Advantage of keeping SOME money in old 401k...?

[PatrickW]

I'll be 59.5 shortly, and am considering rolling my 401k funds (with my current employer) into an IRA. I plan to retire in less than a year (I live in Texas).

Question: Is there any advantage to keeping SOME money in the 401k...? As long as the 401k account exists, can I ever transfer money back into it from an IRA...?

My only concern is protection of money from future lawsuits, creditors, scammers and the like. Other "IRA vs 401k" arguments are not germane.

While I am not wealthy compared to many here, I am solidly in the top 5% - and in today's increasingly litigious society that makes me a target.

To be clear I have no current problems of that nature, nor do I anticipate any. I am simply wondering if it's prudent to keep some amount of money in places where it would be more difficult for others to seize, versus putting all my money into someplace like Fidelity or Vanguard.

I don't think I'm being overly paranoid here. Do others share this concern...?


Patrick

 

[Lewis Clark]

One reason to keep money in an old 401(k) might be if the program has an investment option you particularly like, or one that cannot be duplicated elsewhere.

Other than that, rolling over to an IRA will give you much more choice and control over your money.

 

[ERD50]

IIRC, the protection in a 401K vs IRA varies with the state of residence. So any responses might or might not be applicable.

-ERD50

 

[Freedom56]

Too avoid scammers, freeze your credit, don't send money to strangers on Facebook, and keep track of your accounts and change your passwords at least every six months. Stay under the radar (i.e. don't flaunt your wealth like many who pretend to be wealthy) and the ambulance chasers will avoid you. The only advantage that some 401Ks offer are stable value funds with higher yield to park your cash. I rolled over my 401K one month after retirement and I'm glad I did.

 

[armor99]

Provided you are over 59.5 probably no diff other than more control over what to invest in.
However, if you are 55+ you can get the 401k money after you retire with no penalty. In IRA you need to wait till 59.5

 

[candrew]

As ERD50 points out, IRA/401K protections will vary from state to state. AZ, our state of residence, has some of the strongest protections for retirement accounts.

Having an umbrella policy is a good first step in protecting assets.

 

[Running_Man]

https://www.irafinancialgroup.com/learn-more/self-directed-ira/ira-asset-and-creditor-protection/

The major benefit of a 401K over an IRA is that 401K's are exempt from creditor claims other than being claimed by IRS to satisfy a tax debt. IRA's are limited to 1.25 million credit exemption from generic creditors and eligible for all balances by IRS so rolling over money could lead to your IRA's being over the protection limits in claimable by a creditor when a 401K would continue to provide protection.

No matter the state 401K's always have the maximum creditor protection, and many types of activities can lead to your being considered to be under the jurisdiction of any number of states. A lawsuit does not have to be in the state of your residence.
From Invesotpedia "Whether your individual retirement account (IRA) can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There are no federal protections in place shielding your IRA from seizure in a lawsuit."


https://www.irafinancialgroup.com/learn-more/self-directed-ira/ira-asset-and-creditor-protection/

 

[Montecfo]

https://www.irafinancialgroup.com/learn-more/self-directed-ira/ira-asset-and-creditor-protection/

The major benefit of a 401K over an IRA is that 401K's are exempt from creditor claims other than being claimed by IRS to satisfy a tax debt. IRA's are limited to 1.25 million credit exemption from generic creditors and eligible for all balances by IRS so rolling over money could lead to your IRA's being over the protection limits in claimable by a creditor when a 401K would continue to provide protection.

No matter the state 401K's always have the maximum creditor protection, and many types of activities can lead to your being considered to be under the jurisdiction of any number of states. A lawsuit does not have to be in the state of your residence.
From Invesotpedia "Whether your individual retirement account (IRA) can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There are no federal protections in place shielding your IRA from seizure in a lawsuit."


https://www.irafinancialgroup.com/learn-more/self-directed-ira/ira-asset-and-creditor-protection/

really need to look at laws of state in question.

 

[Scubamax]

And state laws (as well as federal) are always open to being amended by legislative and judicial means. So I have kept my 401k in place to hedge against a state law change scenario, however remote.

 

[MandM]

I am also keeping my pre-tax money in my 401k because I have moved once in retirement to a different state and may move again in the future as I have many years left hopefully. I do some Roth conversions every year to my Roth IRA and I also have a Personal Umbrella insurance policy so for my situation that works best for me.

 

[Running_Man]

really need to look at laws of state in question.

State of residence is not as sure of being the law as you may think.

Defendant caused a traffic accident in the state. The defendant caused a traffic accident in the state in which you've filed the lawsuit (and the case grows out of the traffic accident). All states have "motorist" statutes giving their courts power to decide cases regarding accidents on their roads, regardless of the parties' citizenship. In this case, you can serve the defendant with papers anywhere, not just in the state where the lawsuit was filed.

