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I'm usually the one giving advice here but with this issue I'm having a hard time deciding what to do, hoping some folks can help provide sound advice on what they would do or possibly what they HAVE done in a similar position.
I separated from an employer a while back and have roughly $200K in 401K savings which consists of mostly mutual funds but some company stock ($9K). With my new employer I already have $95K in their 401K account. I'm happy with the new employer's plan, I have most investments in low-cost index funds, heavily weighted in stocks. The former employer's plan is very similar....lots of low cost index funds as options.
What I'm struggling with is whether to roll it over into my own IRA (very low balance currently) or simply roll it over into my new employer's plan. The IRA is through Schwab and they provide access to nearly any/every mutual fund on the planet, plus I could dabble in stocks if I wanted. Since I'd likely stick to the same type of investments, I'm wondering if I am overthinking this too much? Either option has ample low cost funds and I don't plan on ever taking an early distribution or loan......thoughts?
Unless you'll someday need to the backdoor method of funding a Roth IRA, you work in a field where you need to protect your personal assets from a lawsuit, or you may someday need to file for bankruptcy, I think you're looking at a coin flip choice. Can't go wrong either way!
Personally, whenever I have resigned from a position, I transferred my 401k assets to my IRA, which is at Fidelity. Just feel better not having assets potentially connected with a previous employer.
If you rollover into an IRA don't co-mingle with IRA money that is from direct IRA contributions. If you keep the rollover separate then later on you can always choose to move it into your current 401k.
Given the low cost funds available in your former company's plan, I'd leave it or roll it over to your new employer's 401k to protect the assets from potential law suits/bankruptcy as Aredhel referenced (liability in particular - you know how lawsuit happy they are here in Florida).
Check with your new company's recordkeeper but if you change your mind after rolling it over to your new 401k, you'll still be able to roll that portion out if you wanted to even if you're under 59.5 yrs old without tax or penalty implications (rollover funds will be sourced to a "rollover" source within your 401k and this source will be eligible for withdrawal at any time).
Edit: turns out Florida also protects Rollover IRAs from civil suits if you’re alive. All bets are off once you’re dead.
Last edited by Ivan Putski; 06-21-2018 at 02:38 PM..
You should consider a back door ROTH (future contributions). I think a lot of people pass this up and will realize in retirement having some non taxable income is a plus. Assuming cost you have to pay are about the same in the IRA and the 401k I would roll to the 401k and move the IRA to a ROTH. Diversification - taxable and non taxable retirement income.
If your 401k has a ROTH option then I can see rolling to the new co's 401k and putting some money in the ROTH option in the future.
Given the low cost funds available in your former company's plan, I'd leave it or roll it over to your new employer's 401k to protect the assets from potential law suits/bankruptcy as Aredhel referenced (liability in particular - you know how lawsuit happy they are here in Florida).
Check with your new company's recordkeeper but if you change your mind after rolling it over to your new 401k, you'll still be able to roll that portion out if you wanted to even if you're under 59.5 yrs old without tax or penalty implications (rollover funds will be sourced to a "rollover" source within your 401k and this source will be eligible for withdrawal at any time).
Edit: turns out Florida also protects Rollover IRAs from civil suits if you’re alive. All bets are off once you’re dead.
Hadn't even thought of the lawsuit factor, appreciate the input!
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