Retired and still holding onto 401k because....

[Sunset]

We have kept most of our 401K's for the protection AND because the fees charged are very low and the investment choices are good enough.

I did move some smaller 401K's to IRA's because the fees were high, and choices were too limited.

We carry $2M Umbrella insurance as well, to make sure we get good lawyers

 

[Koolau]

ER'd in 2009, didn't touch my 401K until last month. I had enough in stocks outside the 401K that I used it as my "safe haven" with their SV fund, which was paying more than I could get on the outside for most of that time. When MM rates got to 5% and my SV was still languishing at 2%, I finally made the move to my IRA. I'm good with my current allocation for now, but will have to pay more attention once rates start to fall.

Another reason I moved was the ease of accessing my funds from the IRA vs the 401K, which required lots of physical paperwork to make a partial withdrawal. However, I was able to execute the complete rollover with only a few clicks. Go figure.

That's interesting. I find my 401(k) much easier to access than my Roth IRAs though, full disclosure, I have no need/desire to take from Roths at this point. YMMV

 

[Winemaker]

Now that all my tRIAs have been converted to Roths, my only RMD is on my 401(k). Makes it kinda simple to have just one to worry about.

I have significant Megacorp stock in my 401(k). I know it could be moved, but then there's that RMD issue again if I open another tIRA. So, in addition to ERISA and SVF, my 401(k) has some "inertia" issues as well.

I've kept it 18 years now since retirement. I have no plans to change anything other than take my RMDs and to MAYBE roll some to a tIRA (briefly) to do a QCD in the future.

Perhaps you can still take your Mega Corp stock out of your plan in kind. There was a provision at one time to allow you to pay the income tax on the COST of your Mega Corp stock, and allow you to just pay capital gains tax on it. You did have to rollover the remainder of your 401k into a tIRA or Roth.

 

[jollystomper]

I am still holding on to my 401K for the Stable Value fund and the very low cost. ERISA protection is not as much an issue, as my state provides about the same level of protection for IRAs.

However, the Stable Value fund is currently yielding about 3.5%. I am not complaining too much, as when rates were near zero it never fell lower than just below 3%, which was glorious at the time. But I did rollover a small amount (10%) of my SVF holdings to an already established IRA and built a T-Bill ladder. It was easy, so I am contemplating moving more funds in this manner. The end of the quarter is when I will review my 401K investment options and make any changes.

 

[MdaPetralia]

Perhaps you can still take your Mega Corp stock out of your plan in kind. There was a provision at one time to allow you to pay the income tax on the COST of your Mega Corp stock, and allow you to just pay capital gains tax on it. You did have to rollover the remainder of your 401k into a tIRA or Roth.

I think you are referring to NUA (Net Unrealized Appreciation).

 

[USGrant1962]

As my 403(b) was at Fidelity, I, too, thought of leaving it in the 403(b). I decided to move it over about two years. First, Fidelity gave me pretty large bonuses for switching over $1M each time. Second, the index funds fee structure for regular investors came pretty close to matching my 403(b). Finally, my company ended up charging a maintenance fee for the fidelity account (actually I had mad my final transfer just before this fee was initiated).

If you are at one of the big brokerages, make sure you get rewarded for setting up your rollover IRA.

Marc

This thread has me thinking about doing a roll-over IRA at Fidelity (my other money is at Vanguard). I'm past 59.5 so the Rule of 55 is no longer applicable and I've dipped my toes in direct bond purchases instead of bond funds. So rolling to a brokerage roll-over IRA has some attraction.

You made me look for roll-over bonuses at Fido and there seem to be none on offer right now. In the past they had $2,500 for a $million roll-over. I think I'll call them and tell them my situation - 401(k) at Empower, lots of money at VG, a little money at Fido (HSA only). "What can you do for me?"

Has anyone done this recently with Fido?

EDIT - oh, and my maintenance fee at Empower is $6/quarter, which it totally immaterial and totally annoying.

 

[BruinBones]

I rolled my 403(b) into the TSP as soon as I retired for consolidation, lower fees, and the G-fund as my portfolio's entire "fixed/bond" allocation.
I kept my 457(b) in the Stable Value Fund for the 5-year distribution.

 

[dknighd]

I'll probably stick with my 403b at TIAA. It is not too bad. I'm used to it, and getting lazy. They also seem to treat survivors well. At least they did for my friends widow.


Why rock the boat if you do not need to?

