Separating from employer with Fidelity 401

[michelek]

Still in our w#rking years. Separating from current employer and have $$ in a Fidelity 401k. Will not be required to keep it in The employers plan at Fidelity in a few weeks.
1. First question is should we roll it over into our main one at Vanguard or leave it at Fidelity.
2. The funds at Fidelity are invested
50% VFIAX
36% DFREX
7% VSMAX
7% ViMAX

We still have 15 years to go - unless we can pull the plug and retire early.

3. Is there another option for the money I’m not seeing.

4. If we rollover now, how will that play out given the downturn in the markets.

I don’t know what I don’t know so any advice is helpful.

Thanks!

[zinger1457]

Will you need access to the money currently in the 401K if you decide to pull the plug early? Most 401K's allow you to withdraw funds penalty free if you retire in the year you turn 55 (or later) but only from the 401K plan of your employer when you retire. If you left it in the Fidelity (or Vanguard) plan you wouldn't be able to access the funds penalty free until 59.5. You could always roll over funds from either of those accounts into your new employers plan as you get closer to retirement if you determine you will need to access those funds early (between 55-59.5).

[Bamaman]

Upon termination of employment, you'll probably want to move your funds over to a Rollover IRA. Fidelity did a IRA Rollover when I retired and just gave me new account numbers, as I was very diversified in good funds.

You're currently 50% in the Vanguard 500 Index fund and 36% in a REIT mutual fund. This will give you an excuse to diversify more than you've been in the past.

[Callitaday2022]

Some states 401K offer better legal protections VS IRA.

[jazz4cash]

Quote:

Originally Posted by zinger1457 Will you need access to the money currently in the 401K if you decide to pull the plug early? Most 401K's allow you to withdraw funds penalty free if you retire in the year you turn 55 (or later) but only from the 401K plan of your employer when you retire. If you left it in the Fidelity (or Vanguard) plan you wouldn't be able to access the funds penalty free until 59.5. You could always roll over funds from either of those accounts into your new employers plan as you get closer to retirement if you determine you will need to access those funds early (between 55-59.5).

I didn’t read your post carefully at first and now I see that my comment below is redundant:
Leaving it at Fido will not qualify for the age 55 exception. You have to be age 55 or better when you separate from the employer sponsoring the 401k. This happened to me. My division was spun out of megacorp when I was 51 and newcorp established their own 401k also at Fidelity. I left mega’s 401k intact but when I retired at 59 I could use the age 55 exception for newcorp’s 401k but had to wait till 59.5 to access the megacorp plan without early withdrawal penalty.

[Katsmeow]

I have been working very, very, very PT for the last 8 years but recently fully retired. I have so far left my 401(k) in place. Under the rules of my plan I can't withdraw a partial amount from the plan (I am over 59 1/2). I either have to roll it all over somewhere or leave it where it is in the 401(k). Right now I don't need to withdraw from the plan and it has a number of low cost options so I am just going to leave it where it is.

When I get ready to pull it out I will probably roll part of it to a Fidelity IRA and part to a Vanguard IRA. We already have money at Vanguard and I don't want all our money in one basket so I will probably keep some of it in a Fidelity IRA.

[gauss]

@MichelK,

After your employment ends, does your employer's plan allow "partial withdrawals"? This is as opposed to a plan, such as that described above (post #6).

My old employer's plan, indeed, allowed 'partial withdrawals', so I have kept my plan open for the last 6 years.

You must realize that the financial industry has a self-incentive for you to roll funds out of 401ks when you leave an employer. This message has been heavily communicated in media over he past 25 years, so now many folks accept it as fact (who says advertising doesn't work?).

Because of this, you need to understand why you are considering rolling over your money. very often it may not be the best move in your interest.

-gauss

[DrRoy]

You can do virtually everything with it at Fido that you can do at Vanguard.

[DEC-1982]

Quote:

Originally Posted by gauss After your employment ends, does your employer's plan allow "partial withdrawals"?-gauss

An important point. I discovered after retiring, that my FIDO 401(k) would not allow me to make annual withdrawals for my expenses. It was all or nothing. I moved to Vanguard soon after discovering that.

[zinger1457]

Quote:

Originally Posted by DEC-1982 An important point. I discovered after retiring, that my FIDO 401(k) would not allow me to make annual withdrawals for my expenses. It was all or nothing. I moved to Vanguard soon after discovering that.

That was always the weak link in the Fed's TSP plan. After years of complaints and people pulling their money out after retirement they decided to make changes to the withdrawal options and make it more flexible. The changes will come into effect next year some time.

