What to do with my 401K?

[love2travel]

I have been retired for a year now and just turned 64. I left my 401K with Alight who managed it while I was employed at .25%. I ready to move it but cannot decide to where and what. The total is $1.1M. I have been working with a Fidelity advisor the past several years setting up a CD ladder and have a meeting in a couple of weeks to discuss rolling over a portion to a Roth and moving to an IRA for the balance. I have never managed my investments and would really prefer not to, but on the other hand I do not want to pay 1% + to someone else. Honestly I know nothing is free, just trying to figure out the least stressful and best solution. Fidelity has suggested Separately Managed Accounts, I have read on this forum a lot of you are not crazy about them. I also have about $500k with TIAA from an inheritance with guaranteed rate of 4%, never to lose and currently taking RMD's. I am not taking SS yet, hoping to wait until 70, my DH is current taking SS, started at 62. Any advise would be appreciated!

 

[disneysteve]

Roll it into a good balanced index fund with a low expense ratio and be done with it. No decisions to be made. No trades to have to figure out. No manager to pay a stupid amount of money to. I'm not with Fidelity so can't recommend a specific fund (I'm a Vanguard guy) but I'm sure someone here can give you the specifics. Once you start needing to take withdrawals from the account, Fidelity can set that up for you easily enough I'm sure.

 

[OldShooter]

... Any advise would be appreciated!

Here 'ya go:

"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/

"The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
​

Once you are set up, investing shouldn't take more than a few hours of effort a year and you don't need to hire the priests and witches from the investment industry to help you.

More advice (from Warren Buffet): "Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell. ... Lethargy bordering on sloth should remain the cornerstone of an investment style."

 

[garyt]

Leave it. My understanding (please correct me if I'm wrong) but retirement accounts can't be taken from you in a lawsuit but regular IRA's can. We left my wife's 401k there for that reason.

 

[njhowie]

If you don't want to pay 1% for someone else to manage it, then you will be spending your time doing it. Either way, you're ultimately responsible for the outcome. My view - take control and do it yourself...nobody cares more about your money and well being than you.

If you do have 4% guaranteed with TIAA, then leave it there. DW's 401k is at TIAA and I find that in general, their fees are high.

The $1.1M with Alight, seriously consider moving it to Fidelity. However, demand Fidelity pay you. Fidelity has been paying $2500 cash for transferring in $1M over the past several years. If the representative says they no longer have that offer, then just tell him that Etrade is currently paying $3500 for $1M and you're more than willing to move your $1.1M there.

https://us.etrade.com/what-we-offer/how-it-works/ira-cfc3500

 

[Involuntary Retiree]

Leave it. My understanding (please correct me if I'm wrong) but retirement accounts can't be taken from you in a lawsuit but regular IRA's can. We left my wife's 401k there for that reason.

Well, you're not TOTALLY wrong, but .....



The answer really depends on where one resides and that state's laws governing exemptions. In my state, generally, any tax-favored retirement account in one's own name (e.g., not inherited, except for a surviving spouse), including 401ks, tIRAs and Roths, are exempt from creditor claims. Check your state's exemption laws.

 

[SnowballCamper]

If you could tell us why you're ready to move it, or what you're looking for, you might get better answers.

I think 0.25% to manage a retirement portfolio is reasonable. Of course I just do it myself. Here is a great place to learn how https://www.bogleheads.org/wiki/Getting_started

Also, are you spending it down now? do you have other income? What's your asset allocation?

 

[38Chevy454]

Roll it into a good balanced index fund with a low expense ratio and be done with it. No decisions to be made. No trades to have to figure out. No manager to pay a stupid amount of money to. I'm not with Fidelity so can't recommend a specific fund (I'm a Vanguard guy) but I'm sure someone here can give you the specifics. Once you start needing to take withdrawals from the account, Fidelity can set that up for you easily enough I'm sure.

FBALX, Fidelity Balanced Fund, approx 60/40 allocation. Would be a good Fidelity choice. FPURX, Fidelliuty Puritan Fund, also approx 60/40 allocation. Expense is .52% on either, so not real low, but better than the 1% advisor fees on top of whatever fund fees for investments. If you want low fees, there are Fidelity zero fee funds. The Fidelity rep can talk about the choices. You would need to have more than one fund to create a blended equivalent allocation in the zero funds. Given your other $500k in fixed income, you may want to go with higher equity allocation than 60% anyway. You need to talk with the Fidelity account rep and assess your risk tolerance and timeframe, to choose what allocation works for you.

