Should I roll my old 401K into my current one?

DesertTortoise

Dryer sheet wannabe
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Hi Everyone. My current company bought my old company back in 2013 and I just never got around to rolling my old company's 401K into my new one. Now my current company is up for sale and will likely be sold within the next few months. Both 401Ks are at Fidelity and have similar investment options and fees. One from the old company has just under $1MM and the one at the new company has about $550K. Seems like I should roll it just to make managing things easier down the line but are there any gotchas I should be worried about? Greater risk of fraud? Fees for the roll over I'm not counting on? Thanks for your thoughts. BTW, I'm 56, hoping to retire within 3 years.
 
Combining them into your current plan allows you to use the Using the Rule of 55 to Take Early 401(k) Withdrawals from the entire amount.

You probably won't need that, so it's not a real advantage, but because they "have similar investment options and fees" the simplification to one account is probably worth what the minimal effort (assuming the current plan allows incoming rollovers).
 
I’d merge them plus any future ones you get. I’m retired now and merged my last 401k (that was a result of merging about 4 other 401k’s thru the years) into an IRA. I love that it is all in one, easy-to-manage, account. No regrets here.
 
I would dig into the summary plan description. My division was spun out of megacorp and the new company maintained Fido for the 401k. The new plan lacked some features of the old plan so I kept both. I think megacorp had a better deal with Fido due to AUM. It was pretty easy to manage since both accounts were at Fido. Once I retired the new plan started charging fees that had been paid by the employer so I dropped it but I still have my original megacorp plan. Megacorp stlll pays the fees (or Fido absorbs them), it has Stable Value Fund, and offers “loans” which I csn use for large purchases or income smoothing
 
There is no fees for rolling over. In fact, Fidelity may give you a bonus for rolling over.
 
Why not roll them both into a Rollover IRA? You can keep them at Fidelity if you like or move them to your favorite investment house. If you have an IRA with only pre-tax dollars you can combine them all 3 into one IRA. Talk about simplifying! That is what we did with DW's 401K and pension, and mine too, obviously we cannot roll ours together. If the IRA money is needed before age 59-1/2, with some planning, one can withdraw from the IRA penalty free over a min of 5 years using the 72t (SEPP) method.
 
Thanks for that. I never had a Roth 401K or was permitted to contribute after tax $ to my 401Ks. I only had pretax dollars in my 401Ks. I never knew while contributing that some 401K plans allowed post tax contributions. The nuance for a Backdoor Roth is quite foreign to me. I will bow to your expertise.

I was talking about a 401K to a Rollover IRA, not a Roth backdoor. To clarify then, if a 401K was 100% pretax it can be rolled into an IRA without added complication if the IRA also has only pretax dollars in that IRA. (simplistic view). In my case, some backroom ***** pocus was done at Fido. The 401Ks and pensions went to a Rollover IRA and the existing trad IRA was somehow moved into it too. I now have only Backdoor and Roth IRAs, No trad IRA anymore. Simple to manage. For the OP, it eliminates "n" number of investments, depending on the number in their two 401K's.
 
I would transfer to a Rollover IRA. You can request transfer of mutual funds be transferred in-kind. No taxes are due. If you have any money in a low interest stable value fund, you can move this intro Fidelity’s MM fund, which is currently paying 4.97% or buy some CD’s.
 
I was talking about a 401K to a Rollover IRA, not a Roth backdoor.
It is the Rollover IRA that would cause the problem with the backdoor Roth. See that wiki article for details.

There is another process, the Mega-backdoor Roth, that may be available within a 401k/403b plan.

Similar names, but the former applies to IRAs while the latter applies to 401k/403b plans.
 
What are the plans provisions for the Rule of 55? You are currently 56 and that Rule could be an escape for you if you consolidate into the current plan. If you move into an IRA that is gone.
 
I’d consolidate both accounts and determine if the current 401k support rule of 55. If so, I would keep it as a 401k, Otherwise I might consider rolling it over to an IRA. Since you plan on working for 3 more years, rule of 55 is probably not a big deal, but nice to have as an option if you want to quit sooner or are laid off.
 
Sometimes there are company stock units that have to be sold before transfer. This or similar could put portion of asset balance in cash during transfer. That took me nearly 10 business days from Vanguard to eTrade. Naturally, stock market went up during those 10 days. Something to watch out for.

Taken into consideration other points above, I'm definitely fan of consolidation. Make management for you and your estate easier with less accounts.
 
I kept my 401K for years after retiring because they offered a fixed income fund that was paying way more than I could find elsewhere. I wanted to stay conservative, as I was “gambling” in my outside brokerage account. Once rates started climbing I rolled it over. It makes for an impressive looking 1099R, but the rollover itself is not a taxable event. Just don’t let it pass through your hands on the way. It was a bit stressful to see the 401K balance go to zero, while it took a few days to show up in the IRA.
 
Doesn't apply to OP, but for someone reading this in the future: if you plan on doing 72t/SEPP (substantially equal periodic payments) there are advantages to keeping separate 401Ks.
 
It is the Rollover IRA that would cause the problem with the backdoor Roth. See that wiki article for details.

There is another process, the Mega-backdoor Roth, that may be available within a 401k/403b plan.

Similar names, but the former applies to IRAs while the latter applies to 401k/403b plans.
But to be clear - this is only an issue if the OP did backdoor roth. I wasn't a big salary worker, so maxing my 401k was the most I could afford.

I always had a healthy skepticism of my megacorp(s) ability to screw things up. There were 3 mergers/acquisitions/spinoffs/etc in the last 10 years of my work. (Paycheck just had a new payor - but my work address/ cube location and lab location/ and work product remained the same.) I had to face this decision several times. I was that nerd employee that read through the new plans' available funds looking at expense ratios, read the plan summary book, etc... Each time I chose to roll my old 401(k) to a rollover IRA or leave it with the old plan, never rolled it to the new corporate plan. The last plan I had did have a good stable value fund, so I hung onto that 401(k) after I retired, for a few years, to keep that fund... But when interest rates changed, I rolled it over to my rollover IRA. Now all my former 401(k) funds are in 2 IRAs... None are still managed by the 401(k) plans that I originally contributed to.
 
I have at least 30 rollovers from pensions, insurance plans, simple, 401k, ... all into a contributory IRA that became a collection pot. Later I did serial rollovers to a contributory Roth that now holds everything. I used mortgage and tax writeoffs to absorb any taxes generated by the rollovers to the Roth, since post GFC I had no income. All my amounts were small, the market was down during the bulk of the rollovers. I never needed backdoor or other conversion methods.

Rather than examine the fine print and compare plans, I chose to manage directly and read Motley Fool.
 
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