New Retiree - Why roll over 401(k)?

[travelover]

Hi, I just retired and Fidelity has been bugging me to roll over my 401(k), which they administered for my former employer, to an IRA with them.

My question is, "What is their motivation to get me to roll over the 401(k)? " Will I be picking up some fees that they will now collect, or are they just looking at an opportunity to sell me some investments that they'll make a profit from? I have the ability to stay in the 401(k) indefinitely, roll part of it or all of it at any time. Since I'm not 59 1/2, I recognize the advantage of keeping at least some of my investments in the 401(k) until I am older.

Any thought?

Thanks in advance.

[Life_is_Good]

This is a great post, travelover.... I'm in the same situation.

Reasons I might keep it with old employer's 401k:
1) I like the funds that I'm invested in. They have performed well.
2) There are a couple custom funds that are not available outside plan - no ticker
3) Thought I heard I can tap into it at 55 if needed vs. IRA at 59 1/2?

Reasons I might move and roll it into an IRA:
1) Already have taxable brokerage accounts at Vanguard and I like Vanguard
2) Some funds could probably be moved "in kind"
3) Easier use of Vanguard's analysis tools with all funds under their roof
4) I never see any plan admin fees on my 401k statement.... but they must be charging me some type of maintenance fee?
5) What happens to my 401k if the firm goes belly up. Is my 401k gov't protected somehow?

I've been ER'd for almost 2 years and I've let it stay in the 401k so far.

[Nords]

Welcome to the board, Travelover.

Quote:

Originally Posted by travelover My question is, "What is their motivation to get me to roll over the 401(k)? " Will I be picking up some fees that they will now collect, or are they just looking at an opportunity to sell me some investments that they'll make a profit from? I have the ability to stay in the 401(k) indefinitely, roll part of it or all of it at any time. Since I'm not 59 1/2, I recognize the advantage of keeping at least some of my investments in the 401(k) until I am older.

Fidelity can offer you more investment choices if you roll the 401(k) over to them. But don't misconstrue their motives-- Fidelity gets more money from running 401(k)s than they do from running mutual funds. So they're probably happy (and making more money) if you leave the 401(k) where it is.

Fidelity won't get any special fees if you roll the 401(k) over to them. However they've probably noticed that people who do that tend to consolidate other assets at Fidelity, use their retirement planner, tinker with individual stocks, open up additional account features like shorting, margins, & options, and maybe even have Fidelity manage their money.

Depending on how much your 401(k)'s expenses are and what Spartan index funds you'd choose at Fidelity, rolling over could save you quite a bit of money.

[jazz4cash]

If I am reading this correctly, Fidelity is already custodian for your 401k and they are encouraging you to rollover from a 401k to a Fidelity IRA.

I am in a similar situation.............I have Fidelity administered 401k and Fidelity IRA. I know what you are going thru as Fidelity was very enthusiastic about rolling a portion of my 401k into a Fidelity IRA even though they were rolled in-kind to the same mutual funds. I got the impression that my employer may have received some sort of compensation for bringing the funds to Fidelity, which Fido would not have to kick back after the rollover.....never confirmed this.

Anyway, pros and cons pertain to availability of investments and withdrawal rules........

The main advantage I can think of to leave it in the 401k is
- penallty free withdrawals at age 55.
-there could also be possibility for a 401k "loan".


Obviously, the IRA offers
-unlimited investment options
-more flexibility for 72t distribution
-penalty free withdrawals for home purchase, tuition expense, etc.

[mickeyd]

Three reasons that I considered prior to RO my 401(k) to Vanguard: 1) I could select a vast array of low cost index funds that were unavailable in the 401(k). 2) most (all) 401(k) plans have many hidden fees and expenses that most employees are unaware of. These expenses are for many "benefits" that ex employees do not qualify for (counseling, loans, meetings). 3) The employer can change the plan at any time, even cancel it.

[travelover]

Thanks to those of you that replied. Maybe I'm too suspicious, but the Fidelity rep called me at home on a Saturday AM, was in no hurry to hang up, asked repeatedly if there was ANYTHING they could do for me, and promised to call back in a month to discuss it some more. Contrast this with the usual interface with big companies which is an endless telephone menu tree that either refers you to a web site or dead ends, then hangs up............

Fidelity has an office a few miles from my house and it is convenient to be able to drop by and talk to them, but I want to understand the true costs. Thanks again.

[jazz4cash]

Quote:

Originally Posted by travelover Thanks to those of you that replied. Maybe I'm too suspicious, but the Fidelity rep called me at home on a Saturday AM, was in no hurry to hang up, asked repeatedly if there was ANYTHING they could do for me, and promised to call back in a month to discuss it some more. Contrast this with the usual interface with big companies which is an endless telephone menu tree that either refers you to a web site or dead ends, then hangs up............ Fidelity has an office a few miles from my house and it is convenient to be able to drop by and talk to them, but I want to understand the true costs. Thanks again.

Yup.....I got that treatment too. They do seem to have good judgement on where to "draw the line" from being too intrusive. I have to assume there is some financial benefit to Fido and/or to the phone rep to get you to do the rollover. Even after completing the rollover, I still get calls maybe 2x per year offering assistance. I have found it difficult to contact a specific individual, though.

Next time they call...ask them if they work on commision.

[Nords]

Quote:

Originally Posted by travelover Maybe I'm too suspicious, but the Fidelity rep called me at home on a Saturday AM, was in no hurry to hang up, asked repeatedly if there was ANYTHING they could do for me, and promised to call back in a month to discuss it some more.

Whew, you must have one of them there BIG 401(k)s...

The bigger the business you can do with Fidelity, the happier they are to talk to you. It adds a basis point or two to most of their expenses, but you can actually get a correct answer within the first three tries.