401K consolidation question

[WhiskyDave]

I realize this may be just a personal preference, but is there a preferred investment company to consolidate 401k's? Currently I have it split between 2 employer plans (Fidleity and Mass Mutual)...Both are ok, but have limited Fund options.

Anyone else have any recommendations or has already consolidated? and are happy with their choice

 

[Sunset]

Some clarification needed for better answers:

Are you wanting to consolidate into a new 401K (limited to the rules of the 401K) or into an IRA ?

Do you have company stock in the 401K's ?

 

[WhiskyDave]

Good questions Sunset...

I assumed it would need to transition to an IRA as 401K needed to be employer plans inside brokerages?...Did not think I could move to say a Scwab or Vanguard as another 401k, but only as a IRA?

I do not have any company stock in either 401k plan.

I may also take a T(72) plan out a little early prior to 59, but know I can also be done with an IRA.

 

[SecondCor521]

You can combine both old 401(k) accounts into what is called a "rollover IRA". Open the rollover IRA wherever you want to end up, then transfer or rollover each 401(k) account into the rollover IRA. Having a rollover IRA is exactly like having a regular traditional IRA with the additional benefit that it can later be rolled over into a new 401(k).

It's generally recommended to do a "direct" or "trustee-to-trustee" transfer so you don't run afoul of IRS rules about doing two rollovers within a 12 month period. Direct and trustee-to-trustee transfers are not limited and you could do both rollovers in the same general time frame.

If you are currently working at a job that has a 401(k), you additionally may have the option of rolling your rollover IRA into your 401(k). You'll need to check with your employer's benefits management to see if your 401(k) allows this. Some do, some don't. Mine did.

And you're right, as far as I know you can't open your own 401(k) to receive rollovers from your other plan accounts. But a rollover IRA is essentially the same idea.

 

[chassis]

I have accounts with both Fidelity and MassMutual. Fidelity is far superior. The only reason I leave the MassMutual account open is because of a fund selection that Fidelity doesn't offer.

I consolidated other 401ks into a traditional IRA with Fidelity. It is dead easy. Fidelity's website was all I needed to made this happen. They have good phone and email support if needed.

 

[cat4ever]

I'm not sure of your retirement status, but if you plan on retiring after 55 and before 59 1/2, if you leave the 401K with your current employer where it is you will have penalty free access to it after you retire, if you roll it into an IRA, you won't. If it weren't for that rule I wouldn't be retired now, so thought it was worth pointing out.

 

[Sunset]

Folks that have self employment , can open a self-401K. Depending upon where they open it, they can be allowed to roll-over past employment 401K's to the self-401K.

If interested in this, it's worth asking the big brokerages about their self-401K programs (including the 55 rule for them).

I got mine with Vanguard which didn't allow rollovers at the time.

 

[DrRoy]

I consolidated at Fido.

 

[garyt]

My understanding is if you get sued for whatever reason , they can't go after your 401K but can get at your IRA. Might be a good reason to leave some in the 401K?

 

[USGrant1962]

I'm not sure of your retirement status, but if you plan on retiring after 55 and before 59 1/2, if you leave the 401K with your current employer where it is you will have penalty free access to it after you retire, if you roll it into an IRA, you won't. If it weren't for that rule I wouldn't be retired now, so thought it was worth pointing out.

Careful. The IRS allows the Rule of 55, does not require it. You need to look at your 401(k) summary plan document (SPD) to see if it participates in the Rule of 55.

My understanding is if you get sued for whatever reason , they can't go after your 401K but can get at your IRA. Might be a good reason to leave some in the 401K?

While 401(k)s have ERISA protections, IRA protections are by state. Many states have protections for IRAs, but some don't. Check your state.

 

[HenryD]

Careful. The IRS allows the Rule of 55, does not require it. You need to look at your 401(k) summary plan document (SPD)...

And in my case I was hoping to bring my rollover ira and sep ira into my solo 401k before doing a rule of 55 in a few years. Now I am reading that Vanguard's solo 401k doesn't accept rollovers. It's not like a few years of withdrawals would be significant, but its still annoying.

 

[target2019]

You can combine both old 401(k) accounts into what is called a "rollover IRA". Open the rollover IRA wherever you want to end up, then transfer or rollover each 401(k) account into the rollover IRA. Having a rollover IRA is exactly like having a regular traditional IRA with the additional benefit that it can later be rolled over into a new 401(k).

It's generally recommended to do a "direct" or "trustee-to-trustee" transfer so you don't run afoul of IRS rules about doing two rollovers within a 12 month period. Direct and trustee-to-trustee transfers are not limited and you could do both rollovers in the same general time frame.

If you are currently working at a job that has a 401(k), you additionally may have the option of rolling your rollover IRA into your 401(k). You'll need to check with your employer's benefits management to see if your 401(k) allows this. Some do, some don't. Mine did.

And you're right, as far as I know you can't open your own 401(k) to receive rollovers from your other plan accounts. But a rollover IRA is essentially the same idea.

I've read the following linked article to make sure I understand the nuance of direct vs. indirect.
https://www.investopedia.com/terms/i/indirect-rollover.asp

If the 401(k) company sends a check made out to your IRA-rollover institution, I believe that is a direct rollover. But checking with others since it is so important.

 

[Sunset]

And in my case I was hoping to bring my rollover ira and sep ira into my solo 401k before doing a rule of 55 in a few years. Now I am reading that Vanguard's solo 401k doesn't accept rollovers. It's not like a few years of withdrawals would be significant, but its still annoying.

You could open another solo 401K at a different brokerage that allows it. While the expectation is there would be self employment income , there is no actual requirement to fund the solo 401K with self employment income.

 

[Bamaman]

My MegaCorp had a huge 401K program where they paid 50-50 up to 10% of my withholdings. They used Fidelity Investments and had a few great funds and a few not so great fund options for us. They didn't open up the full Fidelity programs to us as they didn't want employees to get too aggressive and blow their portfolio in down years. But they were also paying all the management fees.

So when we retired, MegaCorp required all 401K's to be rolled over into IRA's where they were not paying the fees. It was then I mixed the 401K and my personally funded IRA's into one big IRA Rollover account. I studied Fidelity's programs closely and have done pretty well over all these years just owning their best performing funds.

I just wish I had a crystal ball right now. Politicians just scare the heck out of me.