 

[dknighd]

Personally we found ERISA protections annoying. The spousal waivers it requires were a pain. We are now rid of accounts that require notarized spousal signatures. Edit: good riddance.
That not will apply if you are single.

 

[COcheesehead]

This thread has me thinking about doing a roll-over IRA at Fidelity (my other money is at Vanguard). I'm past 59.5 so the Rule of 55 is no longer applicable and I've dipped my toes in direct bond purchases instead of bond funds. So rolling to a brokerage roll-over IRA has some attraction.

You made me look for roll-over bonuses at Fido and there seem to be none on offer right now. In the past they had $2,500 for a $million roll-over. I think I'll call them and tell them my situation - 401(k) at Empower, lots of money at VG, a little money at Fido (HSA only). "What can you do for me?"

Has anyone done this recently with Fido?

EDIT - oh, and my maintenance fee at Empower is $6/quarter, which it totally immaterial and totally annoying.

You have to talk to a rep to get a bonus.

 

[Marc]

Personally we found ERISA protections annoying. The spousal waivers it requires were a pain. We are now rid of accounts that require notarized spousal signatures. Edit: good riddance.
That not will apply if you are single.

I had totally forgotten about this; they were a pain. Especially as I, initially, was just moving over smallish chunks to my brokerage account.

 

[MRG]

I left money in a legacy profit sharing account so I could use the rule of 55 for penalty free withdrawal.

Little did I know the new fiduciaries were blithering idiots who lost a lot of money for me and thousands of others. I'll find out next month how much of this ERISA protected money I'll get back.

 

[mwilson]

One other consideration is if you have non-deductible IRA contributions and want to convert to Roth IRA. If you rollover 401k to IRA the non-deductible portion is allocated across both the rollover and non-deductible/traditional IRA. So that dilutes the amount of non-deductible portion the IRS considers going to the Roth and so you'll pay more taxes. So consider doing any Roth conversions first and then 401k rollover in a later tax year.

This is an inelegant description of the issue, but I remember it being annoying when I discovered the issue after the fact.

Probably already mentioned, but the 401k should go to its own rollover IRA to help ensure ERISA protection. Your state may vary.

 

[jazz4cash]

My 401k permits me to take “loans” even though I am retired. I know 401k loans are controversial but I’ve used them many times and now see them as a great tool for income smoothing as I navigate all these brackets and cliffs. I may take a loan near the end of the year rather than taking a taxable distribution. I can repay the loan in a few months when my CD matures.

 

[Marc]

One other consideration is if you have non-deductible IRA contributions and want to convert to Roth IRA. If you rollover 401k to IRA the non-deductible portion is allocated across both the rollover and non-deductible/traditional IRA. So that dilutes the amount of non-deductible portion the IRS considers going to the Roth and so you'll pay more taxes. So consider doing any Roth conversions first and then 401k rollover in a later tax year.

This is an inelegant description of the issue, but I remember it being annoying when I discovered the issue after the fact.

Probably already mentioned, but the 401k should go to its own rollover IRA to help ensure ERISA protection. Your state may vary.

This was exactly my situation so I cleaned out the small non-deductible IRA first before establishing rollover IRA; in fact, just to make sure, I waited until next calendar year before establishing my rollover IRA.

Marc

 

[Out-to-Lunch]

My 401k permits me to take “loans” even though I am retired. I know 401k loans are controversial but I’ve used them many times and now see them as a great tool for income smoothing as I navigate all these brackets and cliffs. I may take a loan near the end of the year rather than taking a taxable distribution. I can repay the loan in a few months when my CD matures.

Thanks for the idea!

 

[Alex The Great]

I retired just recently and also have some funds in 401K. I'll keep them as is at least till I'm 59.5, because of the possible distribution according 55 rule. Hopefully I won't need it but it is nice to have this option open just in case. Other than that, institutional index fund available there looks great. But I would have to see yet what are the fees once separated from employer.

 

[Alex The Great]

The process was smooth although I was surprised that Empower wouldn’t do a direct trustee-to-trustee transfer. They would only send me a check (made out to Fidelity… go figure).

I did a direct transfer from Empower to Fidelity multiple times. But these were after tax 401K money distributed to Roth IRA. I think it depends on your employer rather than Empower itself.

 

[steelyman]

I did a direct transfer from Empower to Fidelity multiple times. But these were after tax 401K money distributed to Roth IRA. I think it depends on your employer rather than Empower itself.

Interesting. Maybe the difference is that I don’t have an employer anymore? It was a pre-tax 457 (deferred compensation) account to a new traditional IRA. At any rate, it’s done and I’ve invested the proceeds (less $25 Empower fee). I’ll like not having that extra firm to track.

