Pros & Cons: Rolling over 401K/403B to an IRA ?

[Walt34]

I rolled a 457 account over to an IRA at Vanguard because the fees at Vanguard were lower. While I could have taken withdrawals when I retired at age 52 (which was four years past "normal retirement" for me) I had no plans to and so far haven't. And by the time I did the rollover I was already past 59 1/2 anyway so it really didn't matter.

 

[ziggy29]

I agree with Cobra that the stable value fund is a good option if your 401K has it.

In that case, would it be possible to roll over part, and leave part in the 401K?

This is why I'll probably always keep some money in my TSP now that I have it: continued access to the G fund. Don't have anything in the G fund now, but at some point I can see wanting to use it.

 

[cyber888]

MORE QUESTIONS :

1) If you have had 2 or 3 of these companies servicing your retirement nest egg (Vanguard, Fidelity, Schwab), which do you find better in terms of software, process, service and policies ?

2) Do they withhold taxes from you when you draw from your IRA ? 10% , 20% witholding ? My TIAA-Cref 403b said they will withhold 20% and I cannot adjust that %, so I was hoping for more flexibility with other service providers like Vanguard or Fidelity.

3) Have you done a SEPP 72t with any of these 3 service providers?

 

[pb4uski]

1) I only have Vanguard so no basis for comparison... but Vanguard has served our needs well for taxable, tax-deferred and Roths.
2) I think you can elect not to have withholding unless you are foreign. See http://www.vanguard.com/pdf/wh4p.pdf?221

Unless you instruct us not to withhold taxes, the IRS requires us to withhold at least 10% of your withdrawals from traditional IRAs, SEP-IRAs, and SIMPLE IRAs for federal income taxes.
When you request a distribution online, by phone, or by mail, you can:
• Let us automatically withhold 10% of the distribution.
• Ask us to withhold more than 10% of the distribution.
• Ask us not to withhold taxes at all.

If your distribution is delivered outside of the United States, you may not elect out of federal income tax withholding, and a withholding rate of more than 10% may apply.
If you instruct us not to withhold taxes, you’ll still owe federal income tax on the taxable portion of your IRA distributions, and you may have to make estimated tax payments. ...

3) No 72t for me.

 

[kaneohe]

MORE QUESTIONS :

......................

2) Do they withhold taxes from you when you draw from your IRA ? 10% , 20% witholding ? My TIAA-Cref 403b said they will withhold 20% and I cannot adjust that %, so I was hoping for more flexibility with other service providers like Vanguard or Fidelity.

........................................................?

This sounds like a 403B requirement, not a TIAA-CREF one.
403(b) Plan: Distributions | Investopedia

If you had the funds in an IRA there, it would be a different matter.

3

 

[Brett_Cameron]

Retired at 55.
401k with ex-employer.
Took early distributions from 401k per 401k Summary Plan Description (SPD).
Rolled to IRA at 59 1/2 to be able to modify distributions.

Advantage for me: the early distributions from the 401k required me to lock in a duration for all of the distributions. The SPD did not allow changing the duration or amount of distributions without triggering a total distribution.
YMMV

 

[cyber888]

Thanks a lot Kaneohe. That's great info.

This sounds like a 403B requirement, not a TIAA-CREF one.
403(b) Plan: Distributions | Investopedia

If you had the funds in an IRA there, it would be a different matter.

3

 

[GoodWishes]

I rolled over 401K to IRA several times but still have a couple 401Ks.

Reasons to roll over: better control/management, better investment choices, lower fee.

Reasons not to roll over: 401Ks are protected from creditors. I feel better that there are some money that no one can get at, just in case

 

[cyber888]

If my investments are lackluster by end of this year, I'm moving it to an IRA. Looks like Vanguard would be my first choice.

My only debt is mortgage, and have no consumer debt. And I can always sell the house. So, I don't see creditors coming after me.

 

[GoodWishes]

I don't think creditors are about debt like mortgage or consumer debt. More about unforeseen circumstances like liability or medical.

 

[Hopeful]

The one reason I would consider keeping mine where it is, is because the stable value fund is paying a guaranteed 3%. That is where I have the majority of my fixed income allocation in the current interest rate environment.

 

[papadad111]

If my investments are lackluster by end of this year, I'm moving it to an IRA. Looks like Vanguard would be my first choice.

don't see creditors coming after me.

It's not about creditors.

It's about lawyers and accidents and liability.

Stupid things happen.
Black swans happen.

It's nice to have a little extra asset protection.

And, the protection might still be worth it even if your 401k options are not optimal/lowest cost. Think of the difference as the price for the liability protection.

I'm still keeping my 401K (happens to have good fund choices) not planning on rolling it.

 

[target2019]

Have one 401(k) that's sizable. Current 401(k) provider definitely wants a rollover, but that would not be a good move on my part.

