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Three 401k’s. Any pitfalls to consider before consolidating
04-15-2021, 02:37 PM
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#1
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Recycles dryer sheets
Join Date: Feb 2015
Location: Chicago
Posts: 259
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Three 401k’s. Any pitfalls to consider before consolidating
I have 3 different 401k’s from three employers (Fidelity, Vanguard and Empower). I am thinking of consolidating everything into empower retirement account and simplifying the portfolio by putting around 90% of the value in state Street target retirement 2055 fund with 0.07% expense ratio.
My full retirement age year will be 2043 however, I am choosing target date 2055 fund to lean more towards % allocation towards stocks vs. bonds.
Do you see any flaw with this consolidation plan? Anything that I should consider before taking this action?
Would rolling into IRA and investing one of the 401K accounts in growth funds make sense?
Appreciate your inputs. Please let me know if you need any additional information.
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04-15-2021, 03:13 PM
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#2
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Recycles dryer sheets
Join Date: Jun 2018
Posts: 441
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Only watch out I’d share is when I moved mine it was out of market for a full week when market went up 2%. Not much you can do about it, but that was hard to endure.
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04-15-2021, 04:12 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: Aug 2004
Location: Laurel, MD
Posts: 8,304
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Could provide more details? Are you consolidating into an active 401k or an IRA?
Does any of the 401k’s offer a stable value fund? It might be worth keeping if you need a good cash allocation account.
The target date strategy and ER sound good to me.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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04-15-2021, 04:12 PM
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#4
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Dryer sheet aficionado
Join Date: Nov 2014
Posts: 42
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No real advise and just want to say when I rolled things into Vanguard, they were helpful getting it done. Hope it goes as easily for you whichever one you choose.
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04-15-2021, 06:55 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Jan 2013
Posts: 3,405
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I would look long and hard at Empower. It's really an insurance and annuity company, Great West Life and Annuity. They recently bought Personal Capital.
My guess is there are fees in the mix somewhere. They offer managed accounts and annuities along with funds. They will no doubt try to sell you products you don't need or want.
https://www.empower-retirement.com/individuals
In your shoes, I would consolidate to Fidelity or Vanguard.
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04-15-2021, 06:58 PM
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#6
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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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Quote:
Originally Posted by Another Reader
I would look long and hard at Empower. It's really an insurance and annuity company, Great West Life and Annuity. They recently bought Personal Capital.
My guess is there are fees in the mix somewhere. They offer managed accounts and annuities along with funds. They will no doubt try to sell you products you don't need or want.
https://www.empower-retirement.com/individuals
In your shoes, I would consolidate to Fidelity or Vanguard.
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+1000
I wouldn't go to anyplace except Fidelity, Vanguard, or Schwab. The OP has good choices I'm not sure what they're using a lesser provider. Perhaps they could explain their preference.
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04-15-2021, 08:25 PM
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#7
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Recycles dryer sheets
Join Date: Feb 2015
Location: Chicago
Posts: 259
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Thank you all for your responses. Part of the reason I have three 401K’s is:
Mega Corp 1 - My 1st employer: Was administered by Fidelity. I invested part of my 401K in company stock (very bad choice. Paid around $38 per stock cost basis. It never recovered and now is hovering around $13).
When I switched to Megacorp 2, I wanted try Vanguard (Megacorp 2 provider). Was waiting to move Fidelity account into Vanguard (hoping for MC 1 stock recovery...alas).
Fast forward to now, current Megacorp has Empower Retirement. Was trying to consolidate all accounts into current provider however, based on the inputs, this seems like a bad option. I may still consolidate Fidelity and Vanguard accounts.
I need to educate myself on advantages and disadvantages of transferring to 401K account vs. IRA.
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04-15-2021, 08:45 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Jan 2020
Location: Milwaukee
Posts: 3,939
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Quote:
Originally Posted by Another Reader
I would look long and hard at Empower. It's really an insurance and annuity company, Great West Life and Annuity. They recently bought Personal Capital.
My guess is there are fees in the mix somewhere. They offer managed accounts and annuities along with funds. They will no doubt try to sell you products you don't need or want.
https://www.empower-retirement.com/individuals
In your shoes, I would consolidate to Fidelity or Vanguard.
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Quote:
Originally Posted by MRG
+1000
I wouldn't go to anyplace except Fidelity, Vanguard, or Schwab. The OP has good choices I'm not sure what they're using a lesser provider. Perhaps they could explain their preference.
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Empower is not automatically a bad choice. Our 457(b) plan (for a large employer) is through them, while my 403(b) is from Fido. In our plan, Empower has very low ER index funds available: Domestic funds run from 0.01% (for S&P 500) to 0.03% (midcap), while a EAFE fund runs 0.06%. There is a "management fee" that runs another 8 bips, however. Including that, my weighted average expense ratio is just a touch over 0.10%.
