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Leaving 401K $$$ with company post Retirement
01-24-2016, 06:34 AM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Posts: 6,506
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Leaving 401K $$$ with company post Retirement
In today's WJS is an article about companies urging retirees to leave their money in the companies' plans.
Yeah right. Most are high overhead.
Companies Urge Retiring Workers to Leave Something Behind—Their Money - WSJ
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01-24-2016, 06:41 AM
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#2
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gone traveling
Join Date: Apr 2011
Posts: 3,375
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Looks like size of fees is related to size of 401k holdings by the company.
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01-24-2016, 06:48 AM
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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: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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My last Megacorp's 401K is with Fidelity and it has a lot of good fund options with "institutional shares" that have pretty low fees. I haven't felt sufficiently motivated to move it yet, though I may at some point.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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01-24-2016, 06:53 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Posts: 2,511
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can't read the article without a subscription.
There are a couple cases where leaving it might be in the 401k owner's best interest. Depending upon state, the 401k may provide better protection from creditors. If the owner retired after 55 and before 59.5, it would allow withdraws without penalties.
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01-24-2016, 06:56 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
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When you move it, you have 100% control and more investment options. I m moving mine. Your private investment account will be larger and you may get more perks. Fees will very likely be less.
If you are worried about creditor protections, keep working or clean up your act.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
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01-24-2016, 07:15 AM
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#6
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 1,671
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In Maryland, 401(k) distributions qualify as a pension payment when calculating the pension exclusion for MD income tax. IRA distributions do not, even if the money originally came from a qualified retirement plan. Rolling a qualified retirement plan to an IRA kills off any benefit that you might gain through the pension exclusion.
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01-24-2016, 07:16 AM
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#7
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Recycles dryer sheets
Join Date: May 2015
Location: Houston
Posts: 337
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Quote:
Originally Posted by bingybear
can't read the article without a subscription.
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If you highlight the text in the post, then copy it into Google (or right click and say "search with ....." you can read the article without the pay gate.
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01-24-2016, 07:19 AM
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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: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by jebmke
In Maryland, 401(k) distributions qualify as a pension payment when calculating the pension exclusion for MD income tax. IRA distributions do not, even if the money originally came from a qualified retirement plan. Rolling a qualified retirement plan to an IRA kills off any benefit that you might gain through the pension exclusion.
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This is one of the reasons I haven't done it yet, because some states give preferred treatment to pension income, and 401K/403B plans are treated as pension plans under federal law (IRAs are not). I am probably going to eventually roll it over into my TSP, though. Just need to get around to it. I also don't really want to do it during periods of high volatility; with my luck my 401K would cash out at a bottom and the market would rally 10% while I was out of the market until the transferred funds were reinvested.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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01-24-2016, 07:22 AM
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#9
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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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Quote:
Originally Posted by Senator
If you are worried about creditor protections, keep working or clean up your act.
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Protection from lawsuits.
You can be clean as the wind driven snow, and still get sued, especially if someone gets wind of your NW.
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01-24-2016, 07:33 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
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Quote:
Originally Posted by JoeWras
Protection from lawsuits. You can be clean as the wind driven snow, and still get sued, especially if someone gets wind of your NW.
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Very true. If they do not take your 401k, they take your house and garnish any pensions or investment accounts. And any income that may come out of the 401K once it lands in a bank account. Possibly any life insurance cash values.
I would not let protection from a lawsuit be a main factor in my decision to leave a 401K at an employer. Get umbrella insurance or put it in a irrevocable trust. Many states protect IRA accounts too.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
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01-24-2016, 07:59 AM
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#11
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Full time employment: Posting here.
Join Date: Feb 2014
Posts: 731
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Well, if your plan calls for tapping your 401k using the rule of 55, then it is better to leave it.
There is no automatic 'rule' that says you should/need to roll it out.
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01-24-2016, 08:06 AM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,327
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Quote:
Originally Posted by ziggy29
My last Megacorp's 401K is with Fidelity and it has a lot of good fund options with "institutional shares" that have pretty low fees. I haven't felt sufficiently motivated to move it yet, though I may at some point.
