rethinking our 401K

[steady saver]

DH and I are revisiting our portfolio after 2 years of mostly ignoring it after he finally pulled the plug in Oct 2020. Decided we needed to get clear on what we have and where and to simplify it all.

The question for this thread has to do with our 401K. I'm not sure exactly why we're keeping it now. Initially it was because it had an amazing selection of options but that all went away 2 years ago, about the time retirement happened. And we have primarily index funds in there anway.

The rest of our investments are with Fidelity. Because i'm wanting to simplify things it just seems that it makes sense to roll the whole thing over into a Rollover IRA. That would make rebalancing cleaner as well.

The only thing I don't know but need to find out is if there is any asset protection for the 401K that we wouldn't have for the IRA. I'm in Texas; don't know if that varies from state to state.

What else might I be overlooking?

Thanks in advance.

 

[pb4uski]

Unless your are under 59-1/2 and taking penalty-free withdrawals under the rule of 55 or your 401k has a good stable value fund.

I personally think the asset protection angle is a bit overblown. I've never been sued and never sued anyone and have a lot of insurance... my insurer has 2 million reasons to ensure that I have the most vigorus defense possible.

I rolled over my 401k a few months after I left.

 

[Jerry1]

We kept DW’s 401K because it has her grandfathered into a fixed fund that pays 3%. If that goes away, I’d move it to a roll over IRA. I did move my 401K immediately upon retirement. Unless there is something special about your 401K, I’d roll it over to an IRA.

 

[JBTX]

DH and I are revisiting our portfolio after 2 years of mostly ignoring it after he finally pulled the plug in Oct 2020. Decided we needed to get clear on what we have and where and to simplify it all.

The question for this thread has to do with our 401K. I'm not sure exactly why we're keeping it now. Initially it was because it had an amazing selection of options but that all went away 2 years ago, about the time retirement happened. And we have primarily index funds in there anway.

The rest of our investments are with Fidelity. Because i'm wanting to simplify things it just seems that it makes sense to roll the whole thing over into a Rollover IRA. That would make rebalancing cleaner as well.

The only thing I don't know but need to find out is if there is any asset protection for the 401K that we wouldn't have for the IRA. I'm in Texas; don't know if that varies from state to state.

What else might I be overlooking?

Thanks in advance.

In TX IRA protection against creditors is pretty strong. Yes it does vary state by state. Even in those states that it is weaker, like CA, to the extent you can identify which IRA assets were rolled out of an employer plan you still may be able to protect it.

In your case you are probably Ok to move it out for simplicity. Keep in mind you probably don’t want to be doing back door Roths if you have traditional IRAs.

 

[DrRoy]

Roll it over.

 

[big-papa]

I'm also in TX and have worked for 7 employers over the last ~39 years. In each and every case, shortly after my departure, I've rolled my 401K's over to Fidelity into my IRA there. Wife has done the same. I'll do likewise in a few months when I finally retire.

At that point the fun really begins as I begin to ponder Roth Conversions.

Never regretted doing a rollover.

Cheers
Big-Papa

 

[target2019]

DH and I are revisiting our portfolio after 2 years of mostly ignoring it after he finally pulled the plug in Oct 2020. Decided we needed to get clear on what we have and where and to simplify it all.

The question for this thread has to do with our 401K. I'm not sure exactly why we're keeping it now. Initially it was because it had an amazing selection of options but that all went away 2 years ago, about the time retirement happened. And we have primarily index funds in there anway.

The rest of our investments are with Fidelity. Because i'm wanting to simplify things it just seems that it makes sense to roll the whole thing over into a Rollover IRA. That would make rebalancing cleaner as well.

The only thing I don't know but need to find out is if there is any asset protection for the 401K that we wouldn't have for the IRA. I'm in Texas; don't know if that varies from state to state.

What else might I be overlooking?

Thanks in advance.

It may come down to the available selections in your 401(k) vs other possibilities at Fidelity or Schwab. I had institutional index funds in my primary 401(k). There was no reason to rollover and pay more expense. But when it came time to remove a small amount, I found that the service company was inflexible. So I rolled over two 401(k)'s to Schwab. By that time the expenses on Vanguard ETF's, etc., were close to institutional.

Many who posted here in the past also referred to their Stable Value funds as a reason to stay. I think that advantage has faded away with rising interest rates. My SVF always sucked, so it wasn't a factor.

And simplicity and protection are concerns. Those are hard to weight in a decision.

