Retired in September and still unsure of Where to rollover my 401K

[malwardt]

First of all I have been lurking since 2010 and have read a ton of situations of people entering retirement. Unfortunately I did not retire early but at 66 it is happening now. I will be officially retired in 2 weeks (after 41 years at same job) and need to put my 401K somewhere. As much as I have read here and tried to grasp all the amazing information as to investments I now realize I won't be comfortable doing it myself. I have had free financial guidance through in-laws financial firm but cannot see me paying 1% to them to manage my small savings. My wife and I have about 1.4 mil to work with at the moment but most of it in my 401K. I have opened a rollover account with Fidelity mostly because my wife's IRA is there but I noticed that Vanguard seems to be the preferred choice with many here. Been on hold for hours trying to seek Fidelity's help but I have not connected yet. So other than this being an introductory post I would like to know if I move my $ to this rollover IRA do I have a period of which to decide what investments to pick or at least pick what level of management I would be comfortable with or do I have to move it immediately into specific funds? Cash savings is under a 100K so I don't want to burn that up while trying to decide. We do have a decent S.S income coming but will need to live of investments also.

 

[cat4ever]

Others here are much more knowledgeable about most things than me, but any place you roll over too like Fidelity or Vanguard would let you do whatever you like as far as investment decisions. You can keep it all in cash, you can split among several mutual funds, or you can buy any number of individual stocks, bonds, ETFs, etc. And you can trade in and out on a daily basis if you really want, although fees may apply. And there's no hurry to do anything, but you do probably want to do something eventually, rather than let it set in cash for years.

 

[Dtail]

Do you have a decent yielding Stable Value fund in your 401k? These types of accounts typically only exist in a 401k type account.
They can be used as a portion of your fixed income allocation of your Account Allocation.

 

[Souschef]

I retired at 70, and rolled my 401K into a self directed IRA. I have kept it all in equities, because both our SS and pensions guarantee us a fixed income. That income covers all of our expenses other than taxes.

 

[malwardt]

Do you have a decent yielding Stable Value fund in your 401k? These types of accounts typically only exist in a 401k type account.
They can be used as a portion of your fixed income allocation of your Account Allocation.

I have so many funds (I changed funds for a period and only designated future contributions to those new funds) so I probably do. I will check on that. I do not believe my 401K allows for withdrawals if that is what you mean.

 

[RunningBum]

You probably don't *have* to move your 401K, but most people find expenses are lower at Fidelity, Vanguard, and Schwab. Some people find their 401K has really good offerings not available elsewhere.

It's true that VG has been the favorite for a long time, but Fido and Schwab are extremely competitive on expenses too, so any of the three should work for you. I'm not sure it's fair to hold slow phone response by Fidelity during Christmas week against them. Once you are able to talk with someone at whichever firm you settle on, at $1.4M that's enough that they should patiently answer your questions and explain your options for guidance.

I don't recall the mechanics of moving a 401K to a rollover IRA. Unless you are able to transfer investments "in kind", I think you'll have to specify where to invest. I think I had mine go to a short term bond fund or money market fund, and then at my own pace I exchanged that to the funds I wanted to invest in there. So you probably have to make a choice right away, but you don't have to live with it any longer than you want to.

Congrats on your retirement, whether early or not!

 

[malwardt]

I retired at 70, and rolled my 401K into a self directed IRA. I have kept it all in equities, because both our SS and pensions guarantee us a fixed income. That income covers all of our expenses other than taxes.

Self directed meaning you selected your own investments and allocation? That is what I am foggy on. I have read the Fool's articles on 3 fund portfolio's. They somewhat make sense to me but that seems to simple.

 

[cbo111]

Big Vanguard fan here. I set up a PAS account a few years ago. The advisor moved everything smoothly from 401K and TSP, then created an allocation based on my risk tolerance. I wanted to consolidate as much as possible in case I pass before DW. She does not have a desire to learn about investing, so best to have a dedicated advisor who is salaried (no commissions or churning) and will hopefully keep her on the right track. For this service I pay three tenths of a percent. Not a huge sum to pay for some peace of mind.

