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Posted: 8/1/2022 1:45:38 PM EDT
[#1]
Quoted: I know, I know this comes up all the time, but I just switched employers and have a chance to make a change. I have a 401k (not sure if amount matters for this discussion) I need to roll. My new employer matches and does a discretionary nonelective contribution. This combination will put me at or over the max allowed by law. I was planning to just roll my entire balance into the new 401k and let compounded interest do its thing. However, I keep hearing it's likely best to roll my balance to a traditional IRA, and start with a 0 balance at the new employer. I planned to call the receiving institution but I'm concerned about biased input. I've already received a lengthy voicemail from the current holder of my 401k about how they would love to talk about how they can help me. So, should I put my balance in a traditional IRA and make monthly contributions and start from 0 with the new employer knowing I'll hit the 58k a year? Thanks in advance Excuse mistakes as this was written on my phone What is wrong with your old 401K? high fees or bad fund choices? If neither keep it there. Rollover to IRA wrecks Backdoor Roth, and rollover to new employer puts you in a worse spot if they switch to some expensive American Funds plan in the future. |
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Posted: 8/1/2022 1:55:59 PM EDT
[#2]
Quote HistoryQuoted: What is wrong with your old 401K? high fees or bad fund choices? If neither keep it there. Rollover to IRA wrecks Backdoor Roth, and rollover to new employer puts you in a worse spot if they switch to some expensive American Funds plan in the future. Quote HistoryQuoted: Quoted: I know, I know this comes up all the time, but I just switched employers and have a chance to make a change. I have a 401k (not sure if amount matters for this discussion) I need to roll. My new employer matches and does a discretionary nonelective contribution. This combination will put me at or over the max allowed by law. I was planning to just roll my entire balance into the new 401k and let compounded interest do its thing. However, I keep hearing it's likely best to roll my balance to a traditional IRA, and start with a 0 balance at the new employer. I planned to call the receiving institution but I'm concerned about biased input. I've already received a lengthy voicemail from the current holder of my 401k about how they would love to talk about how they can help me. So, should I put my balance in a traditional IRA and make monthly contributions and start from 0 with the new employer knowing I'll hit the 58k a year? Thanks in advance Excuse mistakes as this was written on my phone What is wrong with your old 401K? high fees or bad fund choices? If neither keep it there. Rollover to IRA wrecks Backdoor Roth, and rollover to new employer puts you in a worse spot if they switch to some expensive American Funds plan in the future. The old one is from an employer I'm no longer with. |
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Posted: 8/1/2022 2:21:07 PM EDT
[#3]
You should convert to a Rollover IRA and not convert it to the new 401k. At some point your old company may kick you off their program because they don't want to carry the cost to keep you.
If you like the options in your old 401k you can convert it In-Kind to the Rollover IRA and keep the same funds but in your Rollover IRA. If you are not satisfied with the options in your old 401k you can convert it cash value to the Rollover IRA (not cash to you) and then pick and choose from everything instead of being limited to your old 401k program. |
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Posted: 8/1/2022 3:39:06 PM EDT
[#4]
Jeez. Try a financial planner. |
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Posted: 8/1/2022 3:43:33 PM EDT
[#5]
For what it’s worth, I have rolled a 401k into a self-directed IRA which gives me more control over what happens with the money. Just to let you know that’s an option. Definitely not the right decision for everyone. I used the self-directed IRA to purchase a rental home. Lots of options although lots of rules as well.
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Posted: 8/1/2022 3:56:56 PM EDT
[#6]
IMO the only downside to the IRA rollover is the normal penalty-free distribution age is 59.5 vs 55 in the 401k.
If there is little to no chance you will want/need distributions before age 59.5 the IRA is better for most. |
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Posted: 8/1/2022 4:19:06 PM EDT
[#7]
The only real reason to roll into your 401K vs a rollover IRA is the rule of 55. If you don’t need the money between the ages of 55 and 59 1/2, rollover IRA is best. Yes you can’t do a backdoor Roth conversions, but you can do straight Roth conversions up to your entire IRA balance.