 

[Alex The Great]

Interesting. Maybe the difference is that I don’t have an employer anymore? It was a pre-tax 457 (deferred compensation) account to a new traditional IRA. At any rate, it’s done and I’ve invested the proceeds (less $25 Empower fee). I’ll like not having that extra firm to track.

The admin managing 457 plan is associated with your former employer who initially offered it. The rules and policies are negotiated between the employer and Empower. Therefore, in this context you still have employer

 

[Koolau]

Perhaps you can still take your Mega Corp stock out of your plan in kind. There was a provision at one time to allow you to pay the income tax on the COST of your Mega Corp stock, and allow you to just pay capital gains tax on it. You did have to rollover the remainder of your 401k into a tIRA or Roth.

Yeah, I think once you mess with it (take some out) you forfeit that option, but I could be wrong. ALso, establishing the cost basis could be problematic as some stock dates to the early 80s. Heh, heh, some of that stock probably has an equivalent of a dollar or less! It's now worth several hundred. LOTS of cap gains there!

 

[steelyman]

The admin managing 457 plan is associated with your former employer who initially offered it. The rules and policies are negotiated between the employer and Empower. Therefore, in this context you still have employer

Also interesting, thanks. In my case, the employer is the state government. Here’s their plan:

https://cms.illinois.gov/benefits/deferred/deferredcompensation.html

When I enrolled, the admin was T. Rowe Price. It later changed to Empower. Apart from the stable value fund, I liked the fact that the only requirement for no-penalty withdrawal was separation from service (no age-related requirement). That seemed important while planning for early retirement. Both TRP and Empower deducted fees quarterly (waived during Great Recession) and didn’t have a very extensive investment lineup but did offer an option in addition to 403(b) annual limits.

So… to answer the original post: I did hold on to an employer plan but the reasons for doing so have evaporated so now I don’t.

 

[djsander]

The week after I took the voluntary early retirement offer and retiring our company announced a “merger” with a very large company. I looked at the acquiring companies benefits as it was available on line. My 401k was with fidelity and the new company had another management company and without being able to go into that company’s actual 401k and doing some research I did glean that it had high er funds. So I rolled over my 401k to an Ira and Roth at fidelity. Later I learned from a former coworker that the employees would be required to roll their 401ks into the acquiring companies 401k. They may have been given an option to roll over to an Ira, but that was never told me. That made sense as the existing plans would have no new contributions and there wasn’t any need to have the expense of keeping the old plan in place. So in short I’m in rollover Ira and rollover Roth. Not much I could really do as not even sure I would be able to use their 401k and didn’t want the high ERs. So to me it was a good decision and maybe the only one, but it works out rather well for me.

 

[Koolau]

The week after I took the voluntary early retirement offer and retiring our company announced a “merger” with a very large company. I looked at the acquiring companies benefits as it was available on line. My 401k was with fidelity and the new company had another management company and without being able to go into that company’s actual 401k and doing some research I did glean that it had high er funds. So I rolled over my 401k to an Ira and Roth at fidelity. Later I learned from a former coworker that the employees would be required to roll their 401ks into the acquiring companies 401k. They may have been given an option to roll over to an Ira, but that was never told me. That made sense as the existing plans would have no new contributions and there wasn’t any need to have the expense of keeping the old plan in place. So in short I’m in rollover Ira and rollover Roth. Not much I could really do as not even sure I would be able to use their 401k and didn’t want the high ERs. So to me it was a good decision and maybe the only one, but it works out rather well for me.

Sounds like your instincts were good. The only thing I don't like about Megacorp's 401(k) is it is "in house" managed. I'm not certain their fees are quite as good as I could get in tIRA at, for instance, Vanguard where I have my other stuff.

 

[Alex The Great]

Sounds like your instincts were good. The only thing I don't like about Megacorp's 401(k) is it is "in house" managed. I'm not certain their fees are quite as good as I could get in tIRA at, for instance, Vanguard where I have my other stuff.

The fee again depend on your Megacorp. In my personal Fidelity tIRA where I dumped money from previous employers 401K, there are no fees at all. But this is what I recently got in email from Empower:
"Effective July 1, 2023, the quarterly plan account fee was reduced from $7.50 to $6.25."
I'm sure this fee is for active employees. It is yet to see, but most likely the fee will be higher for someone like me who no longer work for this employer going forward. Still, I will stick with current 401K for a while.