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Old 07-02-2014, 10:22 AM   #21
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Interesting, though the poor writing/punctuation at that site make me wonder how accurate its information may be. For example, this sentence, a key one for our discussion, has no verb: "IRAs created under an employer-sponsored section 408(k) sim*plified employee pension (a “SEP IRA&rdquo or a sec*tion 408(p) simple retirement account (a “SIMPLE IRA&rdquo, as well as pension, profit sharing, or qualified section 401(k) Plan wealth transferred to a rollover IRA."

Something I learned, that I do not recall being discussed here, is that converting tIRA to Roth in some states causes loss of IRA protection from creditors.
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Old 07-02-2014, 10:42 AM   #22
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Interesting, though the poor writing/punctuation at that site make me wonder how accurate its information may be. For example, this sentence, a key one for our discussion, has no verb: "IRAs created under an employer-sponsored section 408(k) sim*plified employee pension (a “SEP IRA&rdquo or a sec*tion 408(p) simple retirement account (a “SIMPLE IRA&rdquo, as well as pension, profit sharing, or qualified section 401(k) Plan wealth transferred to a rollover IRA."

Something I learned, that I do not recall being discussed here, is that converting tIRA to Roth in some states causes loss of IRA protection from creditors.
The article has the state by state list included that shows which states have enacted protection of Rollover IRAs and Roths and which don't. It appears that all but Wyoming protect rollover IRAs, and 8 (including Wyoming) do not protect Roths. Have to read each states ruling (link) for the fine print of protection.
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Old 07-02-2014, 10:47 AM   #23
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IRAs Could Be Fair Game in LawsuitsΒ*-Β*Los Angeles Times

Keeping money in 401k has its advantages. Personally I would never move money from 401k into IRA.
For many in high-fee and limited choice 401Ks, you'd be much better off moving the money to an IRA and getting an umbrella policy to help protect against lawsuits.
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Old 07-02-2014, 02:54 PM   #24
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I would only do an in-service transfer if there was a significant gap between the funds I wanted from an AA perspective and what was available in the 401k or if the ERs were really high. Seems that is not the situation with the OP.

If the 401k offered a decent stable value fund, I would favor the 401k sine you can;t get a stable value fund in an IRA.

While I understand the protection differences, they do vary by state, I carry a good umbrella policy anyway and haven't ever been sued so its not an big consideration for me.
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Old 07-03-2014, 07:44 AM   #25
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I have been sued by a wacko tenant, which is why I hate real estate. Their goal was to get themselves a free place to live, and to wipe us out. The case was dismissed, with prejudice, and they've crawled back into the woodwork, hopefully never to be seen again. My lawyer was relieved that the bulk of our net worth was in our 401(k)'s. It still cost me a bundle defending it. They acted pro se, so it cost them nothing but filing fees.

Our 401(k)'s will stay right where they are until I rid myself of these properties. And even then I may leave them alone.
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Old 07-03-2014, 08:09 AM   #26
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I think that 401k's have, in many cases, been demonized unfairly. My first employer's 401 was with an insurance company and the choices were VA derivatives. High fees, terrible returns, etc. Couldn't wait to roll it out.

My last two employer plans have been as good or better than most discount broker platforms, with no-load access to low expense load funds, institutional class shares, etc. DW's plan is actually the best I've ever seen even though she works for a small company (the husband of the controller is our 401k contact so he makes sure we (they!) have great options.

Back to the OP's question though, if flexibility and fund choices are the primary driver then it seems that a rollover is the way to get it. I also have a substantial umbrella to cover any liability concerns and recommend that to anyone with the kinds of NW's on this board.

Also, keep in mind that if the 401k is just a portion of your assets you may only need to find one or two funds in that plan that you like. Others would be available in your taxable and other deferred/Roth accounts. That has been helpful for me in one of our plans. I just use it to fill a specific sector in our portfolio.
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Old 07-14-2014, 08:56 PM   #27
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Thanks much for all the great responses ...am evaluating the specific costs of 401 vs the Admiral funds at Vanguard!


