Benefits of Former employer 401k, New Employer 401k, or Rollover?

[Aiming_4_55]

Well, I'm starting to think about FIRE or Semi-Fire and it's time to consolidate 401ks to make life simpler for me and those that might receive it in the future.

I've been lazy and kept all my former 401k accounts, about 6 of them. They are either in Target 2030-2035 funds of S&P500. Expenses seem to be reasonable.

I will turn 55 this year and started a new slowdown job with kids still in school or OMY. My new employer 401k is in Fidelity and I believe have the ability to withdraw upon termination at 55 or older.

- Should I rollover my previous employers 401k to my new employer? Will all balances have access at age 55+? I'm looking to work 2 - 3 more years.

- or Should I just Rollover to Fidelity or Vanguard IRA?

At this point, I do have access in cash or taxable funds in other accounts to fund retirement if I retire in 57 (to about 62), so I probably don't need access until 62 or later.

Thoughts?

 

[mathjak107]

i would never leave a 401k where i didn’t currently work .

we worked at a company and we never saw it coming .

the company fell on hard times .

they closed the 401k and stopped paying the custodian fees .

the custodian liquidated all investments and had to turn the funds over to the court .

the court has to appoint a new custodian to distribute the money .

it took almost a year in an amazing market to get our money and get it reinvested.

 

[statsman]

Should I rollover my previous employers 401k to my new employer? Will all balances have access at age 55+? I'm looking to work 2 - 3 more years.

Any rollover into your current 401(k) will adhere to the 59.5 rule for distributions. My DW did this, and the rollovers from prior employers' plans were not co-mingled with her current (at the time) employer's 401(k) funds.

Once she retired, we moved all of her 401(k) funds, current and rolled over, into an IRA.

 

[Spock]

Check with your new employer plan custodian.
At my former employer, all rollovers into that plan were treated same/same. So if the new plan allows withdrawls at 55, all the rolled over funds were available.

The only reason for keeping old plans is if they have some super duper investment option not available in the current plan. Like a high paying Stable Value fund (if that's of interest to you). Otherwise I'd consolidate them to the new employer.

If the new employer plans aren't that great (few choices or expenses are high(er), then I'd look into the Rollover IRA route.

There are supposedly liability protections for 401k $, and some of those protections can be maintained in a Rollover IRA vs. a traditional IRA. YMMV.

 

[mathjak107]

never go by just what fund fees are in a 401k .

there is a yearly disclosure form with the actual total costs .

the cfo in our company thought we had the lowest fees when he saw a fidelity s&p fund at .02% in our 401k

i got the yearly disclosure form and showed him it was 25x that at .52% when it priced at nav.

you won’t generally see these tacked on admin fees anywhere but the plan disclosure forms

 

[Aerides]

The fees might be reasonable to you, but compared to FIDO choices of many of the index funds, they might be a significant difference. Move it to where you can optimize it easily and cheaply.

 

[qwerty3656]

This guy says you can roll old 401k's into current 401k and rule of 55 would apply:

https://www.google.com/search?q=rol...ate=ive&vld=cid:a4aed29e,vid:oF-mgVd-bMs,st:0


Edit: it occurred to me you may want to consider moving money to an IRA if you were interested in doing Roth conversions

 

[bloom2708]

Vanguard or Fidelity. Put your Rollover Traditional IRA next to your Roth IRA and your Taxable brokerage account.

Roth conversions. 72T (Substantially Equal Payment Plan, SEPP). Many good options.

Each time we left a job we consolidated. The only reason not to is if you do Back Door Roth contributions each year. Then go to 401k.

 

[Wile E. Coyote]

This guy says you can roll old 401k's into current 401k and rule of 55 would apply:

https://www.google.com/search?q=rol...ate=ive&vld=cid:a4aed29e,vid:oF-mgVd-bMs,st:0


Edit: it occurred to me you may want to consider moving money to an IRA if you were interested in doing Roth conversions

I think what the guy in the video was referring to is the current 401k. Our guy has 6.

I would open an IRA with Fidelity and roll over all the old ones not including your current 401k. Once you start talking with Fidelity and realize how painless the process is and they handle it for you then you will wonder why you never did it sooner.

 

[Texas Proud]

I rolled over mine to IRAs... with one exception...


I did have significant gain in my company stock and waited it out until last year and then did a stock distribution so I only had to recognized the cost basis of the shares... I have a huge cap gain now on those shares but can sell and pay cap gains on them and not ordinary income...

 

[OldShooter]

... I've been lazy and kept all my former 401k accounts, about 6 of them. They are either in Target 2030-2035 funds of S&P500. ...

