401k after Retirement

[Luvtoride]

I retired about 6 months ago and left my 401k at my employer without making any changes (obviously no further contribution activity).

As the new year came, I wanted to make sure that I could withdraw funds if I needed for supplemental cash needs. I logged into my Vanguard account and found that Withdrawals are NOT allowed.
Upon calling Vanguard they said I could take a full distribution or roll it over to an IRA, from which I could self manage or withdraw funds as needed.

I chose to open a Vanguard brokerage IRA account to roll over the funds to. It was very easy to do and the phone rep walked me thru it while I was in my account online. Funds and assets (in kind except for any proprietary portfolios) will be in the brokerage account in 2 days.

I guess I had assumed that leaving assets in my 401k after retirement would be accessible. No one at my company HR department nor Vanguard had ever informed me otherwise.

Do all 401k plans work like this post retirement or is this a provision of my company’s plan or Vanguard rules?

 

[SevenUp]

I guess I had assumed that leaving assets in my 401k after retirement would be accessible. No one at my company HR department nor Vanguard had ever informed me otherwise.

Do all 401k plans work like this post retirement or is this a provision of my company’s plan or Vanguard rules?

Some work like you assumed, and some work like you found. It's up to the 401k provider, and should be documented in the Summary Plan Description.

Of course, HR isn't likely to advertise that their company's plan is less favorable than it could be.

 

[Dean56]

I retired from MegaCorp in 2022. I left my money in my 401k. I can take distributions from it every 3 months. It's up to me how much I withdraw at that time. There was an option to take distributions on a monthly basis, but you had to get a fixed amount and then you could never change it, unless I rolled the 401k over to a new company like Fido or Vanguard.

 

[MarieIG]

DH had one of his 401Ks (though his union) at Vanguard. He was able to withdraw after retirement but could not choose from which asset to withdraw - it was a sell across the board. (It also did not have a Roth component, although is finally instituting one this year.) We did end up opening an IRA for him at Vanguard and rolled the funds over in kind.

My company's 401k allowed withdrawals, but they charged $95 for each and every withdrawal. So, if I had wanted to make monthly withdrawals (which I had considered) I would have cost me $95 per withdrawal. Between that and the "administrative fee" I rolled my funds into IRAs. (The latest literature indicated that they now charge $105 for each withdrawal.)

We still have one of DH's 401Ks, which is with a megacorp (not DH's former employer but one which merged with DH's former employer.)

 

[Rjhasti]

Retired a year ago..........you want to get out of any 401k so you can be free of all the fees they charge. I chose Fidelity and it is great. Schwab or Vanguard are also great and there are no fees. Then you have freedom to put your money in what ever investment you want.
Fidelity also provides a free financial planner for you. You don't have to do that the financial planner says but at least you have another set of eyes on your money who does this with people daily and he/she is a free service for Fidelity customers.

 

[Which Roger]

Retired a year ago..........you want to get out of any 401k so you can be free of all the fees they charge

I agree that this is the right thing to do 401ks that have high fees and/or poor investment options. But this is not the case for all plans. My megacorp 401k offers index funds with very low fees, on par with Vanguard and Fido. So I've had no reason to move the money.

 

[USGrant1962]

I agree that this is the right thing to do 401ks that have high fees and/or poor investment options. But this is not the case for all plans. My megacorp 401k offers index funds with very low fees, on par with Vanguard and Fido. So I've had no reason to move the money.

Yes, it depends on the 401(k). A lot of "always roll over your 401(k)" advice is just wrong. FWIW, my 401(k) funds are institutional shares of index funds that have lower ERs than VG or Fido index funds. But I worked for a private megacorp and the partners have their money in that 401(k) too.

 

[badatmath]

Retired a year ago..........you want to get out of any 401k so you can be free of all the fees they charge. I chose Fidelity and it is great. Schwab or Vanguard are also great and there are no fees. Then you have freedom to put your money in what ever investment you want.
Fidelity also provides a free financial planner for you. You don't have to do that the financial planner says but at least you have another set of eyes on your money who does this with people daily and he/she is a free service for Fidelity customers.