 

[malwardt]

You probably don't *have* to move your 401K, but most people find expenses are lower at Fidelity, Vanguard, and Schwab. Some people find their 401K has really good offerings not available elsewhere.

It's true that VG has been the favorite for a long time, but Fido and Schwab are extremely competitive on expenses too, so any of the three should work for you. I'm not sure it's fair to hold slow phone response by Fidelity during Christmas week against them. Once you are able to talk with someone at whichever firm you settle on, at $1.4M that's enough that they should patiently answer your questions and explain your options for guidance.

I don't recall the mechanics of moving a 401K to a rollover IRA. Unless you are able to transfer investments "in kind", I think you'll have to specify where to invest. I think I had mine go to a short term bond fund or money market fund, and then at my own pace I exchanged that to the funds I wanted to invest in there. So you probably have to make a choice right away, but you don't have to live with it any longer than you want to.

Congrats on your retirement, whether early or not!

Exactly the info I am looking for. Thank you. I do realize the phone backup and certainly don't hold that against them. I guess I need more patience. I certainly have the time now. I stopped work in September but luckily still paid until years end. So wanted to keep company match as long as possible.

 

[RunningBum]

Self directed meaning you selected your own investments and allocation? That is what I am foggy on. I have read the Fool's articles on 3 fund portfolio's. They somewhat make sense to me but that seems to simple.

It's not too simple. A total or S&P 500 US stock index fund like VTSAX. A total international index fund like VTIAX. A bond fund with a lot of diversification like perhaps VBTLX or VCORX. Some think they can pick individual stocks or sectors that can do better, and some will do better, while others won't. I don't try. There are other options for bond funds, like CDs, money markets, TIPS (or TIPS fund VAIPX).

 

[malwardt]

Big Vanguard fan here. I set up a PAS account a few years ago. The advisor moved everything smoothly from 401K and TSP, then created an allocation based on my risk tolerance. I wanted to consolidate as much as possible in case I pass before DW. She does not have a desire to learn about investing, so best to have a dedicated advisor who is salaried (no commissions or churning) and will hopefully keep her on the right track. For this service I pay three tenths of a percent. Not a huge sum to pay for some peace of mind.

This is the level of investment help I would be willing to pay for, 1% seemed like a lot for my level of savings. I will check out their PAS account services also. I was good at what I did for 41 years but handling money was not. Sorry to say. Thanks.

 

[malwardt]

It's not too simple. A total or S&P 500 US stock index fund like VTSAX. A total international index fund like VTIAX. A bond fund with a lot of diversification like perhaps VBTLX or VCORX. Some think they can pick individual stocks or sectors that can do better, and some will do better, while others won't. I don't try. There are other options for bond funds, like CDs, money markets, TIPS (or TIPS fund VAIPX).

This seems like solid advice. I am just looking for relative safety with some possibility for growth. I guess I just need more confidence in what I do know or have learned. Very helpful.

 

[HI Bill]

Rather than pay 1% assets under management (AUM) fee, I'd just choose a low-cost target retirement date fund, which changes its asset allocation as you age. You'd pick the year closest to 2020 (Fidelity Freedom Fund 2020), which currently automatically maintains the following allocation:

32% Domestic Equity Funds
21% International Equity Funds
40% Bond Funds
7% Short-Term Funds

It has an expense ratio of 0.6%.

If you want the same results, without the auto-rebalancing, but with a lower expense ratio, I'd go with a simple two or three-fund portfolio:

ITOT (Fidelity Total Stock Market ETF, 0.03% expense ratio) 60%
AGG (Fidelity US Bond ETF, 0.05% expense ratio) 30%
IXUS or IEFA (Fidelity International Stocks ETF) 10% (I'm prefer to hold as much international as the experts recommend).

 

[Lawrencewendall]

I've been with FIDO for 15 years. They've done alright by me. Not a VIP but I like their fees (none) and service.