[jazz4cash]

Quote:

Originally Posted by DEC-1982 An important point. I discovered after retiring, that my FIDO 401(k) would not allow me to make annual withdrawals for my expenses. It was all or nothing. I moved to Vanguard soon after discovering that.

That was mandated by your employer, not Fido. Fido would've happily rolled it over to an IRA if you wanted to stay there.

[RobLJ]

Carefully look at your employer plan.
This is a big "unusual" but in my state employer 403b plan, you will lose health benefits after retired if you move all your money, because the retiree health is paid out of the 403b account.

So the devil is always in the details of the plan. This may dictate moving money to an IRA, or--in my case--not moving all the money. Mine allowed a brokerage Fidelity plan inside, so I did that instead of doing the IRA conversion.

[Bamaman]

So many companies require retirees to get out of their 401K's--and do rollovers.

I was under the impression that that was so they wouldn't be liable for any carrying charges and service charges the company might be paying. They of course want to minimize their retiree benefits.

My MegaCorp has something like $100 million a year going to pay benefits for retirees. And thankfully our defined pension program is heavily funded.

[jwkde]

My employer 401k is at Fidelity. In order to withdraw we have to set up a monthly withdrawl amount. So you cannot do it once a year for expenses. You can change the amount every month and stop it but that all requires interfacing with them on the phone (has not been an issue).

Also the withdrawl has to be done proportionally from each fund. So if you have 5 funds some amount comes from each one of them every month.

This is all mandated by the employer agreement with Fidelity.

Fidelity said I could roll it all to an IRA and then withdrawals could all be on my terms. Have not done that yet because I like some of the Institutional fund option that are available in the employer's plan.

[Which Roger]

I ERd over 5 years ago and haven't touched my 401k. The plan offers low-cost index funds, so I have essentially the same 3-fund portfolio in my 401k that DW and I have with our other investments at Vanguard. I'm still a couple years from being old enough to take distributions, so haven't thought much about that part of the equation.

[GalaxyBoy]

I jumped jobs many times over my w#rking years and always rolled the 401k over to my traditional IRA. However, I never considered that 401k's might have better protection from creditors (although I never needed that, thank goodness), nor did I consider the age-55 rules (I don't need that, either, as it turns out). My main concerns were fees and investment choices, which were always very poor in my various 401k's. For me, it was always a no-brainer.

As a state government employee, DW had an excellent 457 plan available to her. The fees for her funds are extremely low - the stock index fund is 0.02% and the total market bond fund is 0.04%. We're keeping as much money in that plan as we can.

[corn18]

If you ever plan to do back door Roths, then leave it in the 401k or transfer it to a new 401k if you have/like it.

[jazz4cash]

Quote:

Originally Posted by Bamaman So many companies require retirees to get out of their 401K's--and do rollovers. I was under the impression that that was so they wouldn't be liable for any carrying charges and service charges the company might be paying. They of course want to minimize their retiree benefits. My MegaCorp has something like $100 million a year going to pay benefits for retirees. And thankfully our defined pension program is heavily funded.

This is interesting to me. I think our plan allows former employees to maintain their account as long as they have a minimum of $5k. I am under the same impression as you wrt the employer wanting to reduce their fees, but I think it is offset for very large companies that get a discount for having a high level of assets in the plan. Our plan at Fido has no limitations other than $5k minimum. Leaving the funds in the 401k also gives the custodian a shot at retaining the funds in an IRA.

I think a lot of folks are under the impression that they cannot leave funds behind and sometimes the company reinforces this perception or makes it difficult with restrictive policies, etc. When our division was spun out of Megacorp, Newcorp sent out an "advisement" on how to transfer funds to the new 401k and most employees assumed it was mandatory. I left mine behind because I read Newcorp's SPD and it was more restrictive than Megacorp's.

[jazz4cash]

Quote:

Originally Posted by jwkde My employer 401k is at Fidelity. In order to withdraw we have to set up a monthly withdrawl amount. So you cannot do it once a year for expenses. You can change the amount every month and stop it but that all requires interfacing with them on the phone (has not been an issue). Also the withdrawl has to be done proportionally from each fund. So if you have 5 funds some amount comes from each one of them every month. This is all mandated by the employer agreement with Fidelity. Fidelity said I could roll it all to an IRA and then withdrawals could all be on my terms. Have not done that yet because I like some of the Institutional fund option that are available in the employer's plan.

Do they restrict rebalancing between funds?

[Katsmeow]

Quote:

Originally Posted by jazz4cash Do they restrict rebalancing between funds?

I don't know about jwkde but on my 401k with Fidelity I can change investments within the 401k any time I want to. However, I can't withdraw a partial amount. I have to withdraw all of it (that can be a rollover to an IRA) or none of it.