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Posted: 8/1/2022 5:55:32 PM EDT
[#8]
Quote HistoryQuoted: The only real reason to roll into your 401K vs a rollover IRA is the rule of 55. If you don’t need the money between the ages of 55 and 59 1/2, rollover IRA is best. Yes you can’t do a backdoor Roth conversions, but you can do straight Roth conversions up to your entire IRA balance. Lol, I likely wouldn't need it, but I'd like to retire in that age range. ETA: that reads incorrectly. I meant, I'll likely fund the gap from when I retire to when I can draw my 401k without penalty. |
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Posted: 8/1/2022 5:56:42 PM EDT
[#9]
Quote HistoryQuoted: Jeez. Try a financial planner. This is literally the Business & Investing forum. |
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Posted: 8/1/2022 6:06:25 PM EDT
[#10]
Quote HistoryQuoted:The old one is from an employer I'm no longer with. But, as mentioned, if you ever want to do a back door Roth, roll it into your new plan. |
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Posted: 8/1/2022 6:08:04 PM EDT
[#11]
Quote HistoryQuoted: You should convert to a Rollover IRA and not convert it to the new 401k. At some point your old company may kick you off their program because they don't want to carry the cost to keep you. If you like the options in your old 401k you can convert it In-Kind to the Rollover IRA and keep the same funds but in your Rollover IRA. If you are not satisfied with the options in your old 401k you can convert it cash value to the Rollover IRA (not cash to you) and then pick and choose from everything instead of being limited to your old 401k program. The rollover will consist of a check sent or electronic fund transfer to the receiving institution. |
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Posted: 8/2/2022 1:34:39 PM EDT
[#12]
At your income level I am surprised you have not done the Backdoor Roth strategy at this point? If you roll the 401k into a Traditional pre-tax IRA, this will basically preclude you from doing the Back Door Roth due to the pro-rata rule. Also, depending on your State, a 401K enjoys ERISA protection that an IRA may or may not. For high net worth folks, this is an important consideration. A reason to convert a 401k to an IRA in my opinion is the inherent fee reduction over that in a 401K plan. An IRA will always be lower fees even if invested in the identical fund.
I wish you good luck in your journey. |
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Posted: 8/2/2022 1:42:50 PM EDT
[#13]
I would rollover to whatever quality brokerage you want(Fidelity, etc.).
You then have full control over your money, avoid fees, and avoid any hassles from having a 3rd party (employer and/or the firm who manages your exmployer's 401k) involved in your finances. When you leave your current employer then rollover that 401k into the same rollover ira. They want you to leave your money where it is because they make money from your money. |
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Posted: 8/2/2022 2:26:48 PM EDT
[#14]
There is a lot of wrong in this thread.
Most old employers will let you stay in your 401k. In particular if it’s a mega corp with low to no fees and very cheap index funds there is NO reason to leave it. There are no Rule of 55 Withdrawals assuming you left the old employer before you turned 55. Rule of 55 withdrawal from 401k is only from the 401k you separated from at age 55. (I am unsure if you rollover these funds into the new 401, if rule of 55 will apply to them. I know 457 early withdrawal benefits do NOT apply to rolled-in funds). There are MaNY downsides to traditional IRA money, 6000 downsides every year for the rest of your career with the loss of Backdoor Roth ability. |
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Posted: 8/2/2022 5:56:07 PM EDT
[#15]
Quote HistoryQuoted: At your income level I am surprised you have not done the Backdoor Roth strategy at this point? If you roll the 401k into a Traditional pre-tax IRA, this will basically preclude you from doing the Back Door Roth due to the pro-rata rule. Also, depending on your State, a 401K enjoys ERISA protection that an IRA may or may not. For high net worth folks, this is an important consideration. A reason to convert a 401k to an IRA in my opinion is the inherent fee reduction over that in a 401K plan. An IRA will always be lower fees even if invested in the identical fund. I wish you good luck in your journey. I don't know if my income is that high. I found out I have free access to a CFP firm through my employer. They're independent from both my previous and current employers 401k institutions. I have a meeting scheduled for next week. Thanks for the well wishes |
