Rollover 401k to IRA or leave as-is

[Chiara]

My DH (54yo) has a 401k worth about 106k with Fidelity investments - PIMCO-Bond (10k) and Spartan 500 Index (96k).
He is no longer with the employer that offered the 401k and his new employer does not offer any retirement benefits.

My question is, is it better to leave the 401k in Fidelity untouched and just start a new IRA going forward or should he roll the 401k to a IRA?
It's rather unfortunate that he doesn't have a good retirement vehicle now; he had just started making catch-up contributions but now it seems like we are forced to slow down our tax advantaged savings.

I guess my second question then is, is there some retirement vehicle that we may be overlooking that would offer better options than a $6,500/yr contribution?

Thank you all for your help/suggestions/comments

 

[Dreaming of Freedom]

One nice thing I have heard about being a Fidelity client is that you can use their Retirement Income Planner (RIP) tool. I am not a Fidelity client though, so I can not use their RIP tool, and have no review of it personally.

 

[Koolau]

All the providers of IRAs will strongly encourage you to roll over into an IRA (surprise, surprise.) If the choices within the 401(k) are to your liking and the fees are reasonable, there may be reason to stay with the 401(k) assuming the employer doesn't attempt to get you to leave it. I have heard that the 401(k) has the most iron-clad protection against forfeiture to, for instance, a law suit. In my case, I have access to a "stable value" fund which I do not wish to give up. I have rolled some of my 401(k) to IRA(s) but will keep the 401(k) active for the foreseeable future. IOW this is a very personal decision with no absolutes - at least until you do your homework. Good luck and YMMV.

 

[big-papa]

As a matter of course, I have always rolled over my 401K's from previous employers into a rollover IRA. In my case, all of my previous employers used Fidelity for their 401Ks and my rollover IRA is also at Fidelity. It was literally a phonecall to Fidelity to roll it out of the 401K and into the rollover IRA.

The primary reason I do that is that I'm pretty much always unhappy with the fund selections that the 401Ks provide. Though at one company, the 401K had access to brokeragelink and they allowed up to 90% of my 401K holdings to use it - Brokeragelink was set up such that I had access to all of Fidelity's funds. Even then, after I left the company, I rolled it over. I wanted 100% access.

 

[Senator]

If you roll it over, you have more investment options and faster access to any money if you need it. You can open a rollover account at Fidelity. I have never left a 401K at an employer.

Just because the 401K is at Fidelity, doesn't mean the employer can't switch it to another firm, change the rules, or even abscond with any funds, especially if it is a small employer.

I worked for one very small employer that said all it takes is one signature to withdrawal all 401K funds.

 

[DEC-1982]

It's a very personal decision. You will find advice recommending both sides.

All the providers of IRAs will strongly encourage you to roll over into an IRA (surprise, surprise.) If the choices within the 401(k) are to your liking and the fees are reasonable, there may be reason to stay with the 401(k) assuming the employer doesn't attempt to get you to leave it. I have heard that the 401(k) has the most iron-clad protection against forfeiture to, for instance, a law suit. In my case, I have access to a "stable value" fund which I do not wish to give up. I have rolled some of my 401(k) to IRA(s) but will keep the 401(k) active for the foreseeable future. IOW this is a very personal decision with no absolutes - at least until you do your homework. Good luck and YMMV.

+1

Agree with above 100%.

OTOH, IRAs do provide greater choices. But if you are a Bogle follower, this becomes irrelevant, 1-2 stock index funds, 1 bond index fund is enough.

Also, rollovers from Fidelity 401 k to Fidelity IRA is easy. Rollover from Fidelity to another fund company probably means they send you a check.

DISCLAIMER: I did a rollover when I found my 401 k allowed only a one-time withdrawal for all of the money. Now I am chewing my finger nails while the check for most of my lifetime savings is "in the mail".

 

[pb4uski]

To me, the only reason to leave a 401k with an employer is if they have a stable value fund that pays a good interest rate (2% in today's terms). In my state, an IRA is as protected if I were sued as a 401k and I have a good sized umbrella policy, so that is not an issue for me.

Another reason might be if one left service after age 55 and the 401k allowed penalty free withdrawals and you needed access to those funds before 59 1/2.

Other than that, I prefer to be in an IRA where I have better access to low cost index funds and can control the money directly.

 

[jabbahop]

i left mine because it was a Vanguard 401K and had slightly lower institutional expense ratios than I would get as an admiral customer.


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[Animorph]

If you want to do a "backdoor" Roth contribution you'll want to leave your money in the 401k so that you have no pre-tax IRA money. That can be a big consideration if your income level is too high for a regular Roth IRA contribution.