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To rollover old 401(k) or not???
Old 07-05-2020, 08:17 AM   #1
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To rollover old 401(k) or not???

Hello Early Retirement community.
I've been with my current employer for about 9 years. Prior to that I was at a different employer for 14 years.
My previous 401(k) is with Vanguard and has a balance of a little over $500,000. The fees associated with that account are a flat $15 a quarter ($60 per year) regardless of the balance.
My current 401(k) is with John Hancock and has a balance of a little over $200,000. The fees seem to fluctuate but over the past 12 months have totaled a little over $700.
10 years ago I was at 100% stocks in each account. (34% Large-Cap US Index, 33% Small-Cap US Index and 33% International Index) About 3 years ago I switched to a 75/25 stock/bond allocation. (25% bonds, 25% Large-Cap US Index, 25% Small-Cap US Index and 25% International Index) In January of this year as I'm getting closer to retirement (~5 years?) I switched to a 60/40 stock/bond allocation (40% bonds, 20% Large-Cap US Index, 20% Small-Cap US Index and 20% International Index)
As far as returns go, According to Vanguard's website my previous 401(k) has a 10 year average return of around 12%. According to John Hancock's website, my 8 year (as far as I can go back due to switching between union and non-union accounts) return is around 8%.
So obviously, considering fees and returns, I've kept my previous employer's 401(k) with Vanguard. I haven't contributed to it in 10 years but have steadily watched it increase in value.
As I get closer to retirement, and with all the uncertainty of 2020, I'm wondering if I should roll over the old 401(k) into the new one. The company I work for is in the electric utility industry and has quite the backlog of orders so my job prospects seem pretty decent for the next five years but one never knows. The reason I'm considering a rollover is to have earlier access to both accounts.
If I retire on or after January 1st, 2025 I can access the funds in my current employer 401(k) without an IRS penalty but would have to wait until May, 2030 (age 59-1/2) to access the (larger) Vanguard IRA. If I roll over the balance of the Vanguard 401(k) into the JH 401(k) then I could access a larger amount of my retirement savings between age 55 and 59-1/2 if I needed them.
I have no credit card debt. House and vehicles are paid off. I max out my 401(k), Roth IRA, HSA and my wife's IRA every year. I have over a year's expenses in savings if needed. I would like to hear from experienced early retirees on whether it would be worth rolling over my old 401(k) into my new 401(k).
Thanks in advance.
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Old 07-05-2020, 08:27 AM   #2
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Roll all past employer 401Ks in to self-directed (rollover) IRA - it could even stay at Vanguard seeing you are happy with them.

Call Vanguard, they will assist getting the funds from Hancock.

If necessary, you can access as much of the money as you like prior to age 59 1/2. Read up on Rule 72(t).
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Old 07-05-2020, 08:30 AM   #3
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You need to look at expense ratios.

The $15/yr is peanuts compared to a high expense ratio.

I didn't read everything you wrote, but I bet if you think hard on it, you'll keep the Vanguard (low expense ratios).


If you have access to a stable value fund, that's a reason to keep it in the 401k as opposed to moving it to a rollover IRA. If your investment choice is limited, that's a reason to get it out of the 401k.
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Old 07-05-2020, 08:35 AM   #4
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If you absolutely need access to the balance in old 401k, then do the rollover to new 401k just before retiring. That will delay taking higher expenses on all.

I'm willing to bet that something will change before then and you could have other options. So I wouldn't do this now, since you don't have to.
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Old 07-05-2020, 09:05 AM   #5
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Quote:
Originally Posted by njhowie View Post
Roll all past employer 401Ks in to self-directed (rollover) IRA - it could even stay at Vanguard seeing you are happy with them.

Call Vanguard, they will assist getting the funds from Hancock.

If necessary, you can access as much of the money as you like prior to age 59 1/2. Read up on Rule 72(t).
OP - Wait until you are retired, so much can change in 5 years.

Then as njhowie said you can rollover your Vanguard 401K to an IRA , then using the Rule 72(t) you can take out $ without penalty.

As you read about Rule 72(t), consider, splitting your Vanguard 401K into 2 rollover IRA's one with 90% of it, and the other with 10%. Use the 90% one for the Rule 72(t). The 10% one is for emergency use (with penalty) and would probably not be touched until you reach 59.5.
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Old 07-05-2020, 09:06 AM   #6
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Stuff to unpack here. Vanguard and JH manage those 401Ks. Each plan offers a menu of investment options, including (I'm sure) mutual funds managed by each plan manager.

Each plan manager charges fees. Usually these are mostly paid by the employer. You can ask the HR departments for a statement of fees. Probably this will be a "404a-5 Participant Fee Disclosure" but the form # may have changed/IANL. Your HR rep should be happy to explain those fees to you.