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Same with me. I did move some funds out to buy CDs at favorable rates. Good 401k plans let you rollover funds anytime so if you don't trust management or believe the fees are high, why wait until you change employment status? I wish these articles emphasized understanding your 401k plan so you could make an informed decision to stay or switch.
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...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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01-24-2016, 08:08 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,722
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I couldn't read the article. It would be very helpful to put the free link from Google in the original post.
It is also true that new 401k provider wants your old plan. Old plan has institutional funds, and the yearly fees are lower than I could get elsewhere. New 401k plan has 1% expenses on the offered funds. Some are much more, so I will not be moving anything, at least for 1-2 years.
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01-24-2016, 08:10 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Mar 2013
Location: Coronado
Posts: 3,707
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Another reason to leave it in a 401K is if you have an IRA with after-tax contributions that you're planning to convert to a Roth IRA during early retirement. You don't want any more pre-tax money in an IRA if that's part of your strategy. And keeping it in a separate IRA won't help as the IRS treats them all as a single pool of money when calculating the tax due on a conversion, while it completely ignores whatever you have in a 401K.
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01-24-2016, 08:13 AM
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#15
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,212
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Another reason you might keep a 401k is for the stable value fund. I kept my small 401k for this... until the stable value adjusted interest rates down to be less of a good deal. (401k was small because 18 months prior to retirement my division had been spun off and sold, which was a "termination event" for the prior 401k and vesting event in the new 401k).
I spent the bulk of my career working for a very large employer (Motorola) and our 401k was investment class index funds with expense rations that rivaled Vanguard. My husband worked for smaller employers with craptastic 401k fund options - some with loads as high as 5%.. not to mention surrender charges. He contributed just enough for the match because of this and we rolled his to Vanguard when he retired.
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Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 6%, rental income 20%
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01-24-2016, 08:14 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 3,361
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Quote:
Originally Posted by Senator
Very true. If they do not take your 401k, they take your house and garnish any pensions or investment accounts. And any income that may come out of the 401K once it lands in a bank account. Possibly any life insurance cash values.
I would not let protection from a lawsuit be a main factor in my decision to leave a 401K at an employer. Get umbrella insurance or put it in a irrevocable trust. Many states protect IRA accounts too.
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What they can take depends on the state. In Tx homestead protections are the whole house or if in the country up to 20 acres. Note that the big point is what can be taken in Bankruptcy, and Pensions as well as 401ks are exempt.
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01-24-2016, 09:36 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Sep 2006
Posts: 1,743
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I left my 401K in my former employer's plan for the first 18 months after I retired. The plan had no administrative fees and a decent selection of Fido and vanguard index funds. Last December the company substituted all funds I was invested in with different funds and investment trusts. The new funds and trusts had no NAV and would have been too difficult for me to track their performance.
Since my state provides full liability protection for rollovers I rolled over my 401K to a Fido IRA last December and the process went very smooth and now I'm back in the funds I was initially invested in.
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01-24-2016, 09:54 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2013
Location: Texas
Posts: 10,941
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Couldn't read much of the article (no subscription). I've left my 401k at my employer. Very low fees, (.00x) pretty good range of investment options from fixed income to all sorts of funds. Low, mid, large caps, international funds, "company stock", etc. I probably won't touch it until RMD's kick-in 5+ years from now. To be honest, I often forget about it until I get my quarterly statements in the mail. Last year I earned about 3% overall in the 401k. Not to bad considering.
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01-24-2016, 10:13 AM
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#19
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gone traveling
Join Date: Jun 2015
Location: seattle/dahlonega
Posts: 77
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Could not read
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01-24-2016, 10:21 AM
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#20
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Thinks s/he gets paid by the post
Join Date: Jul 2013
Posts: 1,046
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I left mine in the old 401k because money would be available earlier than say IRA. It costs me $35 per quarter to leave it with BNY Mellon.
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