 

[Dtail]

I have so many funds (I changed funds for a period and only designated future contributions to those new funds) so I probably do. I will check on that. I do not believe my 401K allows for withdrawals if that is what you mean.

My reference is not on the withdrawal part.
For example I have a Stable Value fund in my 401K which currently has a net yield of 3.97%. Due to this "high" yielding type of fund in my 401K, I would not consider rolling these monies into an IRA rollover account.

Thus my reference is one shouldn't automatically rollover a 401k account, if the monies are not needed from that account currently, so one can take advantage of relatively safe higher yielding investments.

 

[pb4uski]

You probably don't "have" to move your 401k. First thing you need to do is to contact your 401k administrator and find out what they allow for withdrawals. It would be rare that a 401k would not allow withdrawals, but some have frequency limits. Second, see if your 401k has a stable value fund and if so, what it pays for interest. As Dtail points out, you can't get a stable value fund in a tIRA so if your 401k has a good one then it may be worth keeping some money there.

What is your 401k currently invested in? Are you happy with what it is invested in? If you want simple, Vanguard, Fidelity et al offer "target retirement date" ETFs that have a mix of stocks and bonds appropriate to your risk appetite and you could select one fund that fits with your risk appetite. The fact is that an asset allocation between 50%/50% and 90%/10% all have similar success rates but higher stock allocations typically have higher terminal values.

My 401k rollover was to request a rollover from my 401k administrator. They mailed me a check made out to "Vanguard FBO [pb4uski]"... FBO means "for the benefit of". Then I mailed the check to Vanguard with a tIRA deposit slip with my tIRA account number... or if you don't already have an IRA an IRA application. Then Vanguard deposits the check to the settlement account of your tIRA. I also have a tIRA with Fidelity and the process was similar.

Then you can get online or call Vanguard or Fidelity and select the investments... it could be as simple as a single retirement date fund or ETF.

 

[38Chevy454]

It sounds like you have a lot going on with the retirement, so just take some time and set up a mtg with your work 401k administrator to answer a few questions before you leave:
1. Can I take withdrawals, and how often? How is this done?
2. Am I limited to the current investment options as when I was working? (Probably yes)
3. For potential rollover, do they allow in-kind, or do you need to first convert to cash?
4. What are administrative fees if you leave the money in the 401k program? These are different than the individual investment fund fees.

I have all my savings with Fidelity, and been happy with their support and service. I did a few rollovers to self-directed IRA from various old work 401k/403b accounts. Nice thing about Fidelity is if you are near one of their offices, you can meet with an advisor who can help you with all of the rollover paperwork. Essentially you bring in your work 401k paperwork, and fill out some paperwork at Fidelity, and they do all the work to complete the rollover. At your level of funds you meet Fidelity Private Client status, Fidelity will offer investment advisor services free, to help you with any questions and some recommendations for your portfolio. They won't provide specific investment choices, but they will talk about asset allocation (AA), risk tolerance, monthly income needs, upcoming RMDs, estate planning (general, not formal lawyer), and more. The advisors are certified financial planners (CFP) who can help you out. BTW, Fidelity will likely also give you some incentive to move your 401k to a Fidelity IRA. That incentive could be around $2500 range I have heard. They will also push for their paid FA services, but you don't have to take that. You can get the advisor for free, and still get good customer service and advice.

I believe you can do just fine as self-directed and not have to pay any FA fees. Keep it simple as the three fund type examples. Go with low fee widely diversified funds that match your desired AA. You can do it, especially with some initial help fro a Fidelity advisor. Or whatever company Vanguard, Schwab are both good alternatives. I just like the Fidelity sticks and bricks offices where I can go to get things done in-person. You can probably get your in-laws to review your plan for free or maybe for a small fee if you want second opinion. Or discuss it here on E-R.org and you can get some great advice.

 

[pb4uski]

I don't get the fixation on in-kind rollovers for tax-deferred accounts.... what does it matter? I have always just converted to cash in the old account, transferred cash to the new tIRA and then bought what I wanted to in the new tIRA.

