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Leaving a 401k with a previous employer.
Old 01-09-2015, 11:21 AM   #1
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Leaving a 401k with a previous employer.

Hello all,
I was wondering what everyone thought about leaving a 401k with your previous employer..? I am happy with the available fund choices and allocation, and the returns have been just dandy.

I am currently working part-time with no available 401k plan available to me at my current employer. Money that I do invest right now goes into a separate Roth IRA.

I'm 39 (knock knock knockin' on 40's door), with a little over 200k in retirement assets spread out over 4 accounts (between my spouse and I). The 401k account in question has (by far) the largest balance of that 200k.

Thanks!
Bryan
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Old 01-09-2015, 11:30 AM   #2
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In addition to the returns, look at the fees. Compare them to equivalent open-market funds.

Mine has low-fee funds with good returns, so I'd have no problems leaving the balance there if I left the company...
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Old 01-09-2015, 11:33 AM   #3
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Yes - I meant to mention that. The fees are all around .07% for the five funds that I have.
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Old 01-09-2015, 11:42 AM   #4
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You should roll the funds over to Fidelity, Schwaab, Vanguard or ??

The disadvantage, if you get sued the funds may be in play. Get an umbrella policy to protect you.

The advantage, Lower fees, many more investment choices, more flexible withdrawals, etc.

And, there is only one signature, yours, that can take the money and run. Never assume your 401K money is safe. Companies have been known to abscond with 401K money.
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Old 01-09-2015, 12:10 PM   #5
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I have never seen any reason to keep my 401K accounts with previous employers. I have always seen better options within Rollover IRA's. I would bet that that .07% is above the management fees of the individual accounts. but that is neither here nor there. It all works out at the end of the year.



I'd look forward to the time you convert them to income. IRA's and 401K's are treated somewhat differently in some cases. MRD amounts, Age of required MRD's, possible differences in state taxation (?), how the remaining proceeds get distributed to beneficiaries etc.... I am no expert in these areas and some of them vary by state. All I am saying is to look beyond the basics of number of funds available and management rates.
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Old 01-09-2015, 12:19 PM   #6
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We have always left our old 401Ks with former employers for ERISA asset protection. Plus our plans are all with the low cost mutual fund companies already. And they give us the added benefit of multiple stable value funds as an investment option.
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Old 01-09-2015, 12:24 PM   #7
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The reason that you want to roll it to your new ERs 401k is so that you can take a loan out, in case of a rainy day...
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Old 01-09-2015, 12:25 PM   #8
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We have always left our old 401Ks with former employers for ERISA asset protection.
what asset protection?
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Old 01-09-2015, 12:27 PM   #9
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what asset protection?
"Distinct from the debtor protections for retirement assets in bankruptcy are the anti-alienation provisions of ERISA and the Code. Under ERISA, a pension plan must contain a contractual “anti-alienation” clause providing that plan benefits cannot be assigned or alienated."

Protection From Creditors for Retirement Plan Assets
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Old 01-09-2015, 12:41 PM   #10
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oh, so you don't lose it getting sued - good point! no excellent point!


he can still lose his *** either way - 401k or IRA

DC plans don't have PBGC insurance like DB plans do
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Old 01-09-2015, 12:49 PM   #11
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oh, so you don't lose it getting sued - good point! no excellent point!


he can still lose his *** either way - 401k or IRA

DC plans don't have PBGC insurance like DB plans do
Some states have more protection for IRAs than others. But if you live in a state with poor IRA protection or may envision moving to one some day in retirement, it is something to consider.

We try to have X amount of income that is pretty much bullet proof. We took our pensions as annuities for the same reason. The money has better asset protection for our particular circumstances us than it would rolled over into an IRA.
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Old 01-09-2015, 12:58 PM   #12
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At the time I left Megacorp One, their 401K plan was in proprietary funds with pretty high fees that were difficult to deal with in terms of access to trade and rebalance. So I rolled that out. My Megacorp Two 401K is with Fidelity and it has a lot of good funds with low fees and easy reallocation and rebalancing. As a result, I've felt no need to move it.