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Old 07-14-2014, 10:46 PM   #28
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In my plan with a major aerospace company, I have a small/midcap indexed equity fund that benchmarks to the Russell Small Cap Completeness Index. The expense ratio is ranging from .05 to .10% per the most recent plan document. The last yearly was .07. Vanguard's Extended Market Admiral shares is .10%. That is one of the factors I considered. Other factors were discussed in this thread.

However, I was severed a few months ago, and know I can rollover. Is that possible with your plan while you are still employed? Or are you just thinking ahead?
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Old 07-14-2014, 11:12 PM   #29
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With the terrible investment options, high expenses, and inflexible withdrawal rules of many (not all) 401Ks, it clearly makes a lot of sense to jump out of them and into an IRA at the earliest convenient opportunity.
My 401K has good investment options and low expenses. But the withdrawal option is not flexible. For that reason, I am keeping my 401K until RMD time - then I will rollover the 401K to IRA.
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Old 07-15-2014, 10:06 AM   #30
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Also, keep in mind that if the 401k is just a portion of your assets you may only need to find one or two funds in that plan that you like. Others would be available in your taxable and other deferred/Roth accounts. That has been helpful for me in one of our plans. I just use it to fill a specific sector in our portfolio.
I've used this tactic in a couple of crappy employer plans. I've chosen something they can't mess up too badly (used to be the equivalent of a short-term bond or a money market fund) and invest my other funds more aggressively.

While I agree that most megacorps have decent 401(k)s and the small plans tend to be worse, one of my employers was acquired by a megacorp I'll call Giant Enterprise and the selections went from pretty much any Fidelity Fund you wanted, to a weird selection of funds, mostly proprietary so they weren't listed or tracked anywhere, plus company stock. It was awful. I was SO happy when Giant Enterprise sold us to a company with a much better plan, but immediately yanked my 401(k) into a rollover IRA, which was permissible because of the sale.
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Old 07-16-2014, 04:43 AM   #31
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The flexibility of doing 72t withdrawals and the fact my former 401K plan withdrawals could only be done by paper check and only 4 times a year.
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Old 07-16-2014, 12:19 PM   #32
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Did a quick fee comparison between VG (all Admiral funds) and my megacorp funds - type for type (apples to apples, I think) - megacorp doesnt have a REIT fund.

Vanguard
1. VFIRX (ST Treasuries (ave 2.3 yrs) – 0.10% (0.32% LOWER than mega)
2. VICSX (5-10 yr Bonds) - 0.12% (0.04% HIGHER than mega)
3. VTSAX (Total Stock Market) – 0.05% (0.03% LOWER than mega)
4. VSMAX (Small cap) – 0.09% (SAME)
5. VGSLX (REIT) – 0.10% (not available mega)

6. VEMAX (Emerging markets) – 0.15% (0.47 LOWER than mega)

Megacorp
1. Stable Value – 1-3 yr Treasuries (benchmark Merrill Lynch 1-3 Yr Treasuries) – 0.42%
2. Fixed Income – High Quality Bonds (benchmark Barclays Aggregate index) – 0.08%
3. US Equity – Large and medium size companies (benchmark S&P 500) – 0.08%
4. US Small Cap – (benchmark Russell 2000) – 0.09%
5. No REIT available at Megacorp
6. Emerging Marketing – (benchmark Morgan Stanley Capital Emerging Markets NDR Index) – 0.62%

Even though there is some difference in the above comparo, most of the differences are not very large ... so, if the "cost/fee competition" is between a (1) low cost megacorp 401K and a (2) low cost VG (Admiral or ETF) fund, other differences may rise to the fore, like: (a) ease of trading, (b) ease of understanding the data (I would think VG and other like fund families have better website information capabilities), (c) FAR wider variety of funds, and (d) suitable/qualified advice and assistance.
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Old 07-16-2014, 12:25 PM   #33
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There's a lot to be said for having everything in one place. It's one thing when you're still working and up on all your financial homes. It's quite different if you "lose a little off your fast ball" or expect your non-financially inclined spouse or children to take over someday.