In addition to these cheap, passive funds, there are some specialty funds available (from Dodge and Cox, DFA, Calvert, Vanguard, etc.) for those so inclined. And a stable value fund.
Granted, I think the roots of Empower/Great Western are high-cost insurance contracts, and my large employer is probably forcing them to provide good value. But they are not always a bad choice.
__________________
The closing years of life are like the end of a masquerade party, when the masks are dropped. -Arthur Schopenhauer, philosopher (1788-1860)
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04-15-2021, 09:03 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Feb 2021
Location: Puget Sound
Posts: 3,191
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I was always a little leery of Empower, where DW's current accounts are. We will Roth convert them out of there at retirement.
__________________
Class of 2023
OMY to 2024
Operating Engineer for a commercial plumbing contractor
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04-15-2021, 09:20 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Location: DC area
Posts: 2,464
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In my experience Empower has rock bottom expense ratios, Vanguard and Fido do not beat them. Their funds are Black Rock and State Street institutional funds. One example in my 401(k) is their Blackrock S&P500 Index at 0.03% - beats Vanguard. At least in my megacorp plan the management fee is trivial at ~$7/quarter.
In your case I would consolidate with your current employer simply for the quality of life improvement of a single account. Also, if you are looking at Rule of 55 withdrawals those only apply to the current plan when you retire. You can always roll it all into a tIRA later, but you would lose Rule of 55 and may lose institutional diversification if you did that.
EDIT - oh, and I don't think you can rollover your current plan into a former plan - how would that work?
__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged
"All models are wrong, some are useful." - George Box
“There is always a well-known solution to every human problem: neat, plausible, and wrong.” - H.L. Mencken
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04-15-2021, 09:38 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 1,979
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Quote:
Originally Posted by Love This Community
I need to educate myself on advantages and disadvantages of transferring to 401K account vs. IRA.
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Kiplinger's personal finance magazine has a good article on just this subject:
https://www.kiplinger.com/article/re...to-an-ira.html
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
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04-16-2021, 05:09 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 2016
Location: Northern Virginia
Posts: 7,515
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If it were me and my current 401k had attractive options and rule say in-service withdrawal I would consider consolidating there to preserve an uncomplicated path to back-door Roth.
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04-16-2021, 06:47 AM
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#13
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Recycles dryer sheets
Join Date: Jan 2021
Location: Allen
Posts: 106
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I currently have accounts at TDAmeritrade, Fidelity, Vanguard and Schwab.
TDAmeritade is my personal brokerage account.
Fidelity is my 401k, rollover IRA, Roth IRA, etc
Schwab is just a donor advised fund
Vanguard is my wife’s 401k
By far Vanguard is the worst. Website is horrible, fees are outrageous, etc
Schwab website is just annoying.
I am often baffled by all the love of Vanguard.
I think the issue is they sell different features/look and feel, along with different fee structures to each company plan. So be careful with making blanket statements about website and fee structures.
The ironic thing is that when my wife retires next year, I will transfer her stuff out of Vanguard. Vanguard had a chance to impress a client with a large portfolio, but instead took advantage of a small business and probably lost a potential customer long term.
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04-16-2021, 07:19 AM
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#14
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Recycles dryer sheets
Join Date: Feb 2015
Location: Chicago
Posts: 259
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Quote:
Originally Posted by USGrant1962
In my experience Empower has rock bottom expense ratios, Vanguard and Fido do not beat them. Their funds are Black Rock and State Street institutional funds. One example in my 401(k) is their Blackrock S&P500 Index at 0.03% - beats Vanguard. At least in my megacorp plan the management fee is trivial at ~$7/quarter.
In your case I would consolidate with your current employer simply for the quality of life improvement of a single account. Also, if you are looking at Rule of 55 withdrawals those only apply to the current plan when you retire. You can always roll it all into a tIRA later, but you would lose Rule of 55 and may lose institutional diversification if you did that.
EDIT - oh, and I don't think you can rollover your current plan into a former plan - how would that work?
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Thanks USGrant1962. You’re correct, I was not planning on rolling over my current 401K (with empower) to a former plan. Appreciate you sharing the rule of 55. I need to spend some time educating myself on this topic. Never thought of institutional diversification so far...[emoji1]. We learn something new everyday.
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04-16-2021, 07:20 AM
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#15
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Recycles dryer sheets
Join Date: Feb 2015
Location: Chicago
Posts: 259
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Quote:
Originally Posted by RetireeRobert
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Thanks RetireeRobert! I know what I will be doing over the weekend...[emoji1]
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04-16-2021, 07:22 AM
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#16
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Recycles dryer sheets
Join Date: Feb 2015
Location: Chicago
Posts: 259
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Quote:
Originally Posted by Montecfo
If it were me and my current 401k had attractive options and rule say in-service withdrawal I would consider consolidating there to preserve an uncomplicated path to back-door Roth.
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Thanks Montecfo. Will explore our plan for in-service withdrawal options. This is a great point and I believe will help especially if one is planning to RE.
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