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Should I roll 401K to IRA?
Old 03-14-2019, 12:05 PM   #1
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Should I roll 401K to IRA?

I stopped working in August 2016 and still have the company 401K. I am considering moving it to my normal IRA to simply things. Both are at the same large brokerage company.

I can pick funds for the 401K and it seems to have recently swapped the "supposed" premium versions of funds to the same class that I have in my regular brokerage. There seem to be some sort of "fees" being deducted quarterly from the 401K. I don't think my IRA has such deductions, but there may be some sort of fees built in that I do not realize.

So, my question is: "Is there any major reason that I would want to keep the 401K active and not roll it to an IRA?"

I am under the impression that the 401K will be added to my IRA's for the mandatory distributions once I hit 70. The 401K does not help dodge that does it?

I remember reading somewhere that if you were sued it was harder to take the money in the 401K compared to the IRA. Is that a consideration?

Other than that I can't see any reason not to consolidate into the IRA.

Thanks in advance for any advice.

Joe
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Old 03-14-2019, 12:07 PM   #2
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If you are over 55 and under 59.5, and left employment after 55, you can withdraw without penalty from a 401 I think.
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Old 03-14-2019, 12:10 PM   #3
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Originally Posted by bizlady View Post
If you are over 55 and under 59.5, and left employment after 55, you can withdraw without penalty from a 401 I think.


If your employer allows it.
Not all do
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Old 03-14-2019, 12:13 PM   #4
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I left mine at my employer because they allowed withdrawals before 59 1/2 . So I used it to bridge the gap between retirement and when I had access to my IRAs. When that wasn't needed I did roll it over to an IRA to simplify things.
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Old 03-14-2019, 12:13 PM   #5
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Check your state laws about IRA protection. Iím pretty sure they now have the same protection everywhere, but check it out.
As far as Required Minimum Distributions, they are required for Traditional IRA and 401k. Roth are exempt.
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Old 03-14-2019, 12:22 PM   #6
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Originally Posted by joesxm3 View Post
I can pick funds for the 401K and it seems to have recently swapped the "supposed" premium versions of funds to the same class that I have in my regular brokerage. There seem to be some sort of "fees" being deducted quarterly from the 401K. I don't think my IRA has such deductions, but there may be some sort of fees built in that I do not realize.

So, my question is: "Is there any major reason that I would want to keep the 401K active and not roll it to an IRA?"

I am under the impression that the 401K will be added to my IRA's for the mandatory distributions once I hit 70. The 401K does not help dodge that does it?

I remember reading somewhere that if you were sued it was harder to take the money in the 401K compared to the IRA. Is that a consideration?

Joe
It should be easy enough to find out if your brokerage has any fees for IRAs via their website. Many don't.

The only major reason you might want to keep the 401k is for the lawsuit protection, if you're in a state that doesn't exempt all or enough of it. Here is something I've posted before that gives a state by state breakdown:

https://www.thetaxadviser.com/conten...teirachart.pdf

I'm not sure what you mean by your 401k being added to your IRAs. No rollovers take place unless you make it so. Having any money in a 401k makes it subject to mandatory distributions, even amounts that are Roth 401k, though only amounts that are pretax would be taxable.

Incidentally, that's one excellent reason to roll over Roth 401k amounts to a Roth IRA, which isn't subject to mandatory distributions.
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Old 03-14-2019, 12:25 PM   #7
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Ask yourself this question: what if my ex-employer does a BK?

And, read this
http://www.401khelpcenter.com/401k_e..._and_401k.html
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Old 03-14-2019, 12:28 PM   #8
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Check your state laws about IRA protection. Iím pretty sure they now have the same protection everywhere, but check it out.
As far as Required Minimum Distributions, they are required for Traditional IRA and 401k. Roth are exempt.
As I posted, Roth 401k are still subject to RMDs, an important distinction. I'm pretty sure you're wrong about IRAs having the same protection everywhere. A quick Google search confirms this from any number of sources.
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Old 03-14-2019, 12:30 PM   #9
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Ask yourself this question: what if my ex-employer does a BK?
The employer doesn't have custody of the 401k funds.
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Old 03-14-2019, 12:35 PM   #10
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If your 401K has a Stable Value fund, and if you desire such a fund in your portfolio, leave it at the 401k. IRAs do not have access to stable value funds.
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Old 03-14-2019, 12:37 PM   #11
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First - determine the fees in your leftover 401k ... some companies have low fees and some have high fees.

Second - determine the options for investing in those 401ks ... most companies have a pretty restricted set of options

Third - compare findings from above to make decision about which company to shift the funds to .. or, not. Usually, it is clear what you should do.

Two years ago I transferred my 401k from megacorp to Fidelity and Vanguard ... both have far more options and far better service and far better access to those funds.
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Old 03-14-2019, 12:42 PM   #12
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We left my wife's funds in her company's 401(k) plan when she retired mid-2017 because, in addition to having several Vanguard funds available, she also had access to some manage funds, like DODIX. Those funds could be bought/sold within the 401(k) without purchase or selling fees.