I used to think that target date funds were pretty much the same until I investigated a little. It turns out that they are not. In particular, the "ramp" from heavier equity weight to reduced equities can be quite different among fund companies. One fund IIRC went to a fixed AA at the target date and no further adjustments were made. Others started the ramp much earlier than what I saw as sensible. Likely you have had only one company's target date funds available in each 401K, so you may have had a random collection of strategies chosen for you.

My point here is that as you simplify (good idea BTW!) you should give your target date funds a good hard look and make sure they are what you want. Other target date funds may be closer to what you want, or doing your own AA using two or more funds may be better when you start withdrawals. You can also tune target date funds toward being more aggressive if you choose later targets or toward being less aggressive if you choose earlier targets. There are no stone tablets that require the fund dates to match your planned or actual retirement dates.

Here is another little horror story that should prompt people to look carefully inside their target date funds (or really, any blended fund): https://www.reuters.com/article/idUSKBN1GH1SI/

 

[mathjak107]

there are no standard allocations for what is right in target date funds . Each company does their own glide path .

target date funds load you up on investments based on time instead of what is happening around you and what part of the cycle an asset is in with no regard for your own risk tolerance.

not only do they not take risk tolerance in to the equation there is no standard format for what a fund should hold. it varys from fund family to fund family.

keep in mind there is noooooooooo standard as to how risky a target date should be even if you are at retirement .

the same 2010 target date fund from wells fargo in 2008-2009 lost 11.5% while the t.rowe price 2010 target fund lost 26.5%. that is a target fund that had 2 years to go before retirement.

in fact the t.rowe target date fund didn't fall to below 45% equities until 5 years after the target date. to make things worse after the downfall instead of buying more equities over the next 5 years as good investing tactics would dictate target funds actually shed their holdings further as they reduced down by design the equity side and sold while they really should be buying.


they also do not work well dollar cost averaging in . since markets are up 2/3's of the time and down only 1/3 that fact plus the fact as time goes on they are buying less and less equities could leave you under goal as you will be much more conservative then you may have wanted to be by dollar cost averaging.

new research show they are not a good glide path either, as best results have been ramping down lower going in to retirement,staying low a bit but then rising higher again , like a V shape

 

[Cayman]

i would never leave a 401k where i didn’t currently work .

we worked at a company and we never saw it coming .

the company fell on hard times .

they closed the 401k and stopped paying the custodian fees .

the custodian liquidated all investments and had to turn the funds over to the court .

the court has to appoint a new custodian to distribute the money .

it took almost a year in an amazing market to get our money and get it reinvested.

I have a similar story, although it involves "just" poor decision making on the part of my previous (nonprofit) employer. They switched from a great Fido 401 to a lame insurance company administered 401 based on a slick presentation by a FA and a few free lunches he spread around... they even went outside of the investment guidelines set in the nonprofit organization's bylaws but that's a story for another day. My money was tied up for many months and I lost 8%. Lesson learned.

 

[target2019]

I left my 401(k) at a previous employer because it offered State Street institutional index funds, and the administrative fee was pennies.

Without knowing the funds available and expenses at the current employer, any answer is a guess.

 

[retire48in2018]

If you need/want the rule of 55 - then roll over to your current 401k provider
If you need/want a stability fund that’s good in your current 401k - same
If your income is high enough to warrant back door Roth IRA - same

Otherwise - I’d roll over to an IRA which most likely has more choice and easier ability for Roth conversions, etc

 

[qwerty3656]

I think what the guy in the video was referring to is the current 401k. Our guy has 6.

At the 1:50 minute mark, he suggests rolling over old 410ks to your current 401k and then using the rule of 55 to spend that money.

 

[MarieIG]

I would compare the offerings, fees and transparency (do you get regular statements - keep up with them) of each 401k, and compare it with your current plan. Sometimes a good plan morphs into a poor one.

 

[Aiming_4_55]

Without knowing the funds available and expenses at the current employer, any answer is a guess.

At my new employer, I'm looking at the IS S&P 500 IDX K (WFSPX) with Exp Ratio (Net) 04/28/2023 ($0.30 per $1,000) 0.03%, Management Fee 0.01%

 

[Aiming_4_55]

Thanks for everyone's feedback. I confirmed that my new employer's 401k plan has the Rule of 55 option. With that, I started a few rollovers to my current employer plan this morning.

While I won't need the funds immediately if I retire before age 59.5 due to reasonable cash/CD/brokerage acct balances, it's nice to have the option as I hope to consider Roth conversions in the future after employment.

Thanks for the feedback and sharing your situation.