The first thing I did when DW executed her POA for her parents was to get her to consolidate everything at Vanguard. My FIL had little accounts spread out all over the place. I think we found everything but I have been reguarly checking the "lost money" website.
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Old 07-16-2014, 01:39 PM   #34
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Just checked with Megacorp - they are very familiar with 59 1/2 rollovers to IRAs ... they do track before and after tax contributions separately - but, the entire balance of my 401K can be transferred ...if I do this, as my current contributions are deposited, I can figure out some way to continue to, at some interval, transfer those amounts, as well.
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Old 07-16-2014, 02:44 PM   #35
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And, after checking with Vanguard, it gets even more interesting ...my 401K from Megacorp has both before tax and after tax dollars comingled - but, tracked by Megacorp. Vanguard says there are three options - actually, two categories with one category having two sub options.

Transfer before and after tax 401K funds either (1) together (comingled), or, (2) separately, into a Rollover IRA account. Or, transfer the after tax funds into a Roth IRA - this category/option is still legally fuzzy in that the IRS has not specifically ruled this is allowable. My sense is that they could rule one way or the other, but it could be some time in the future - and would not be retroactive.

I am leaning towards the Roth approach - only reason I could see to not do this is if I was planning to retire soon and planned on spending these funds immediately.

This is getting more interesting!

Would love to hear comments ...
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Old 07-16-2014, 02:51 PM   #36
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I am leaning towards the Roth approach - only reason I could see to not do this is if I was planning to retire soon and planned on spending these funds immediately.

This is getting more interesting!

Would love to hear comments ...
It's a no brainer to me to split them into a pre-tax and Roth IRAs. Having a comingled IRA is a hassle for tax purposes. The mix confounds your methodolgy of making withdrawls if you don't separate now.
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Old 07-16-2014, 02:55 PM   #37
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And, after checking with Vanguard, it gets even more interesting ...my 401K from Megacorp has both before tax and after tax dollars comingled - but, tracked by Megacorp. Vanguard says there are three options - actually, two categories with one category having two sub options.

Transfer before and after tax 401K funds either (1) together (comingled), or, (2) separately, into a Rollover IRA account. Or, transfer the after tax funds into a Roth IRA - this category/option is still legally fuzzy in that the IRS has not specifically ruled this is allowable. My sense is that they could rule one way or the other, but it could be some time in the future - and would not be retroactive.

I am leaning towards the Roth approach - only reason I could see to not do this is if I was planning to retire soon and planned on spending these funds immediately.

This is getting more interesting!

Would love to hear comments ...
I did a similar TIRA and Roth rollover, only at Fidelity. They were very helpful and with no hesitation. To learn more go to Fairmark forum and ask Alan S. I think he knows more about it than anyone I've encountered.
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Old 07-16-2014, 02:56 PM   #38
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I had one -- no two -- of those over the years. I would suggest separating the after-tax money from the retirement money then do whatever you would do with an after-tax "windfall". Put the retirement money into an IRA.

The ROTH part does sound strange. For what year(s) would that money be considered ROTH contributions?
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Old 07-16-2014, 03:01 PM   #39
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I recently rolled over my Merrill Lynch 401K to a Vanguard IRA ( I'm 51). The process took a month. The surprise to me was that I had to liquidate some Vanguard funds since they were institutional shares. This resulted in me having to be out of the market for about 2 weeks and then buy back in. This worked OK but was stressful seeing the market going up and me sitting in cash. Was lucky to be able to buy back in during a down week. So you may wish to see if you would have to liquidate. This might influence your decision. I would do it again but in hindsight I would research which funds I would have to sell and try to buy funds in the 401K that could be transferred in kind. Also check on any after tax money you might have in your 401K. I decided to take this out as it complicates tax reporting if you roll it into an IRA. Best of luck.


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Old 07-16-2014, 03:02 PM   #40
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I had one -- no two -- of those over the years. I would suggest separating the after-tax money from the retirement money then do whatever you would do with an after-tax "windfall". Put the retirement money into an IRA.

The ROTH part does sound strange. For what year(s) would that money be considered ROTH contributions?
It is a great opportunity to move the after tax $ into a Roth. Like I said, Fairmark has the technique laid out.
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