 

[Graybeard]

If your 401k has a Stable Value Fund that would be a good reason also to keep some money in your 401k. Other benefits have already been mentioned. I'd also suggest an umbrella policy if you are concerned about the potential of law suits.

 

[USGrant1962]

https://www.irafinancialgroup.com/learn-more/self-directed-ira/ira-asset-and-creditor-protection/

The major benefit of a 401K over an IRA is that 401K's are exempt from creditor claims other than being claimed by IRS to satisfy a tax debt. IRA's are limited to 1.25 million credit exemption from generic creditors and eligible for all balances by IRS so rolling over money could lead to your IRA's being over the protection limits in claimable by a creditor when a 401K would continue to provide protection.

No matter the state 401K's always have the maximum creditor protection, and many types of activities can lead to your being considered to be under the jurisdiction of any number of states. A lawsuit does not have to be in the state of your residence.
From Invesotpedia "Whether your individual retirement account (IRA) can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There are no federal protections in place shielding your IRA from seizure in a lawsuit."


https://www.irafinancialgroup.com/learn-more/self-directed-ira/ira-asset-and-creditor-protection/

Or more simply - 401(k)s are Federally protected under ERISA and IRAs are not.

Here's a quick summary: https://www.investopedia.com/ask/answers/09/erisa-coverage.asp

 

[JoeWras]

So for those keeping it in the 401k and wanting to do Roth conversions...

Do you do in-plan conversions within the 401k?

 

[Midpack]

If your 401k has a Stable Value Fund that would be a good reason also to keep some money in your 401k.

That’s the only reason I would’ve kept my 401k, but I had no way of knowing today’s near zero interest environment might hit us then. Hindsight is a wonderful thing, but those making the decision today might have the option.

I’d like to have access to some of the Stable Value find returns I’ve seen mentioned here. And I-bonds are essentially useless because of the $10K/year limits for many here.

 

[MRG]

I kept a retirement account after leaving to allow for rule of 55 withdrawal. The fund it was in was mismanaged and I lost a six figure amount between 59 and 59.5......

 

[Sunset]

We have some in 401K's and the costs are low enough for some broad funds that it's not worth losing the lawsuit protection to move it to an IRA.

While we have an umbrella , and are pretty low risk folks, you never know the future. We do have a rental which of course stands out as a risky thing.

 

[GalaxyBoy]

Would the answer to OP’s question regarding whether money could be transferred back into the 401(k) depend on the provisions of the particular plan?

I considered keeping money in my employer’s plan but the available investment options were terrible. Their stable value fund wasn’t paying any higher than the online banks, so I rolled everything over to my tIRA.

 

[FloridaJim57]

Stable Value Funds

As far as I know, Stable Value funds are only available through a 401k. If you are interested in them, keep some money in the 401k

 

[TheWizard]

I have a 403(b) rather than a 401(k) and yes, I'm keeping my tax-deferred funds there for the indefinite future. I no longer have a traditional IRA.

My reasons have less to do with lawsuit protection and more to do with superior investment options. In my 403(b), I have access to TIAA Traditional, TREA, and a few Vanguard institutional index funds...

 

[pb4uski]

If your 401k has a Stable Value Fund that would be a good reason also to keep some money in your 401k. Other benefits have already been mentioned. I'd also suggest an umbrella policy if you are concerned about the potential of law suits.

That’s the only reason I would’ve kept my 401k, but I had no way of knowing today’s near zero interest environment might hit us then. Hindsight is a wonderful thing, but those making the decision today might have the option.

I’d like to have access to some of the Stable Value find returns I’ve seen mentioned here. And I-bonds are essentially useless because of the $10K/year limits for many here.

+1 Never been sued, no currently pending or threatened litigation and I doubt that I'll be ever be sued... plus I have a $2m umbrella so my insurer had 2 million reasons to provide me with the best defense possible.

Since my employer didn't offer a stable value fund I moved my 401k money to my tIRA soon after retiring.

While it is true that the i-bond limit is $10k a year for individuals, with trusts a married couple can increase that limit to $50k a year (or more).

 

[Which Roger]

I ERd almost 9 years ago and have found no reason to move my 401k. It offers very-low-cost index funds, comparable to what I can get from places like Vanguard and Fido, so I just replicate the same 3-fund portfolio that DW and I use for all of our investments.

 

[GalaxyBoy]

I mentioned I rolled my 401(k) over due to lousy investment choices, but forgot to mention we are keeping money in DW’s 457 for the opposite reason. The bond index fund there has an ER of 0.01%, for example.

 

[beyou]

roll back to 401k ?

Most plans will not allow incoming $ once you terminate/retire.
Even if they did, moving money once you have a legal problem is too late.
Other side can challenge the validity of the transfer as being simply to evade a judgement. I could be wrong, specifically if 401k is treated differently, but generally transfers to hide money from a lawsuit are possible to challenge.

 

[Dtail]

Stable Value funds as mentioned previously. My 401k also has the low cost Vanguard index funds, so can also use the account to change the AA if necessary.