Not so. I am 55 and could not use the rule of 55 if I was in an IRA. (I haven't taken any yet but I will keep it as an option until I am properly 59.5 at minimum). And we do not have high fees.

 

[RE2Boys]

OP...moving a 401k to an IRA can be a bad idea in some situations. If you have ever made non-deductible contributions to an IRA in the past, moving a large 401k to a tIRA can make it nearly impossible to recover your basis in the IRA. Remember that an individual only has one IRA, regardless of the number of IRA accounts you may have. My 401k has never been moved, even after 24 years of retirement.
Also, you never mention if your plan included the "Rule of 55" where withdrawals can be made from the 401k without incurring early withdrawal penalties. To withdraw from TIRA, you must generally be over 59.5 without incurring a penalty tax.

 

[Rjhasti]

yes you do.........the fees are buried in your transactions part of web page of your 401k. They will normally be admin fees of $45 per quarter ($180 per year). So more some less.

They hide them in the transactions because few people ever will look there. But they are there and no that does not include the expense ratios. The ER of even the popular funds are often more what they are when they are out of the 401k.
I have analyzed at least 100 of these for people during my working years. FEES are there if you look hard enough.

 

[Sunset]

One other reason to keep the 401K is lawsuit protection, some States have limits on how much in an IRA is protected.

I have a self 401K and am keeping it, since the fees are either $20 or free.

Now once I hit RMD age, I'll probably merge it into an IRA because otherwise I have to do the RMD and withdrawal for the 401K separately from the IRA(s). So twice the work.

 

[jazz4cash]

I agree that this is the right thing to do 401ks that have high fees and/or poor investment options. But this is not the case for all plans. My megacorp 401k offers index funds with very low fees, on par with Vanguard and Fido. So I've had no reason to move the money.

+1
I had two megacorp 401k plans which were both excellent while I was working. When I retired one of them started charging fees for maintenance and withdrawals. It just depends on how it is setup between employer and custodian. I kept the one that did not charge fees and rolled the other one over to an IRA.
I always tried to understand the plan details as described in the Summary Plan Description because I received inaccurate info on more than one occasion from HR and Fidelity too. I read the full prospectus once but primarily relied on the SPD.

 

[Rjhasti]

I hope you are right about your fees in your 401k........that $20 is probably per quarter. And your option on what you invest in are very limited.

Yes the law suite thing is correct.......but hopefully you have an umbella policy that would cover that and other liability........normally a million dollar policy for $140 per year.

 

[Romer]

I just rolled my 401K to my tIRA/Roth (depending on 401K allocation) after 18 months of retirement.

Post retirement withdrawals required paperwork etc. I wasn't making much in 401K over last 3 years. I put it all in a 5%CD for one and two years. I expect the whole balance to be converted to my Roth over the next 4-5 years. Fortunately I was able to invest in the Roth option the last few years.

 

[jollystomper]

I retired about 6 months ago and left my 401k at my employer without making any changes (obviously no further contribution activity).

As the new year came, I wanted to make sure that I could withdraw funds if I needed for supplemental cash needs. I logged into my Vanguard account and found that Withdrawals are NOT allowed.
Upon calling Vanguard they said I could take a full distribution or roll it over to an IRA, from which I could self manage or withdraw funds as needed.

I chose to open a Vanguard brokerage IRA account to roll over the funds to. It was very easy to do and the phone rep walked me thru it while I was in my account online. Funds and assets (in kind except for any proprietary portfolios) will be in the brokerage account in 2 days.

I guess I had assumed that leaving assets in my 401k after retirement would be accessible. No one at my company HR department nor Vanguard had ever informed me otherwise.

Do all 401k plans work like this post retirement or is this a provision of my company’s plan or Vanguard rules?

I believe is likely a provision of your company's plan, and Vanguard is just following their rules.

