Pros & Cons: Rolling over 401K/403B to an IRA ?

[athena53]

Quote:

Originally Posted by growing_older After rolling to an IRA I was free to choose the best options for my investments.

You can also move it to another firm; I've done that a couple of times.

[Senator]

Quote:

Originally Posted by RE2Boys And this is the most important reason I did not co-mingle 401k money with T-IRA money. I can work down the basis in the IRA much faster if sum of T-IRA is small. Applies only if you have a basis in the T-IRA and wish to do Roth conversions.

I do not think it matters if you have separate IRA accounts, or even different brokerage accounts at different investment companies, for each IRA. All IRAs are treated as a single amount.

Quote:

Basis. Your basis in traditional IRAs is the total of all your nondeductible contributions and nontaxable amounts included in rollovers made to traditional IRAs minus the total of all your nontaxable distributions, adjusted if necessary. https://www.irs.gov/pub/irs-pdf/i8606.pdf

[Big_Hitter]

401k plans also have "forfeitures" that are used to reduce fees

[RetireAge50]

I have both an IRA and a 401k. Keeping them separate so I can do Roth conversions in the IRA and a 72t in the 401k.

[Slow But Steady]

Quote:

Originally Posted by Cobra9777 I rolled my 401K to an IRA for same reasons others have stated: (1) wanted access to more (and lower cost) investment choices, and (2) to eliminate account maintenance fees. Both accounts were within Fidelity, so it was an extremely smooth process. I think I sold and bought on the same day. My one regret is that the 401K had access to a very good stable value fund, which I might have used for a portion of my fixed income allocation.

I agree with Cobra that the stable value fund is a good option if your 401K has it.

In that case, would it be possible to roll over part, and leave part in the 401K?

[Walt34]

I rolled a 457 account over to an IRA at Vanguard because the fees at Vanguard were lower. While I could have taken withdrawals when I retired at age 52 (which was four years past "normal retirement" for me) I had no plans to and so far haven't. And by the time I did the rollover I was already past 59 1/2 anyway so it really didn't matter.

[ziggy29]

Quote:

Originally Posted by Slow But Steady I agree with Cobra that the stable value fund is a good option if your 401K has it. In that case, would it be possible to roll over part, and leave part in the 401K?

This is why I'll probably always keep some money in my TSP now that I have it: continued access to the G fund. Don't have anything in the G fund now, but at some point I can see wanting to use it.

[cyber888]

MORE QUESTIONS :

1) If you have had 2 or 3 of these companies servicing your retirement nest egg (Vanguard, Fidelity, Schwab), which do you find better in terms of software, process, service and policies ?

2) Do they withhold taxes from you when you draw from your IRA ? 10% , 20% witholding ? My TIAA-Cref 403b said they will withhold 20% and I cannot adjust that %, so I was hoping for more flexibility with other service providers like Vanguard or Fidelity.

3) Have you done a SEPP 72t with any of these 3 service providers?

[pb4uski]

1) I only have Vanguard so no basis for comparison... but Vanguard has served our needs well for taxable, tax-deferred and Roths.
2) I think you can elect not to have withholding unless you are foreign. See http://www.vanguard.com/pdf/wh4p.pdf?221

Quote:

Unless you instruct us not to withhold taxes, the IRS requires us to withhold at least 10% of your withdrawals from traditional IRAs, SEP-IRAs, and SIMPLE IRAs for federal income taxes. When you request a distribution online, by phone, or by mail, you can: • Let us automatically withhold 10% of the distribution. • Ask us to withhold more than 10% of the distribution. • Ask us not to withhold taxes at all. If your distribution is delivered outside of the United States, you may not elect out of federal income tax withholding, and a withholding rate of more than 10% may apply. If you instruct us not to withhold taxes, you’ll still owe federal income tax on the taxable portion of your IRA distributions, and you may have to make estimated tax payments. ...

3) No 72t for me.

[kaneohe]

Quote:

Originally Posted by cyber888 MORE QUESTIONS : ...................... 2) Do they withhold taxes from you when you draw from your IRA ? 10% , 20% witholding ? My TIAA-Cref 403b said they will withhold 20% and I cannot adjust that %, so I was hoping for more flexibility with other service providers like Vanguard or Fidelity. .................................................. ......?

This sounds like a 403B requirement, not a TIAA-CREF one.
403(b) Plan: Distributions | Investopedia

If you had the funds in an IRA there, it would be a different matter.

3

[Brett_Cameron]

Retired at 55.
401k with ex-employer.
Took early distributions from 401k per 401k Summary Plan Description (SPD).
Rolled to IRA at 59 1/2 to be able to modify distributions.

Advantage for me: the early distributions from the 401k required me to lock in a duration for all of the distributions. The SPD did not allow changing the duration or amount of distributions without triggering a total distribution.
YMMV

[cyber888]

Thanks a lot Kaneohe. That's great info.

Quote:

Originally Posted by kaneohe This sounds like a 403B requirement, not a TIAA-CREF one. 403(b) Plan: Distributions | Investopedia If you had the funds in an IRA there, it would be a different matter. 3

[GoodWishes]

I rolled over 401K to IRA several times but still have a couple 401Ks.

Reasons to roll over: better control/management, better investment choices, lower fee.

Reasons not to roll over: 401Ks are protected from creditors. I feel better that there are some money that no one can get at, just in case

[cyber888]

If my investments are lackluster by end of this year, I'm moving it to an IRA. Looks like Vanguard would be my first choice.

My only debt is mortgage, and have no consumer debt. And I can always sell the house. So, I don't see creditors coming after me.

[GoodWishes]

I don't think creditors are about debt like mortgage or consumer debt. More about unforeseen circumstances like liability or medical.

[Hopeful]

The one reason I would consider keeping mine where it is, is because the stable value fund is paying a guaranteed 3%. That is where I have the majority of my fixed income allocation in the current interest rate environment.

[papadad111]

Quote:

Originally Posted by cyber888 If my investments are lackluster by end of this year, I'm moving it to an IRA. Looks like Vanguard would be my first choice. don't see creditors coming after me.

It's not about creditors.

It's about lawyers and accidents and liability.

Stupid things happen.
Black swans happen.

It's nice to have a little extra asset protection.

And, the protection might still be worth it even if your 401k options are not optimal/lowest cost. Think of the difference as the price for the liability protection.

I'm still keeping my 401K (happens to have good fund choices) not planning on rolling it.

[target2019]

Have one 401(k) that's sizable. Current 401(k) provider definitely wants a rollover, but that would not be a good move on my part.

Largish 401 has institutional expense ratio on funds. The selection is limited, but that is no problem for me.

The stable value fund does not come close to 3%. If it did, that would be a differentiator. I'm only getting 1.5%.

If the fund expense ratios were not so low, I would definitely roll over to Schwab or Vanguard IRA. I do expect to eventually roll this over, for simpler management on my part.

[nubill]

I rolled over my TSP 401K and TSP Roth to Vanguard accounts even though the TSP had lower fees. I was planning to keep them there until I learned that upon age 70 1/2 they co-mingle both accounts and force RMD's.

[donheff]

Quote:

Originally Posted by nubill I rolled over my TSP 401K and TSP Roth to Vanguard accounts even though the TSP had lower fees. I was planning to keep them there until I learned that upon age 70 1/2 they co-mingle both accounts and force RMD's.

It looks like you could have rolled the Roth over and leave the tax deferred with TSP.