorp, my brokerage account, TIRA and Roth at Schwab more than qualify me for max perks. And my MegaCorp 401k fund ER's are equal to or less than Vanguard Admiral. I think the important thing to note is that 401k's vary in costs and services just as brokerage accounts do. Your situation is true for you only and while I'm sure you didn't intend to broad-brush your situation across eveyone, it sounded a bit that way. So, I just wanted to clear things up that your comments apply only to your situation.

 

[big-papa]

I've worked for a number of companies and none have had a 401k I was altogether happy with. So, after departure, I always roll it into my IRA where I have many more choices to invest as I see fit.


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[Corporateburnout]

401k gives me iron safe protection from Creditors which you will never get in private IRA account

Not true. Some states like mine provide full protection for a rollover IRA as long as you don't co-mingle it with other IRAs.

 

[youbet]

Depends on the company plan..........
I have some friends with excellent 401k plans with low ER and great fund choices. They will likely want to leave their money in such good plans.

There ya go! It varies from plan to plan.

 

[Big_Hitter]

I've worked for a number of companies and none have had a 401k I was altogether happy with. So, after departure, I always roll it into my IRA where I have many more choices to invest as I see fit.


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I always roll mine into my new employer's 401k - I have a lot of old thrift (pre-roth after-tax contributions) in mine

I've never even considered rolling k money into an IRA, you lose a ton of flexibility as I've mentioned above, plus it can be more expensive

FAs should be telling the whole story before soliciting people to roll in to their IRA products - just goes to show you where they put their interests

 

[youbet]

Some states like mine provide full protection ..........

It's that word "some" you need to understand and research. It varies.

 

[Corporateburnout]

It's that word "some" you need to understand and research. It varies.

True but to say that you will never get the same protection of a 401K is not accurate. Not only I researched it before I rolled it over but I consulted an attorney who advised not to co mingle the funds with another IRA.

 

[Big_Hitter]

once plan sponsors start putting Retirement Income Solutions (RIS) into their plans, it may nerf the IRA. Here's a really good piece on RIS:

https://dciia.memberclicks.net/assets/Publications/2015/dciia_guide_for_plan_sponsors_121815.pdf

 

[eta2020]

Not true. Some states like mine provide full protection for a rollover IRA as long as you don't co-mingle it with other IRAs.

So basically you are saying it is not same level of protection.

I think inherited IRAs have 0 level of protection in all states. (Unless it is inherited by spouse)

If you build wide moat around your assets creditors will not have desire to test them.
Questionable moats will be tested ... process of which involves expensive lawyers.

 

[Markola]

Here's one summary of each state's protection of IRAs. I live in Minnesota and its protections are crap, hence we're considering rolling DWs IRA into the TSP. My own 401b is a high fee swamp, so I'll keep my IRA at Vanguard, as maybe I'll have a different employer soon: http://www.thetaxadviser.com/content/dam/tta/issues/2014/jan/stateirachart.pdf


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[youbet]

Here's one summary of each state's protection of IRAs. I live in Minnesota and its protections are crap, hence we're considering rolling DWs IRA into the TSP. My own 401b is a high fee swamp, so I'll keep my IRA at Vanguard, as maybe I'll have a different employer soon: http://www.thetaxadviser.com/content/dam/tta/issues/2014/jan/stateirachart.pdf


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What does "exempt" mean in the context of this chart. It looks like it means "exempt" from being taken by creditors during bankruptcy. I wonder what it means regarding law suites.

You mention Minnesota's protections are crap. All I see is "yes" and "yes" under TIRA and Roth IRA. Almost all the states show that. What is "crap" about Minnesota's protections?

My state, Illinois, also shows "yes" - "yes." But I'd expect anything involving gov't in Illinois to be crap as demonstrated regularly.

 

[sengsational]

I've had a four employers, four 401k's, one horror story.

I moved the first employer 401k to the fourth employer 401k recently. Both big companies with very low fees. I'm leaving that 401k open after leaving so I have a guaranteed income fund and age 55 access. The second and the third employer plans were small companies and those 401k's ended up in my single Rollover IRA, along with my traditional IRA funds.

My second employer was the horror story. A small company that was going to be bought-out. I left. The 401k fees weren't horrible, so although I intended to move it, I didn't get around to it right away. The "smart money" got out of the 401k, then they split the fees to liquidate the 401k proportionally across the remaining "dumb money". So if there's any chance a 401k will be liquidated, get the heck out!

 

[kneehigh]

I almost rolled my 403B CALSTRS to a tIRA but decided not to for the pro-reasons already stated previously. Besides those, I can easily borrow against the 403B up to a certain amount for a fee (processing), of course. The fees are also reasonable for index funds. Vanguard Inst fee is only .04% + .25% (admin fee) for an annualized fee of .29%. What I don't understand is why does CALSTRS charge that much for administrative fees?

 

[Fedup]

After reading this thread, I'm thinking of leaving my husband's 401k as is. It's very low cost, but it's not as flexible. But after my problem with Vanguard, I think I could trade something good to something horrible. I mean customer service wise.


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[Olbidness]

One thing I hadn't thought of when I rolled my old 401K to an IRA is that most 401K plans allow a rollover from a 401K plan but may not from an IRA. Luckily mine did and so I'll use the rule of 55 to access my 401K penalty free. It didn't hurt that the fees on the same index fund type were cheaper in the new 401K.

 

[Senator]

I left mine in place mostly for the stable value fund. It beats most fixed income alternatives. Also megacorp was a dividend payer and the dividends from company stock can be passed through without any restrictions. The funds are mostly institutional and trust funds ( TRowe and Vanguard ) so the fees aren't bad.

My megacorp stable asset fund has a .43% expense ratio. It has a return of 1.58% YTD. It is mostly AAA corporate bonds.

That return can easily be duplicated with something like IEF or MUB, both of which trade free at Fidelity.

 

[ls99]

I kept my 403b with Columbia U. Other eployer's where I had 401k were dismal. Got rolled.