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Advantage of keeping SOME money in old 401k...?
04-13-2022, 01:21 PM
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#1
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Dryer sheet aficionado
Join Date: May 2019
Posts: 35
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Advantage of keeping SOME money in old 401k...?
I'll be 59.5 shortly, and am considering rolling my 401k funds (with my current employer) into an IRA. I plan to retire in less than a year (I live in Texas).
Question: Is there any advantage to keeping SOME money in the 401k...? As long as the 401k account exists, can I ever transfer money back into it from an IRA...?
My only concern is protection of money from future lawsuits, creditors, scammers and the like. Other "IRA vs 401k" arguments are not germane.
While I am not wealthy compared to many here, I am solidly in the top 5% - and in today's increasingly litigious society that makes me a target.
To be clear I have no current problems of that nature, nor do I anticipate any. I am simply wondering if it's prudent to keep some amount of money in places where it would be more difficult for others to seize, versus putting all my money into someplace like Fidelity or Vanguard.
I don't think I'm being overly paranoid here. Do others share this concern...?
Patrick
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04-13-2022, 01:32 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Aug 2018
Posts: 1,020
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One reason to keep money in an old 401(k) might be if the program has an investment option you particularly like, or one that cannot be duplicated elsewhere.
Other than that, rolling over to an IRA will give you much more choice and control over your money.
__________________
"Be kind whenever possible. It is always possible." - Dalai Lama
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04-13-2022, 01:58 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,896
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IIRC, the protection in a 401K vs IRA varies with the state of residence. So any responses might or might not be applicable.
-ERD50
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04-13-2022, 02:12 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Jan 2013
Location: SoCal, Lausanne
Posts: 4,408
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Too avoid scammers, freeze your credit, don't send money to strangers on Facebook, and keep track of your accounts and change your passwords at least every six months. Stay under the radar (i.e. don't flaunt your wealth like many who pretend to be wealthy) and the ambulance chasers will avoid you. The only advantage that some 401Ks offer are stable value funds with higher yield to park your cash. I rolled over my 401K one month after retirement and I'm glad I did.
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04-13-2022, 02:16 PM
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#5
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Full time employment: Posting here.
Join Date: Feb 2007
Posts: 741
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Provided you are over 59.5 probably no diff other than more control over what to invest in.
However, if you are 55+ you can get the 401k money after you retire with no penalty. In IRA you need to wait till 59.5
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04-13-2022, 02:25 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Oct 2013
Location: Cholula
Posts: 1,595
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As ERD50 points out, IRA/401K protections will vary from state to state. AZ, our state of residence, has some of the strongest protections for retirement accounts.
Having an umbrella policy is a good first step in protecting assets.
__________________
“Before you criticize someone, walk a mile in their shoes. That way, you’ll be a mile from them, and you’ll have their shoes.” – Jack Handey
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04-13-2022, 02:53 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Sep 2006
Posts: 2,844
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https://www.irafinancialgroup.com/le...or-protection/
The major benefit of a 401K over an IRA is that 401K's are exempt from creditor claims other than being claimed by IRS to satisfy a tax debt. IRA's are limited to 1.25 million credit exemption from generic creditors and eligible for all balances by IRS so rolling over money could lead to your IRA's being over the protection limits in claimable by a creditor when a 401K would continue to provide protection.
No matter the state 401K's always have the maximum creditor protection, and many types of activities can lead to your being considered to be under the jurisdiction of any number of states. A lawsuit does not have to be in the state of your residence.
From Invesotpedia "Whether your individual retirement account (IRA) can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There are no federal protections in place shielding your IRA from seizure in a lawsuit."
https://www.irafinancialgroup.com/le...or-protection/
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But then what do I really know?
https://www.early-retirement.org/forums/f44/why-i-believe-we-are-about-to-embark-on-a-historic-bull-market-run-101268.html
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04-13-2022, 02:57 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2016
Location: Northern Virginia
Posts: 7,591
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Quote:
Originally Posted by Running_Man
https://www.irafinancialgroup.com/le...or-protection/
The major benefit of a 401K over an IRA is that 401K's are exempt from creditor claims other than being claimed by IRS to satisfy a tax debt. IRA's are limited to 1.25 million credit exemption from generic creditors and eligible for all balances by IRS so rolling over money could lead to your IRA's being over the protection limits in claimable by a creditor when a 401K would continue to provide protection.
No matter the state 401K's always have the maximum creditor protection, and many types of activities can lead to your being considered to be under the jurisdiction of any number of states. A lawsuit does not have to be in the state of your residence.
From Invesotpedia "Whether your individual retirement account (IRA) can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There are no federal protections in place shielding your IRA from seizure in a lawsuit."
https://www.irafinancialgroup.com/le...or-protection/
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really need to look at laws of state in question.
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04-13-2022, 03:07 PM
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#9
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Recycles dryer sheets
Join Date: Jul 2013
Posts: 87
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And state laws (as well as federal) are always open to being amended by legislative and judicial means. So I have kept my 401k in place to hedge against a state law change scenario, however remote.
