Three 401k’s. Any pitfalls to consider before consolidating

[Love This Community]

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.

 

[WhenIsItTime]

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.

 

[jazz4cash]

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.

 

[Alderman]

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.

 

[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.

 

[MRG]

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.

+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.

 

[Love This Community]

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.

 

[Out-to-Lunch]

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.

+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.

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.

 

[skyking1]

I was always a little leery of Empower, where DW's current accounts are. We will Roth convert them out of there at retirement.

 

[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?

 

[RetireeRobert]

I need to educate myself on advantages and disadvantages of transferring to 401K account vs. IRA.

Kiplinger's personal finance magazine has a good article on just this subject:

https://www.kiplinger.com/article/r...d-cons-of-rolling-your-401-k-into-an-ira.html

 

[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.

 

[thod]

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.

 

[Love This Community]

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?

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.

 

[Love This Community]

Kiplinger's personal finance magazine has a good article on just this subject:



https://www.kiplinger.com/article/r...d-cons-of-rolling-your-401-k-into-an-ira.html

Thanks RetireeRobert! I know what I will be doing over the weekend...[emoji1]

 

[Love This Community]

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.

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.