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Wifes 401 movement
Old 12-26-2013, 12:56 PM   #1
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Wifes 401 movement

My wife no longer works but has a decent sum of money in her 401 and as she has departed work we have a decision to make. I thought I'd consult the experts here. The money is with Principal. I am not entirely happy with the funds they offer so was thinking of moving to where I will eventually put my money also, as I'm just a few years from retirement myself, but anyway, any suggestions? I was thinking Fidelity or Vanguard, or where?

What are the advantages or disadvantages of moving it from Principal?
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Old 12-26-2013, 01:00 PM   #2
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I don't know what Principal is, but we moved my wife's 401K to Schwab and we have complete control over investment choices with low fees. Same would be for Vanguard or Fidelity.
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Old 12-26-2013, 03:00 PM   #3
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I like Fidelity, but Vanguard is probably a better choice if you prefer their index funds or ETF's. See which one (or Schwab) offers the funds you want without a transaction fee. They all have a different selection.

401k's (some at least) allow withdrawals if you retire at age 55 and better creditor protections in some cases. IRA's offer that investment flexibility, customer service, and chance to consolidate.
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Old 12-26-2013, 03:10 PM   #4
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When my division was sold off last year - we were able to roll out our 401k's as if it were a "termination act". I rolled to Schwab.

I have another old 401k at Fidelity.

I have other moneys at Vanguard.

All have low expense ratio funds. Customer service and product offerings can vary between them. If you're a DIYer who doesn't buy individual stocks - vanguard is probably the cheapest.
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Old 12-26-2013, 03:35 PM   #5
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IF your wife's 401k offers a stable value fund that pass a reasonable interest rate - unfortunately 2-3% is reasonable these days - it may be worth keeping to use for the fixed income portion of your fixed income allocation. Stable value funds should no have significant interest rate risk like bond funds AND you can't get a stable value fund outside a 401k.

If there is no stable value fund available or it is paying pathetic interest, then I would move to Vanguard or Fido.
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Old 12-26-2013, 04:30 PM   #6
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Quote:
Originally Posted by pb4uski View Post
If there is no stable value fund available or it is paying pathetic interest, then I would move to Vanguard or Fido.
+1. If you want to invest in anything other than a cash/stable value fund (and then only if the 401k offers 3% or more), moving it is a no-brainer IMO. In a rollover IRA you can buy virtually any asset you want, with the 401k you're presumably limited to whatever funds the 401k admin decides to offer and that could change at their whim.

I've had good success with Vanguard, Fidelity & Schwab but they each have subtly different strengths/offerings. So I'd start by deciding what you want to invest the rollover funds in (not vice versa as many do), and then see which firm has the best match for what you want to invest in short term (and long if possible).
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Old 12-26-2013, 04:40 PM   #7
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If you already have a TIRA that includes some post tax money, think twice about moving your 401k to a rollover IRA. If later you decide to do some Roth conversions, your post tax dollars (non taxable during the conversion) will be diluted by the pre-tax dollars in the rollover account.

Generally, in deciding whether to move 401k money to a rollover IRA, you must compare the 401k you're in with the most favorable (to you) IRA provider you can find. In my case, I'm doing some Roth conversions (as above) and my former employer's 401k is excellent (a excellent web site and customer service plus a small selection of extremely low ER index funds - yes, lower ER than Vanguard!), so for now I'm sticking with the 401k.

Do you already have TIRA(s) with some provider? Are you planning on doing Roth conversions? Are the few unique protections that 401k's have that IRA's don't important to you? How do the features/costs of your employer's 401k compare to the features/costs of the best IRA provider you've been able to find? There's your answer as to whether to move or not.

I've been retired for 7.5 yrs and I'm about one third IRA and two thirds 401k. DW, OTOH, had a 403b with crappy features and costs. She's been retired 12 years and is 100% IRA. She did a rollover immediately upon retirement (couldn't do it fast enough) because the costs were ugly. YMMV
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Old 12-26-2013, 05:02 PM   #8
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Principal is likely to have a bunch of rather expensive investment options. Barring a really good stable value fund, I would roll over to another shop. If you pray at the altar of index mutual funds, Vanguard seems to be the best choice. Otherwise, you might get better service at Schwab or Fidelity. We mostly use Schwab and I have been very happy with them over the last 15 years. Fido I only use for a single smallish account, but they seem to do a good job as well.
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Old 12-26-2013, 05:27 PM   #9
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Is Principal the custodian or the only funds you can choose from?
Edit to add - Brewer12345 is correct a quick glance at some of their funds, high ERs, please pay carefull attention to the class of the fund.

Pros to moving - move to someone that has lower ER funds or lower ER funds in their NTF network. You get absolute control.

Cons to moving - if your plan offers a 55 and terminated from service clause and you need it for 55-59.5, you give that up. You can still do a 72t if needed.
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Old 12-27-2013, 09:53 AM   #10
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Thanks for all the replies,

The bulk of the wifes money is in a Stable Value fund that has earned...wait for it... .56% for the year, so clearly I've gotta get the money out.

It will be some time before we need to draw on the money so I would like more options, preferably more index fund choices to make the money work for me. I now have 4 index fund choices which are fairly redundant.

I have 457 money with ICMA that I will also move in a few years and would like to move it to the same account/company. Not sure of the rules though.

I'm still researching and still have questions but I thought I had better spend a minute to reply to all the kind people who posted, thanks.
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Old 12-27-2013, 10:01 AM   #11
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If you want to have her 401k be part of your fixed income allocation one good choice might be to transfer it to PenFed and grab one of the 5 year 3% CDs they are currently offering. 3% is decent these days and there is no interest rate risk like a bond fund and beats the pants off the 0.56% SV fund.
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Old 12-27-2013, 01:10 PM   #12
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Vanguard was extremely helpful in moving my 401k to and IRA, then to a Roth IRA which I've invested in low cost index funds. If you are more than a few years from retirment I'd think you would want to place the majority of your cash in stocks and bonds vs. CD choices. But, that's up to you.......I'm cheap so Vanguard is my firm of choice. I still do have a little money with Fidelity.......they are great for my diversification.
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Old 12-27-2013, 02:02 PM   #13
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I had my 401K with Principal when I was still working. The day I left my company I called them to move the money to Vanguard. They charged very high fees and the investment choices were quite limited. I see no advantage to keeping a 401K once you leave a company. Moving the money to an IRA and investing in low cost index funds will always yield better results than paying high fees and having limited investment choices. I'm not aware of any 401K having a Stable Value fund paying 3% of greater, so moving SV money to PenFed's CDs while they offer a 3% rate is a no brainer to me.
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Old 12-27-2013, 04:15 PM   #14
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Just check and make sure you don't have a weird state tax impact. In my state, there is an exemption from state tax for qualified pension distributions (up to a certain amount). 401(k), and similar (403, 457 ...) are considered pensions. IRAs are not, even if the money originated from a qualified plan. Doing a rollover from a 401(k) effectively disqualifies the money from the state tax exemption.
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