 

[Car-Guy]

I live in Texas too but haven't "kept up with" any special protection you might get from a 401k vs an IRA. I keep insurance for that, including an umbrella policy. I did merge all my IRA's some years ago and have considered merging my 401k too. BUT, I like the fixed/common asset option we have in my 401k plan that act much like a high yield variable rate savings account. Example, I'm on track to earn between 6 and 7% this year in my 401k (that will become a lower 6 digit yield) just letting it sit there, so I don't see much reason to mess with that. So to me it gets down to investment options.

 

[Alan]

I had a deductible IRA that I’d had for years, before Roths and Backdoor Roths were available. I kept the 401k for a year while I did a Roth conversion on my deductible IRA, then I rolled my 401k to an IRA which made things much cleaner going forward for gradual Roth Conversions.

 

[Aerides]

I rolled my 401k over to a Fido IRA, far easier to manage and better options. If you do it, have Fido manage the whole thing if possible.

 

[MarieIG]

Yes, IRA protection varies from state to state, and Texas does have some.

Unless your 401(k) has special options, I would roll over. My 401(k) had a management fee paid out of the employee's accounts; a lack of good funds, and a fee of $95 for each withdrawal, so I did roll my 401(k) into my IRAs.

 

[Mark1]

SS based on your prior posting, I believe we're in the same Megacorp 401K program. I don't think it really matter much if you roll over, or not, but I will make a few comments.

1) Yes, the fund selection went down from several hundreds to maybe a couple dozen index funds, etc. but I was never in the high cost funds anyway.

2) If you want more investments options you can always just move money to Brokerage Link and have access to all of Fido's investment options. Based on DW's and my assets, the majority of my 401K is actually invested in Fido brokerage CDs via the Brokerage Link option.

3) If you look closely you will note that Megacorp started charging us Bookkeeping/Administrative fees this year, but at $12.50/quarter that isn't really material for me (0.0031% of 401K balance/year).

4) Much like our retirement medical coverage, if you ever leave you can never get back in.

 

[ncbill]

401(k) plans 'rolled over' to an IRA that doesn't have any other outside money added still enjoy federal protection from creditors, during bankruptcy proceedings:

http://www.bairdfinancialadvisor.co...008/Asset Protection for Qualified Assets.pdf

State law often provides protection w/o having to first file for bankruptcy.

E.g. here all IRAs of any type (traditional, Roth),or amount (including inherited) are protected from creditors w/o requiring filing for bankruptcy.

 

[punkinhead]

I rolled my entire 401k into an IRA when I retired just for the simplicity and better options. I was (and still am) less than 59.5 but my spouse was over that so we'll just draw from hers for a few years. My state protects IRAs from lawsuits.

 

[wdberry62]

Roll it over. You'll have better investment options. Also, your 401K may have limits on how many withdrawals you can make annually (mine did) that won't exist with a rollover IRA. May not be a concern now, but could be down the road. If you're worried about asset protection, look into an umbrella policy.

 

[mpeirce]

Does anyone have any examples of people protecting their retirement by having their money in an IRA and shielding the money from law suit?

I get it that there is a chance. It just seems quite small. And umbrella insurance appears to address that.

 

[steady saver]

SS based on your prior posting, I believe we're in the same Megacorp 401K program. I don't think it really matter much if you roll over, or not, but I will make a few comments.

1) Yes, the fund selection went down from several hundreds to maybe a couple dozen index funds, etc. but I was never in the high cost funds anyway.

2) If you want more investments options you can always just move money to Brokerage Link and have access to all of Fido's investment options. Based on DW's and my assets, the majority of my 401K is actually invested in Fido brokerage CDs via the Brokerage Link option.

3) If you look closely you will note that Megacorp started charging us Bookkeeping/Administrative fees this year, but at $12.50/quarter that isn't really material for me (0.0031% of 401K balance/year).

4) Much like our retirement medical coverage, if you ever leave you can never get back in.

Thanks, I'm not familiar with the Brokerage Link option so i'll look into that before making any changes.

 

[steady saver]

All in all, I think we'll probably roll things over just to make life super simple. We are only interested in basic index funds, nothing complicated. And while we need to get power of attorney set up anyway, this way I believe the IRA will be in both our names. I need to double check that.

 

[Dtail]

Do you have a stable value fund in the 401k, which one can only have in a 401k?
If yes and the historical yields are decent, then it can be a portion of your fixed income allocation.