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

[JoeWras]

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.

Amazingly, my plan was the rare bird that allows this after retirement. I rolled in so as to reduce my IRA basis for future Roth conversions.

Agree on trying to evade judgement by rolling in after a potential liability event occurs. They'll look back and call it out.

 

[Lucky1]

The important point is, if you move the money out of your 401K, make sure it’s titled ROLLOVER IRA. As opposed to IRA.

 

[gauss]

Yes there are many good reasons to leave funds in a good 401k and not rolling to an Ira.

The problem is that all the advertising money is spent by the Ira industry, so many will repeat the claims that it is almost always in your best interest to rollover your funds.

The ability to roll from an Ira into a 401k plan will be determined by the rules of that particular plan.

GAUSS

 

[MarkiePippo]

Another reason to roll it over to an IRA is the inheritance issue. If you are not married and decide to do that, your future partner gets half of the 401K regardless of who you have designated. This could be important with children from an earlier marriage. It is also a pre-nup issue to consider.

 

[jazz4cash]

Amazingly, my plan was the rare bird that allows this after retirement. I rolled in so as to reduce my IRA basis for future Roth conversions.

Agree on trying to evade judgement by rolling in after a potential liability event occurs. They'll look back and call it out.

401k balances subject to RMD so I don’t see how that helps.

 

[JoeWras]

401k balances subject to RMD so I don’t see how that helps.

Sorry, I didn't explain well. It had nothing to do with RMDs.

I had multiple IRAs. One was labeled "Rollover" from an old plan decades ago. The other was "Traditional".

I had after tax money in my traditional, so it had basis. When converting to Roth, the after tax money is not taxed. However, the basis is pro-rata on the entire sum of IRAs, including the Rollover. By moving the Rollover IRA to the 401k, my entire IRA value dropped, so my after-tax basis became a much higher percentage.

This was very advantageous during the IRA Roth conversion process.

 

[Lucky1]

401(k)s tend to have broader federal protection from creditors. IRAs have federal protection from bankruptcy protection, but that protection has limitations. General creditor protection is decided at the state level. As a result, 401(k) assets tend to have broader protection from potential lawsuits. If you have a pending lawsuit (or think there may be the possibility of one in your future) you should think twice about rolling assets from a 401(k) plan to an IRA. Check your state’s protection of an IRA and if different a ROLLOVER IRA - which these funds should be identified by, since they came from an employer's plan.

 

[eyenitnoy]

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

You are wise to be concerned about the effects of lawsuits. 401(k)'s are governed by federal law and offer substantial protection due to ERISA. Basically, only the IRS or a spouse can get the money, not a judgment creditor.

When you roll the money into an IRA, however, the rules governing what happens to the money vary by state. Some states give good protection, others don't, so you would need to look up the law for the state you live in.

As an aside, it is also very important to have umbrella type liability insurance. Folks often consider the effects of judgments, but what they often overlook is the cost of DEFENSE.

If you are sued, and you do not have insurance, you will have to pay for your own defense and this can cost a ton of money. So, even if you are in a state with good laws protecting IRA's, you need to be mindful of this potential retirement breaking expense.

 

[big-papa]

With the exception of a couple of 401K plans that included a brokerage window option, I've never been exactly thrilled with my 401K choices at any of my employers. Even then, the restrictions imposed by the brokerage window reduced the overall attractiveness.

So, upon departure from any of my former employers, I've always rolled everything over to my IRA. Same for my wife.

I can see that for many, a stable value fund is a good choice, but we typically don't try and hold much at that end of the spectrum with the exception of I-bonds, which we've been purchasing for a number of years and for the very specific purpose of providing additional COLA'd income as a supplement to SS, once we turn 70.

Cheers,
Big-Papa