BTW, for OP love2travel, with the amount you have in the 401k, Fidelity will likely add some incentive to move the account over to Fidelity. Like $2500 or maybe more. Even if you go self-directed and not use any of the Fidelity advisory services. Learning to become self-directed can benefit you in other ways than just the financial savings aspect.

What do you get at current 401k for the mgmt fees? It may just be a cost that adds nothing for you. Which is more incentive to move to Fidelity or similar.

 

[jollystomper]

Another potential reason to leave it: does your 401K provides a stable value fund with a good (3% or above) return? Those funds do not exist outside of 401ks.

 

[love2travel]

If you could tell us why you're ready to move it, or what you're looking for, you might get better answers.

I think 0.25% to manage a retirement portfolio is reasonable. Of course I just do it myself. Here is a great place to learn how https://www.bogleheads.org/wiki/Getting_started

Also, are you spending it down now? do you have other income? What's your asset allocation?

I cannot access it unless I move it all.

I am not spending it down, but thought I would start moving some to a Roth. I do have a 3 year CD ladder along with RMD's from TIAA

 

[RetireeRobert]

You might want to look into Fidelity's target-date funds, of which they have several. This could be a one decision investment on your part. The fund itself would become more conservative with asset allocations as it approaches the "target date". These funds typically are "balanced" with some portion in equities and some portion in bonds. Of the equity portions, some amount is in US and some amount is in international. And those percentages change as target date approaches.

For example, one fund with target date of 2035 is: https://fundresearch.fidelity.com/mutual-funds/summary/315793612

 

[teetee]

After I left my last magacorp for a new position in 2019, I waited a couple of months to let the last paycheck and unused PTO pay to be in my 401k account from Fidelity. Then I rolled it over to a rollover IRA (traditional IRA) account still with Fidelity and all in FXAIX with 0.015% expense ratio. I remember I was disappointed their rollover IRA does not offer zero fee funds like FZROX.

With divident reinvest option it has been doing 20+% gain per year in the past couple of years. I am waiting for a gap year in which I have low/no income to convert the balance to Roth IRA in batches mainly to avoid future RMDs.

I don't remember I had to do any detailed analysis or research. Certainly not something fancy or time consuming to rollover my account. I did save some money from admin fees from rolling over versus if I kept it where it was. Now I have total control and I just let it grow inside the index fund. It is probably the most boring (but steadily growing) part of my total portfolio.

 

[target2019]

I have been retired for a year now and just turned 64. I left my 401K with Alight who managed it while I was employed at .25%. I ready to move it but cannot decide to where and what. The total is $1.1M. I have been working with a Fidelity advisor the past several years setting up a CD ladder and have a meeting in a couple of weeks to discuss rolling over a portion to a Roth and moving to an IRA for the balance. I have never managed my investments and would really prefer not to, but on the other hand I do not want to pay 1% + to someone else. Honestly I know nothing is free, just trying to figure out the least stressful and best solution. Fidelity has suggested Separately Managed Accounts, I have read on this forum a lot of you are not crazy about them. I also have about $500k with TIAA from an inheritance with guaranteed rate of 4%, never to lose and currently taking RMD's. I am not taking SS yet, hoping to wait until 70, my DH is current taking SS, started at 62. Any advise would be appreciated!

If it were me, I would not move from .25% to 1.0% management fee.

You could use a balanced mutual fund or a target date fund and save quite a bit on fees.

Without details, I say you should just stand there until someone analyzes your total portfolio holdings and gives sound advice on future moves. It's a good time to learn more about all of the rules and what makes the most sense for your situation.

 

[Dtail]

Another potential reason to leave it: does your 401K provides a stable value fund with a good (3% or above) return? Those funds do not exist outside of 401ks.

+1
SV funds can be a great addition for your fixed income portion of your portfolio.

 

[gauss]

Leave it. My understanding (please correct me if I'm wrong) but retirement accounts can't be taken from you in a lawsuit but regular IRA's can. We left my wife's 401k there for that reason.

+1

Don't move it until you understand all the downsides. I am not sure that the eager financial advisers typically reveal the downsides, so you may be on your own in researching this (outside of here of course).

Remember, you typically can't "unmove" it is done.

-gauss

 

[gauss]

I cannot access it unless I move it all.

....

So your plan does not allow any "partial distributions" (ie 'please send me a check for $10,000)'? You have separated from your employer already, correct? That would seem to be a bit of an exception to many plans.