Largish 401 has institutional expense ratio on funds. The selection is limited, but that is no problem for me.

The stable value fund does not come close to 3%. If it did, that would be a differentiator. I'm only getting 1.5%.

If the fund expense ratios were not so low, I would definitely roll over to Schwab or Vanguard IRA. I do expect to eventually roll this over, for simpler management on my part.

 

[nubill]

I rolled over my TSP 401K and TSP Roth to Vanguard accounts even though the TSP had lower fees. I was planning to keep them there until I learned that upon age 70 1/2 they co-mingle both accounts and force RMD's.

 

[donheff]

I rolled over my TSP 401K and TSP Roth to Vanguard accounts even though the TSP had lower fees. I was planning to keep them there until I learned that upon age 70 1/2 they co-mingle both accounts and force RMD's.

It looks like you could have rolled the Roth over and leave the tax deferred with TSP.

 

[RE2Boys]

I rolled over my TSP 401K and TSP Roth to Vanguard accounts even though the TSP had lower fees. I was planning to keep them there until I learned that upon age 70 1/2 they co-mingle both accounts and force RMD's.

The RMD rules apply to the Roth TSP and Roth 401k. If the retirement plan permits, it may be wise to convert any Roth 401k to a Roth IRA to avoid RMD rules.

 

[nubill]

It looks like you could have rolled the Roth over and leave the tax deferred with TSP.

Yes, that is good strategy, but I planned to convert more tax deferred to a Roth anyway, while in the window between ages 59 1/2 and FRA (66) or later for SS and still under the 25% bracket.

 

[ziggy29]

It looks like you could have rolled the Roth over and leave the tax deferred with TSP.

Indeed, that's what I plan to do. My TSP is a Roth, but employer matches are "conventional" so I plan to roll the Roth portion of my TSP over to a Roth IRA sometime before RMDs would be due, I suspect, while keeping the conventional TSP in place (especially if I want continued access to the G fund).

 

[nubill]

Indeed, that's what I plan to do. My TSP is a Roth, but employer matches are "conventional" so I plan to roll the Roth portion of my TSP over to a Roth IRA sometime before RMDs would be due, I suspect.

Keep in mind the Second 5 yr rule for Roth Conversions (link below). It may be good to have an established Roth to convert to. Also on the TSP Roth conversions, start early Nov if you want it to happen in the same calendar year. TSP personnel are swamped in December.

https://www.kitces.com/blog/underst...s-for-roth-ira-contributions-and-conversions/

 

[ziggy29]

Keep in mind the Second 5 yr rule for Roth Conversions (link below). It may be good to have an established Roth to convert to. Also on the TSP Roth conversions, start early Nov if you want it to happen in the same calendar year. TSP personnel are swamped in December.

Yep, already have a Roth -- I've had one established at Schwab since 1999.

As for the conversions, I don't turn 70 1/2 until 2036, so I have quite a lot of time to see how things shake out in terms of the law and our financial circumstances. Suffice it to say I wouldn't be waiting until 2036.

 

[523HRR]

DW and I both rolled our 401Ks to IRAs at Fidelity. Biggest driver for us was being able to convert significant after-tax contributions to Roth. Happy with service at Fidelity. Expense ratios for Fidelity index funds are comparable with Vanguard.

 

[easysurfer]

I was going to create a new thread IRA related but saw this so will just add on to the topic plus my question.

When I FIRE'd transfered my w*rk 401K to my personal traditional IRA at Vanguard. I preferred to have the retirement account at one place. Also, I felt it more convenient to sign in to Vanguard and look instead of keep up with any changes the 401K might undergo if left with w*rk.

I've been doing the task of cleaning out my old paper files. About 30 years worth of stuff. My question is for the paper records of the life of an IRA, do I need to retain all the records or just the most recent IRA life? Come RMD time, is the past IRA life important or only the present?

In other words, my very first IRA began about 30 years ago as a CD at the local bank. But since then, got transfered to different custodians (bank to Kemper to Vanguard), then combined with the 401K.

 

[gayl]

I rolled a 457 to SCHWAB IRA bc I was concerned about claw backs & limited options. That was 8 yrs ago and I'm glad I did. Like having them all at 1 place

 

[gayl]

My question is for the paper records of the life of an IRA, do I need to retain all the records or just the most recent IRA life? Come RMD time, is the past IRA life important or only the present?

RMD will be taxable as ordinary income UNLESS part of your contribution was made with after tax dollars. If that's the case, consult with your CPA before shredding anything so that you don't pay tax on more $$s than necessary

 

[easysurfer]

RMD will be taxable as ordinary income UNLESS part of your contribution was made with after tax dollars. If that's the case, consult with your CPA before shredding anything so that you don't pay tax on more $$s than necessary

Thanks. I remember when my 401K got rolled over to my IRA I was asked what to do with the after tax dollar contributions. I took the money and ran .