In addition, each mutual fund you invest in will charge fees. Vanguard's index fund fees are among the lowest. From a quick Google search, JH's fees are not (https://www.bogleheads.org/wiki/John_Hancock_Funds). Their total US market fund fee is about ten times what VG charges for an equivalent fund. Fees for actively managed funds will be much higher; these funds are to be avoided because of the high fees and because they rarely beat the index funds. Ssometimes the shortfall can be significant.

If it were me, I would follow @njhowie's advice and move the old 401K just on general principles. You can probably transfer "in kind" so no buying and selling of funds would be required. From a VG 401K to a VG TIRA is probably the easiest possible move, but if you prefer Schwab, Fido, etc. that should be pretty easy too. After the move you will have a much wider range of investment options and, probably, a better and more convenient user interface to your account.

I would be very wary of JH. They are not known as a low cost mutual fund provider and that article I linked bears that out. They are also an insurance company first, then an investment company out of necessity. They are very likely to be pushing annuities and other insurance products. I'm not sure they can legally give your contact information to one of their regular insurance salespeople but if they can, you can be sure that they will. You are stuck with them at your current employer, so keep an eagle eye on all fees, switching if possible to lower fee index funds offered by VG, Fido, or Schwab. If no low cost index funds are offered, complain to your HR department. More: https://www.cnbc.com/2018/03/12/thos...-cost-you.html
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Old 07-05-2020, 09:29 AM   #7
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Originally Posted by njhowie View Post
If necessary, you can access as much of the money as you like prior to age 59 1/2. Read up on Rule 72(t).
Interesting. I thought "The rule of 55" only applied to 401(k) accounts with my current employer. I had read about the SEPP rule but again, I thought it applied to 401(k) accounts and that I would have to wait until 59-1/2 to access any (non-Roth) IRA funds without a penalty.
So if I retire in 2025 I could roll over both of my 401(k) accounts into a rollover IRA and take Substantially Equal Periodic Payments for 5 years or until I turned 59-1/2. (which would be in May of 2030)
Thank you. This is good information.
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Old 07-05-2020, 10:15 AM   #8
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I would be very wary of JH. They are not known as a low cost mutual fund provider and that article I linked bears that out. They are also an insurance company first, then an investment company out of necessity. They are very likely to be pushing annuities and other insurance products. I'm not sure they can legally give your contact information to one of their regular insurance salespeople but if they can, you can be sure that they will. You are stuck with them at your current employer, so keep an eagle eye on all fees, switching if possible to lower fee index funds offered by VG, Fido, or Schwab. If no low cost index funds are offered, complain to your HR department. More: https://www.cnbc.com/2018/03/12/thos...-cost-you.html
I know I'm stuck with JH for my current employer 401(k). My current employer actually was bought by an investment group a few years back and has subsequently brought on some new financial officers but the existing CFO has tried to convince me that JH is a good company and suggested I roll over my Vanguard 401(k) into my JH account. He probably gets a kick-back from JH for getting more money to them so they get more fees. It would be nice if us as employees could convince the new financial officers to make the switch from JH to a better (for the employees) 401(k) provider like Vanguard.
I do have Vanguard Target-Date funds available in my JH 401(k) but with an expense ratio of .15% I think I'm (a little) better just sticking with my current allocation of JH funds with expense ratios of .07%, .08%, .16% and .14% in my 4 funds. That seems to be the best I can do with the diversification I want until a better option presents itself.
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Old 07-05-2020, 10:23 AM   #9
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Do not roll Vanguard into JH! Can't you access the Vanguard money at age 55? I did something similar but different. A 72t is an option but 55 is easy-to-use.
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Old 07-05-2020, 10:37 AM   #10
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Quote:
Originally Posted by ArmchairMillionaire23 View Post
I know I'm stuck with JH for my current employer 401(k). My current employer actually was bought by an investment group a few years back and has subsequently brought on some new financial officers but the existing CFO has tried to convince me that JH is a good company and suggested I roll over my Vanguard 401(k) into my JH account. He probably gets a kick-back from JH for getting more money to them so they get more fees. It would be nice if us as employees could convince the new financial officers to make the switch from JH to a better (for the employees) 401(k) provider like Vanguard.
I do have Vanguard Target-Date funds available in my JH 401(k) but with an expense ratio of .15% I think I'm (a little) better just sticking with my current allocation of JH funds with expense ratios of .07%, .08%, .16% and .14% in my 4 funds. That seems to be the best I can do with the diversification I want until a better option presents itself.
Well, that really doesn't sound too bad. I don't like blended funds generally so I have not looked at target date funds, but I recall reading that the net fees on target date funds were higher because the target date fund expenses were stacked on top of the underlying funds' fees. As far as what JH is charging in other fees you're pretty much stuck with that. $700 on $200K is 35bps. That's a lot. I would get a disclosure form, though. You absolutely should know exactly what and how you're being charged.

If a group of employees want to argue for a new 401K manager, the drum to beat is "breach of fiduciary duty."

I see no advantage in moving the VG stuff into the current 401K.
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