 

[38Chevy454]

I don't get the fixation on in-kind rollovers for tax-deferred accounts.... what does it matter? I have always just converted to cash in the old account, transferred cash to the new tIRA and then bought what I wanted to in the new tIRA.

I agree, but sometimes it is easier to do in-kind. Either way in the end if simplifying you will be selling the various old funds.

 

[Brat]

I like in-kind if you like what you have, in that way you don't have cash sitting around gaining (or losing) nothing during the move.

 

[LarryMelman]

At your level of funds you meet Fidelity Private Client status, Fidelity will offer investment advisor services free, to help you with any questions and some recommendations for your portfolio. They won't provide specific investment choices, but they will talk about asset allocation (AA), risk tolerance, monthly income needs, upcoming RMDs, estate planning (general, not formal lawyer), and more. The advisors are certified financial planners (CFP) who can help you out. BTW, Fidelity will likely also give you some incentive to move your 401k to a Fidelity IRA. That incentive could be around $2500 range I have heard. They will also push for their paid FA services, but you don't have to take that. You can get the advisor for free, and still get good customer service and advice.

I wish could figure out why the Fidelity I know is so unlike the Fidelity that many of you write about. At one time I had over $2M in retirement and non-retirement accounts at Fidelity. My statements all said "Private Client" and "Preferred Services" but the only thing they ever offered me was free TurboTax for a couple years (and then they took it away, claiming "my relationship with Fidelity was insufficient"). I visit the local office every now and then and speak to the local reps, but they never "offer" me any services or anything else. I make sure to get a free cup of coffee but that's about it.

Early in 2019, I removed all of my Fidelity IRA accounts to Schwab, who gave me $2500 to move them. Later in 2019, I had a 401k to rollover. Schwab said that I needed to wait till a year after the earlier incentive. So I took the rollover to Fidelity and asked them what incentive they would offer. Nothing, nada, zip, zilch. I gave it to them anyway but it will also be moving to Schwab as soon as the local rep gives me an offer to move it. Which I know he'll do at the earliest possible opportunity.

That the OP says "Been on hold for hours trying to seek Fidelity's help" is no surprise to me. For years, they have projected an attitude of not really seeming to care.

I would advise the OP to shop his rollover around, and go with the best offer. Any of the major firms will do the basic setup and help you with the asset allocation if you need that level of help.

 

[teej1985]

Many of the brokerage will give you a bonus for rolling over to them, so there's no reason not to unless you live in a state that gives 401(k)'s better asset protection, or you have access to superior funds in the 401(k). E*Trade, Merrill Edge, TD Ameritrade and Schwab all offer signup bonuses. Fidelity will as well if it's over $1,000,000....

 

[Surewhitey]

I rolled over mine a couple of years ago and it was painless with Vanguard. Phone call and a direct rollover (not a check cut to you). Within the rollover IRA, you can buy anything stock, mutual funds, etc.

Just to clarify one earlier post, VTSAX is not an S&P 500 fund, it's a total US stock fund (appx 3500 companies). Good one IMO though.

 

[RunningBum]

Just to clarify one earlier post, VTSAX is not an S&P 500 fund, it's a total US stock fund (appx 3500 companies). Good one IMO though.

If you read my post more closely you'd see that I used VTSAX as an example of a "total or S&P 500 US stock index fund".

 

[OldShooter]

... I have read the Fool's articles on 3 fund portfolio's. They somewhat make sense to me but that seems to simple.

The investment industry spends millions every year to convince the public that investing is difficult and everyone needs to pay them to deal with it. This is self-serving but flatly false. Two equity funds are enough, maybe even one.

Start here: "The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/

and then read: "The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365

The joke around here is really a true statement: By the time you know enough about investing to select a good advisor, you know enough to not need one.

I don't get the fixation on in-kind rollovers for tax-deferred accounts.... what does it matter? I have always just converted to cash in the old account, transferred cash to the new tIRA and then bought what I wanted to in the new tIRA.

In some cases (IIRC Fast Eddie, Raymond James, etc.) there are still transaction costs and the transferor will get whacked if he has the assets liquidated before transfer.