My megacorp 401K is with Fidelity, and the plan allows partial withdrawals/rollovers, which I had done without a problem online (only have to call when withdrawal/rollover is to be taken from specific funds).

 

[Stormy Kromer]

I had a couple small employer plans that I rolled over to an IRA at Vanguard. One was easy, the other company made it hard.

After handling my parent's estates I realized I want to have all my IRA's with one company with named beneficiaries. It will be much easier for the administrator of my estate when I pass.

Plus, I'm familiar with Vanguard and their offerings and like to be in complete control with the click of a mouse.

 

[Winemaker]

I left my 401k with my employer, and it's been almost 10 years. $80/yr fees, good investments via Vanguard Institutional Funds. However when you make a withdrawal from a 401k, there is an automatic 20% haircut for taxes, unlike a tIRA where you have the option of 99% or less.

 

[Rjhasti]

I left my 401k with my employer, and it's been almost 10 years. $80/yr fees, good investments via Vanguard Institutional Funds. However when you make a withdrawal from a 401k, there is an automatic 20% haircut for taxes, unlike a tIRA where you have the option of 99% or less.

remember that is not the case in a roll over

 

[HGTVFanatic]

My spouse’s 401k was with Prudential. When he tried to take money out it was a pain in the neck process. And at least a week wait. We immediately moved the money to a Vanguard IRA. So easy and get money within a day.

 

[Rjhasti]

you are exactly right..............most 401k/403b's are a pain and have high fees. They even charge you around 40-50 dollars to make the roll over
You did good with your decision.

 

[JohnDoe]

yes you do.........the fees are buried in your transactions part of web page of your 401k. They will normally be admin fees of $45 per quarter ($180 per year). So more some less.

They hide them in the transactions because few people ever will look there. But they are there and no that does not include the expense ratios. The ER of even the popular funds are often more what they are when they are out of the 401k.
I have analyzed at least 100 of these for people during my working years. FEES are there if you look hard enough.

What types of transaction? Contributions and buys?

 

[Rjhasti]

What types of transaction? Contributions and buys?

yes, just do some digging into your account on their web site.
often it is under the transactions .......you will see the fees they take out without your knowledge.

I have helped many of my employees and friends with this. You will be amazed and ticked

 

[MRG]

I has a 401k that I rolled over before I retired and started self managing. I left a profit sharing plan at Megacorp so I could use the rule of 55. I retired at 56 and wanted to make sure I could get to it before 59.5. I did take a couple withdrawals to have some income. As I got closer to 59.5 it started losing money, lots of it.

When I was 59.5 the balance was over 100k lower than the prior year. I got involved in a class action lawsuit that is going to distribute over 100 million dollars this year.


Sure wish I knew how to scroll up in what I wrote.

 

[Rjhasti]

I has a 401k that I rolled over before I retired and started self managing. I left a profit sharing plan at Megacorp so I could use the rule of 55. I retired at 56 and wanted to make sure I could get to it before 59.5. I did take a couple withdrawals to have some income. As I got closer to 59.5 it started losing money, lots of it.

When I was 59.5 the balance was over 100k lower than the prior year. I got involved in a class action lawsuit that is going to distribute over 100 million dollars this year.


Sure wish I knew how to scroll up in what I wrote.

Sounds like you kept it all in stocks. Just YouTube "buckets of money in retirement". You will get plenty of hits on how to separate your retirement money in buckets i.e. safe money of a few years, moderate growth for a few years and growth for 5+ years.
listen to several.........you will get the idea.

 

[GalaxyBoy]

My old 401k was terrible and I rolled it over as soon as I quit. DW’s 457, OTOH, has index funds with very low fees so we’re keeping it. One thing about it though, was when we wanted to convert a portion of it to a Roth but they would only do a rollover to a tIRA. And the check would take up to about two weeks to be delivered. Then Schwab put a hold on the check for several days, which meant she barely squeaked by getting her Roth conversion done by the end of the year. Lesson learned.