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04-13-2022, 03:21 PM
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#10
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Dryer sheet aficionado
Join Date: Mar 2018
Location: CLT
Posts: 30
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I am also keeping my pre-tax money in my 401k because I have moved once in retirement to a different state and may move again in the future as I have many years left hopefully. I do some Roth conversions every year to my Roth IRA and I also have a Personal Umbrella insurance policy so for my situation that works best for me.
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04-13-2022, 05:14 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Sep 2006
Posts: 2,844
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Quote:
Originally Posted by Montecfo
really need to look at laws of state in question.
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State of residence is not as sure of being the law as you may think.
Defendant caused a traffic accident in the state. The defendant caused a traffic accident in the state in which you've filed the lawsuit (and the case grows out of the traffic accident). All states have "motorist" statutes giving their courts power to decide cases regarding accidents on their roads, regardless of the parties' citizenship. In this case, you can serve the defendant with papers anywhere, not just in the state where the lawsuit was filed.
__________________
But then what do I really know?
https://www.early-retirement.org/forums/f44/why-i-believe-we-are-about-to-embark-on-a-historic-bull-market-run-101268.html
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04-13-2022, 06:05 PM
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#12
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Full time employment: Posting here.
Join Date: Aug 2018
Posts: 597
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If your 401k has a Stable Value Fund that would be a good reason also to keep some money in your 401k. Other benefits have already been mentioned. I'd also suggest an umbrella policy if you are concerned about the potential of law suits.
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04-13-2022, 06:32 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Location: DC area
Posts: 2,496
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Quote:
Originally Posted by Running_Man
https://www.irafinancialgroup.com/le...or-protection/
The major benefit of a 401K over an IRA is that 401K's are exempt from creditor claims other than being claimed by IRS to satisfy a tax debt. IRA's are limited to 1.25 million credit exemption from generic creditors and eligible for all balances by IRS so rolling over money could lead to your IRA's being over the protection limits in claimable by a creditor when a 401K would continue to provide protection.
No matter the state 401K's always have the maximum creditor protection, and many types of activities can lead to your being considered to be under the jurisdiction of any number of states. A lawsuit does not have to be in the state of your residence.
From Invesotpedia "Whether your individual retirement account (IRA) can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There are no federal protections in place shielding your IRA from seizure in a lawsuit."
https://www.irafinancialgroup.com/le...or-protection/
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Or more simply - 401(k)s are Federally protected under ERISA and IRAs are not.
Here's a quick summary: https://www.investopedia.com/ask/ans...a-coverage.asp
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Consulting to stay engaged
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04-14-2022, 05:02 AM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Posts: 11,702
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So for those keeping it in the 401k and wanting to do Roth conversions...
Do you do in-plan conversions within the 401k?
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Retired Class of 2018
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04-14-2022, 06:16 AM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,305
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Quote:
Originally Posted by Graybeard
If your 401k has a Stable Value Fund that would be a good reason also to keep some money in your 401k.
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That’s the only reason I would’ve kept my 401k, but I had no way of knowing today’s near zero interest environment might hit us then. Hindsight is a wonderful thing, but those making the decision today might have the option.
I’d like to have access to some of the Stable Value find returns I’ve seen mentioned here. And I-bonds are essentially useless because of the $10K/year limits for many here.
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Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
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04-14-2022, 06:36 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2013
Posts: 11,078
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I kept a retirement account after leaving to allow for rule of 55 withdrawal. The fund it was in was mismanaged and I lost a six figure amount between 59 and 59.5......
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04-14-2022, 01:12 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,099
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We have some in 401K's and the costs are low enough for some broad funds that it's not worth losing the lawsuit protection to move it to an IRA.
While we have an umbrella , and are pretty low risk folks, you never know the future. We do have a rental which of course stands out as a risky thing.
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Fortune favors the prepared mind. ... Louis Pasteur
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04-14-2022, 01:38 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Jul 2009
Location: The Beautiful Blue Ridge Mountains
Posts: 2,792
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Would the answer to OP’s question regarding whether money could be transferred back into the 401(k) depend on the provisions of the particular plan?
I considered keeping money in my employer’s plan but the available investment options were terrible. Their stable value fund wasn’t paying any higher than the online banks, so I rolled everything over to my tIRA.
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04-14-2022, 04:15 PM
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#19
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Recycles dryer sheets
Join Date: Sep 2020
Location: Tampa, FL
Posts: 173
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Stable Value Funds
As far as I know, Stable Value funds are only available through a 401k. If you are interested in them, keep some money in the 401k
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04-15-2022, 07:30 AM
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#20
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: Reading, MA
Posts: 1,806
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I have a 403(b) rather than a 401(k) and yes, I'm keeping my tax-deferred funds there for the indefinite future. I no longer have a traditional IRA.
My reasons have less to do with lawsuit protection and more to do with superior investment options. In my 403(b), I have access to TIAA Traditional, TREA, and a few Vanguard institutional index funds...
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