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Should I rollover my 401k?
Old 03-18-2013, 11:32 AM   #1
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Should I rollover my 401k?

I have ~$48k in a previous employer's plan. They charge me $100 a year to keep in there. That's about 20 bps.

Should I roll this over to Vanguard? If I do, I'll lose the ability to do a backdoor Roth.

Basically, the decision is:

Is my ability to do a tax-free backdoor roth contribution > $100/year?

Any thoughts?
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Old 03-18-2013, 01:05 PM   #2
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There is more than one way to skin a cat.

Will your current 401k take rollovers? What about a solo 401k? HSA contributions....etc etc.

I have a rather large rollover IRA and I don't do a backdoor roth. My wife does.

It should be quite easy to determine if a backdoor roth is $100/yr makes cents. That is a quantitative analysis boogered with assumptions about the future.
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Old 03-18-2013, 02:52 PM   #3
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I'm wrestling with this decision myself, but for another reason. From what I read, a 401(k) is almost bullet proof against lawsuits and creditors, but an IRA doesn't have the same protections (which come from ERISA).

DH is restired, and his Fidelity 401(k) doesn't have great options, so it's making me crabby. Having lived through a lawsuit, I'm just going to have to learn to live with being crabby.
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Old 03-18-2013, 03:05 PM   #4
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Quote:
Originally Posted by ronocnikral View Post
There is more than one way to skin a cat.

Will your current 401k take rollovers? What about a solo 401k? HSA contributions....etc etc.

I have a rather large rollover IRA and I don't do a backdoor roth. My wife does.

It should be quite easy to determine if a backdoor roth is $100/yr makes cents. That is a quantitative analysis boogered with assumptions about the future.
Interesting. Thanks. I didn't know I could setup a individual 401k if I'm not self-employed.

I'm unclear what HSA contributions have to do with this though.

I wouldn't want to put it in my current 401k since the investment options are mediocre.

Thanks for helping me think this through!
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Old 03-18-2013, 04:50 PM   #5
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I don't think you can have a solo 401(k) if you're not self employed:

Quote:
Unlike other retirement plans, though, an individual 401(k) is strictly for sole proprietors who have no employees (although your spouse may contribute if he or she earns income from your business).
Self employment: Individual 401(k)s - Ultimate Guide to Retirement

What am I missing?
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Old 03-18-2013, 04:58 PM   #6
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Originally Posted by SumDay View Post
I don't think you can have a solo 401(k) if you're not self employed:



Self employment: Individual 401(k)s - Ultimate Guide to Retirement

What am I missing?
You are correct. I called Vanguard to confirm. You must be self-employed to do so.

Honestly, I think I'm going to keep the money there and just pay the $100 annual fee. It's worth it to have the option to contribute to my Roth. I don't want to roll it to my new employer's plan since the investment options stink.
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Old 03-18-2013, 10:24 PM   #7
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If the investments in your Roth from the backdoor contributions would have thrown off more than $100 in taxes if they had been in a taxable account then they are better in the Roth. Might not make that in the first year or three of the Roth, but it should soon beat that threshold. $667 in qualified dividends per year would do the trick unless you like to trade a lot and generate capital gains.
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Old 03-20-2013, 06:58 AM   #8
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I've struggled with this decision myself. I want(ed) to leave open the door to the Backdoor Roth, but I don't know if it is worth the risk SumDay mentioned.

Incidentally, between my spouse and I, we have three 401(k)s at Fidelity, and they are better and best among 401(k) plans. It isn't really a matter of the custodian, but rather it is the plan sponsor that governs how good the 401(k) plan is.

Anyway, since our previous employer 401(k) plans are so good, I've really not been inclined to do rollovers, especially since both of our current-employer 401(k)s are "crap" (according to several folks on various personal finance forums). Of course, that means that when these current employers become former employers, I'll have to consider this again, especially if there is no "next employer" or the next employer doesn't offer a 401(k) that accepts rollovers into them. (Our current, crap 401(k)s remarkably do accept rollovers into them. Hmph.) It'll be less of an issue with my spouse because her total traditional IRA balance is low enough that we can just make that part of the Roth conversion (heck, it's not even "Backdoor" in any way) and pay the tax. I've got too much in traditional IRAs for that to work for me.
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