Have you verified this by reading your written plan documents (ie the SPD)? These days you may have to go online to get them.

-gauss

 

[Aerides]

Leave it. My understanding (please correct me if I'm wrong) but retirement accounts can't be taken from you in a lawsuit but regular IRA's can. We left my wife's 401k there for that reason.

Most states do protect IRA's, but true there's no official federal protection. Either way, paying a whole quarter percent, vs. near zero for most decent fido funds, seems like an expensive way to insure that protection. That's $2500 per year on a mill? I'd move it to a fidelity ira and get an umbrella policy if I was that worried.

Both DH and I moved our 401ks to fidelity IRAs, was pretty easy, regular Fido call support handled everything. Then we plopped most everything into their index funds with our AA in mind, very easy.

ETA to the OP: look into getting out of that 1%, or yes the separate thing, vs. total AUM. Fido tried to sell us a management service when we moved, and they were very convincing, but we declined and held firm.

 

[love2travel]

So your plan does not allow any "partial distributions" (ie 'please send me a check for $10,000)'? You have separated from your employer already, correct? That would seem to be a bit of an exception to many plans.

Have you verified this by reading your written plan documents (ie the SPD)? These days you may have to go online to get them.

-gauss

That is correct, it is all or nothing. I have verified with Alight. Before retiring, I could move any amount, but not after retirement. I did not know this until it was too late.

 

[gauss]

^Thanks for the clarification.

 

[freedomatlast]

So your plan does not allow any "partial distributions" (ie 'please send me a check for $10,000)'? You have separated from your employer already, correct? That would seem to be a bit of an exception to many plans.

Have you verified this by reading your written plan documents (ie the SPD)? These days you may have to go online to get them.

-gauss

This is the way my 401K is set up. Take all or nothing.

 

[38Chevy454]

That is correct, it is all or nothing. I have verified with Alight. Before retiring, I could move any amount, but not after retirement. I did not know this until it was too late.

It is still not clear - what do you get from Alilght "managing" your 401k? Do they provide financial advisor services for investment choices? Do you get financial planning advice? IOW, what do you get for your .25% fee you are paying?

 

[disneysteve]

It is still not clear - what do you get from Alilght "managing" your 401k? Do they provide financial advisor services for investment choices? Do you get financial planning advice? IOW, what do you get for your .25% fee you are paying?

Also, how is the money currently invested? What are you paying in expenses on top of that 0.25% fee? If they have you in costly funds, you could be paying a lot more than necessary. And if they have you in low cost index funds, what do you need their "management" for?

 

[OldShooter]

@love2travel, you are getting some good tactical advice and discussion here, but I'd strongly encourage you to look and the books and reading (Post #3 and #7). Those will substantially increase your comfort with investing and help you to select tactical moves.

Don't be in a hurry. If you hurry and make a mistake you will remember it forever. If you study and think for a couple of months to get the right answer for you, you will never remember that it took a little time.

 

[retiredunder50]

+1

Don't move it until you understand all the downsides. I am not sure that the eager financial advisers typically reveal the downsides, so you may be on your own in researching this (outside of here of course).

Remember, you typically can't "unmove" it is done.

-gauss

+1


I just witnessed the damage done by a 'financial planner' who gave garbage advice on Roth conversions that has so many downsides. I am helping a semi-retired individual with his taxes. His planner told him to convert $150K a year for 2 years because he sees major tax increases coming (his normal income is about $60K, including SS. It might later get to about $85-$90K total with RMDs in a few years). His medicare premiums will get hammered for 2 years; he knocked himself out of a property tax senior freeze that created a base level of taxes years ago and he won't be able to get back in the program for a few years and the new base year rate will likely be about $1K more per year - an amount he will pay every year for the rest of his life; knocked him out of homestead rebate eligibility for 2 years; knocked him out of $75K of excludable retirement income in the state; knocked him out of being eligible for federal itemization as he had over $10K of medical expenses after the threshold (coupled with prop taxes and charitable contributions, he would have easily exceeded the standard deduction); he also made Roth IRA contributions (sadly, his income level exceeded the eligibility requirement); and on and on... Understand all the 2nd, 3rd, 4rth order downside effects before making any move.

 

[love2travel]

Here 'ya go:

"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/

"The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
​

Once you are set up, investing shouldn't take more than a few hours of effort a year and you don't need to hire the priests and witches from the investment industry to help you.

Ok, I have the books coming, thank all of you and I will definitely hit Fidelity up for the $2500...thank you