That said, they changed the plan in the middle of 2018 to start charging an administration fee (beyond the fund fees) for retirees to maintain their account within the 401(k). An additional 0.15% fee per year. Needless to say, once we're settled into our new house in a few months, we'll be rolling over her 401(k) into an IRA. Just one of those things you may have to watch with any money left in a 401(k) plan upon retirement.
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Old 03-14-2019, 01:00 PM   #13
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If you have a basis in your Traditional IRA (you made non-deductible contributions to you T-IRA sometime in the past), you may wish to keep the total of all IRAs relatively low to allow recovering a larger percentage of the basis with each IRA withdrawal. If you increase the total size of your IRAs, a smaller percentage is deemed non-taxable ( recovery of your basis ) upon each withdrawals. I have that situation and I may never roll my 401ks into the IRAs.
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Old 03-14-2019, 01:14 PM   #14
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Two years ago I transferred my 401k from megacorp to Fidelity and Vanguard ... both have far more options and far better service and far better access to those funds.

I also moved 457bs (government 401k) to Fidelity. I am trying to simplify and like having everything at Fidelity. I did give up the use of Stable Value Fund, but I have not 457b fees and better investment options.
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Old 03-14-2019, 01:30 PM   #15
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If your 401K has a Stable Value fund, and if you desire such a fund in your portfolio, leave it at the 401k. IRAs do not have access to stable value funds.
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Old 03-14-2019, 01:38 PM   #16
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Our 401K accounts are managed by Vanguard. I asked them about Vanguard rollover accounts. They told me that the S&P500 fund, and bond fund we hold in 401K are institutional shares. They will have to be sold; rolled over; purchase like-kind individual shares.

The expense ratio for institutional shares are lower than individual shares, so we left our money in 401K.

I will roll it over when I am ready to do Roth conversion maybe next year.
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Old 03-14-2019, 01:49 PM   #17
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Quote:
Originally Posted by joesxm3 View Post
I stopped working in August 2016 and still have the company 401K. I am considering moving it to my normal IRA to simply things. Both are at the same large brokerage company.

I can pick funds for the 401K and it seems to have recently swapped the "supposed" premium versions of funds to the same class that I have in my regular brokerage. There seem to be some sort of "fees" being deducted quarterly from the 401K. I don't think my IRA has such deductions, but there may be some sort of fees built in that I do not realize.

So, my question is: "Is there any major reason that I would want to keep the 401K active and not roll it to an IRA?"

I am under the impression that the 401K will be added to my IRA's for the mandatory distributions once I hit 70. The 401K does not help dodge that does it?

I remember reading somewhere that if you were sued it was harder to take the money in the 401K compared to the IRA. Is that a consideration?

Other than that I can't see any reason not to consolidate into the IRA.

Thanks in advance for any advice.

Joe
Major reason to keep the money in 401K vs IRA is to allow simple math for backdoor IRA contributions if you are in that situation. Other than that I would roll over to IRA any day. Both 401K and IRA are subject to RMD. Both 401K and IRA enjoys the same asset protection under bankruptcy situation.
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Old 03-14-2019, 06:00 PM   #18
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Thanks for all the prompt and helpful replies.

I should have mentioned that I am 62 and only planning to tap the IRA's now to roll some to ROTH.

When I said "added to my IRA's" for RMD, I should have said "included with".

Thanks for mentioning the non-deductible IRA contribution percentage. I had been making non-deductible IRA contributions in addition to my 401K, so I will have to keep that in mind.

I checked my state and the law suit exclusion is the same for IRA and 401K, so I guess that reason does not apply.

I have not been active on the forum much since I FIRE'd in 2016, but I knew that this should be my go-to place for good advice as it had been all those years leading up to FIRE.

Thanks again for this and all the previous help.

Joe
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Old 03-14-2019, 06:06 PM   #19
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In Ohio, assets held in 401Ks are more protected from law suits than assets held on IRAs.
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Old 03-14-2019, 06:32 PM   #20
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Originally Posted by bizlady View Post
If you are over 55 and under 59.5, and left employment after 55, you can withdraw without penalty from a 401 I think.
My employer allowed withdrawals at age 55 in accordance with IRS laws that allow it if you retired in the year you reached 55 from that same company. Once I read this ďfine printĒ in the Summary Plan Description when I was 55 I was dancing in the cubicle aisles at work! It meant I could say the heck with you guys whenever I was ready, which turned out to be 56 years and 8 months.

The ability to tap my robust 401K early and my moderate pension bridged us until today and tapped wifeís IRA last year when she turned 59. Then tapping SS at 62 next year and wifey the year after and then Medicare savings at 65 vs. huge ACA premiums we have now. Thatís our retirement ladder.
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