As for now, where asset protection is concerned, we're in Texas which the strongest asset protection laws in the country for financial assets (along with Florida and Oklahoma). So in my case that's currently a non-issue. And one reason to keep it there is that if I ever go back to w*rk enough to have another 401K plan I can roll this in just before "retiring" (for good) in 2020, the year I turn 55 (if the new plan accepts such rollovers). Then I can take as little or as much as I want from the 401K starting at age 55 (i.e. can get to before 59.5 without 72t).
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Old 01-09-2015, 01:48 PM   #13
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I can see reasons for keeping the funds at an employer.

1) If they offer a well run stable value fund. That's something you don't get outside of 401ks and fits some peoples fixed income asset allocation. Obviously, you have to look at the stable value fund to determine if you're comfortable with it, the interest rate, etc.

2) If you had a large megacorp - some have institutional funds that are EXTREMELY low cost. I worked for Motorola and they had Northern Trust funds. The ER on these index funds was lower than even Vanguard. (I was shocked to learn that). Not a lot of choice of funds though.

I still have my most recent employer's 401k because of the stable value fund. I am considering rolling it out - but can't find anything equivalent to roll it to. Unfortunately, the rate it guarantees each period has been sliding... not surprising in this interest rate environment.
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Old 01-09-2015, 02:56 PM   #14
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Reason(for me) is I retired at 56 and could use the 55 and terminated from service rule to allow penenlty free withdrawals. Yes, I checked up front and knew I could actually receive distributions on a monthly basis.

Actually posts on this forum made me check the plan and administration rules regarding early withdrawals.

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Old 01-09-2015, 03:02 PM   #15
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Reason(for me) is I retired at 56 and could use the 55 and terminated from service rule to allow penenlty free withdrawals. Yes, I checked up front and knew I could actually receive distributions on a monthly basis.

Actually posts on this forum made me check the plan and administration rules regarding early withdrawals.
I forgot to add that to our reasons as well. We rolled over some 401K and IRA money to the 401K plan for the employer DH left when he was 55 for penalty free withdrawals from age 55 to 59.5, when we can take money penalty free out of the other retirement plans.
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Old 01-10-2015, 05:29 AM   #16
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Previous employer's 401k does indeed have a stable value fund - and I do have some money in that. And my largest holding is an institutional fund that I am very happy with (VINIX).

The plan's choices are very limited (around 8-10), but they all seem like solid choices.
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Old 01-10-2015, 06:04 AM   #17
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You really need to evaluate your own plan. There are many out there that are crazy high in expenses. Yours sounds very much like the one I have. Miniscule fees in Vanguard Institutional funds with a decent stable value fund. The only other fees are an annual $50 bookeeping fee regardless of account size. A real bargain in my book.
However, at ER I'll have to roll it over so my overall costs will go up slightly.
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Old 01-10-2015, 06:48 AM   #18
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This applies to us too. Megacorp 401K at Fidelity with very low fees.

I want to leave it in for better bankruptcy protection, but I also want to convert some of it to Roth each year for income to qualify for ACA silver plan (and also to establish a Roth pipeline)

Can you take just part of a 401K and roll it into an IRA or can you do 401K to Roth IRA conversions while keeping the 401K at a previous employer?
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Old 01-10-2015, 08:06 AM   #19
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I left mine at megacorp mainly for the stable value fund. Also megacorp is a dividend payer and the company stock dividends can be passed through for income with no penalty. It is mostly TRowe funds and a couple vanguard index funds, stable value and company stock fund.
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Old 01-10-2015, 08:28 AM   #20
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I left mine at megacorp mainly for the stable value fund. Also megacorp is a dividend payer and the company stock dividends can be passed through for income with no penalty. It is mostly TRowe funds and a couple vanguard index funds, stable value and company stock fund.
I have never heard of this at all! How can 401K dividends "pass through" for income with no penalty unless you are doing a 72T?
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