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Posted: 8/2/2022 6:05:58 PM EDT
[#16]
Quote HistoryQuoted: There is a lot of wrong in this thread. Most old employers will let you stay in your 401k. In particular if it’s a mega corp with low to no fees and very cheap index funds there is NO reason to leave it. There are no Rule of 55 Withdrawals assuming you left the old employer before you turned 55. Rule of 55 withdrawal from 401k is only from the 401k you separated from at age 55. (I am unsure if you rollover these funds into the new 401, if rule of 55 will apply to them. I know 457 early withdrawal benefits do NOT apply to rolled-in funds). There are MaNY downsides to traditional IRA money, 6000 downsides every year for the rest of your career with the loss of Backdoor Roth ability. This is good to know. Yeah, I'm still way under 55 and haven't done anything in the past except roll entire 401k to new employer 401k. |
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Posted: 8/7/2022 9:35:36 PM EDT
[#17]
yes roll it, self directed IRA with vanguard or fidelity
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Posted: 8/8/2022 9:32:22 AM EDT
[#18]
Donnie,
The maximum 401K ERISA contribution limit is $61,000 in 2022 hence my comment about you being a highly compensated person. 2022 ERISA plan limits |
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Posted: 8/13/2022 4:01:51 AM EDT
[#19]
In the past, every time I've left a job I rolled the 401k into my traditional IRA at Vanguard. Most of that was just that Vanguard offered more and better options than most 401k plan providers.
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Posted: 8/16/2022 2:44:32 AM EDT
[#20]
The advice I always give in this situation is ALWAYS transfer your old 401k into a traditional/rollover IRA at schwab, vanguard, fidelity, etc. You will have an order of magnitude more, better, and lower cost investment options.
You will have better investment options than your new employer almost certainly, so I wouldn't bother trying to roll it into the new employer's 401k, besides this option is almost always a bigger PITA. |
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Posted: 8/16/2022 8:46:24 PM EDT
[#21]
Roll it into an account with an index mirroring strategy....no fees and never ever take a loss in a down market. You only ever gain...this is the type of account the wealthy 5% of America leverages to build their wealth.
PM me for the details. |
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Posted: 8/22/2022 6:50:40 AM EDT
[#22]
Roll it to one of the big firms into a traditional IRA. Invest it there in the unlimited choices they have available.
Rolling it to your new firm is a very bad idea IMO as choices are limited and fees are likely higher. |
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Posted: 8/22/2022 7:43:36 AM EDT
[#23]
Quote HistoryQuoted: Roll it into an account with an index mirroring strategy....no fees and never ever take a loss in a down market. You only ever gain...this is the type of account the wealthy 5% of America leverages to build their wealth. PM me for the details. I will. I spoke with my company's CFP, but they're independent of our 401k and still suggested rolling it. I'll shoot you a message. |
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Posted: 8/29/2022 9:03:22 AM EDT
[#24]
Options in my 401k are pretty limited. I'd jump at the opportunity to roll into an IRA and take it to whatever advisor and whatever investments I wanted. Not to mention, gaining the ability to do Roth conversions in years I'm down a bracket.
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Posted: 8/30/2022 9:06:12 AM EDT
[#25]
Your question reads like you think the roll would count towards some limit. I don't believe it does as it's just moving it from one tax deferred account to another.
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Posted: 9/8/2022 10:22:05 PM EDT
[#26]
Quote HistoryQuoted: Options in my 401k are pretty limited. I'd jump at the opportunity to roll into an IRA and take it to whatever advisor and whatever investments I wanted. Not to mention, gaining the ability to do Roth conversions in years I'm down a bracket. This what I am looking at doing before the end of the Trump tax cuts, I won't be able to get it all though  . I will probably go with Fidelity because I already have an account and my current Roth IRA that I have been funding is at Vanguard. I try not to keep all my eggs in one basket.
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