401K Roll Over - Another 401K or IRA?

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401K Roll Over - Another 401K or IRA?

Postby learnfinance » Fri Feb 01, 2013 1:10 am

Hi,

I have a sizable amount in my old 401K (from my ex-employer) and I'm thinking to roll it over (they charge maintenance fees once employee is not active, so no point in keeping it there ).

My current company provides facility to invest in 401K at GWRS (well no matching though) and it has following funds -

Name Ticker Last Year Return
Great-West SF Balanced Fund G1 MXSHX 11.69
Great-West S&P SmallCap 600 Index Fund MXISX 15.78
Great-West S&P 500 Index Fund I MXVIX 15.42
Great-West International Index Fund I MXINX 17.92
Great-West S&P Mid Cap 400 Index Fund I MXMDX 17.12
Northern Emerging Markets Equity Index NOEMX 18.80
Great-West Bond Index Fund I MXBIX 3.90

American Funds 2010 Target Date Fund R3 RCATX 9.83
American Funds 2020 Target Date Fund R3 RCCTX 12.26
American Funds 2030 Target Date Fund R3 RCETX 15.63
American Funds 2040 Target Date Fund R3 RCKTX 16.00
American Funds 2050 Target Date Fund R3 RCITX 16.04

American Funds EuroPacific Gr R3 RERCX 18.89
DFA Emerging Markets I DFEMX 19.16
Lazard Emerging Markets Open LZOEX 22.03
Oakmark International II OARIX 28.70
Thornburg International Value TGVRX 15.18
Vanguard Total Intl Stock Index VGTSX 18.14

Invesco Real Estate A IARAX 16.55

Baron Small Cap Retail BSCFX 17.98
Perkins Small Cap Value A JDSAX 8.77
Vanguard Small Cap Index Fund NAESX 18.04

ASTON/Fairpointe Mid Cap N CHTTX 16.45
Goldman Sachs Mid Cap Value A GCMAX 18.03
Great-West T Rowe Price MidCap Gr Fund I MXMGX 13.68
Vanguard Mid Cap Index Inv VIMSX 15.80

American Funds Growth Fund of Amer R3 RGACX 20.20
Davis NY Venture A NYVTX 12.73
Fidelity Contrafund FCNTX 16.26
Fidelity Spartan 500 Index Inv FUSEX 15.93
T. Rowe Price Equity Income Fund PRFDX 17.25

Great-West US Govt Mortgage Secur Fund I MXGMX 3.22
Oppenheimer Global Strategic Income A OPSIX 13.49
PIMCO Total Return Admin PTRAX 10.08
Vanguard Total Bond Market Index VBMFX 4.05

So the second option is to roll this 401K to IRA account (I'm not sure which funds are good and read few posts regarding some index funds/growth funds in Vanguard). Considering current market - what is the best way to deal with rolling over my 401K.

Thanks in advance for all the suggestions.

Thanks.
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Re: 401K Roll Over - Another 401K or IRA?

Postby bogleblitz » Fri Feb 01, 2013 3:13 am

What are the expense ratios of your 401k? pick the one with lower expense ratio of funds you plan to buy.

401k offers better protection than IRA if you get sued in court or divorce.

rolling to IRA prevents you from doing a backdoor Roth.

Your fund selection is pretty good so it sounds like 401k is the better choice.
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Re: 401K Roll Over - Another 401K or IRA?

Postby learnfinance » Fri Feb 01, 2013 4:25 am

Thanks for replying. Here is the list of funds with expense ratios (4th column - I'm losing formatting here) -

Name Ticker Last Year Return Total Expenses
Great-West SF Balanced Fund G1 MXSHX 11.69 0.69
Great-West S&P SmallCap 600 Index Fund MXISX 15.78 0.69
Great-West S&P 500 Index Fund I MXVIX 15.42 0.69
Great-West International Index Fund I MXINX 17.92 0.69
Great-West S&P Mid Cap 400 Index Fund I MXMDX 17.12 0.69
Northern Emerging Markets Equity Index NOEMX 18.8 0.69
Great-West Bond Index Fund I MXBIX 3.9 0.69

American Funds 2010 Target Date Fund R3 RCATX 9.83 1.03
American Funds 2020 Target Date Fund R3 RCCTX 12.26 1.06
American Funds 2030 Target Date Fund R3 RCETX 15.63 1.09
American Funds 2040 Target Date Fund R3 RCKTX 16 1.11
American Funds 2050 Target Date Fund R3 RCITX 16.04 1.12

American Funds EuroPacific Gr R3 RERCX 18.89 1.14
DFA Emerging Markets I DFEMX 19.16 0.1
Lazard Emerging Markets Open LZOEX 22.03 1.42
Oakmark International II OARIX 28.7 1.39
Thornburg International Value TGVRX 15.18 1.45
Vanguard Total Intl Stock Index VGTSX 18.14 0.22

Invesco Real Estate A IARAX 16.55 1.3

Baron Small Cap Retail BSCFX 17.98 1.31
Perkins Small Cap Value A JDSAX 8.77 1.24
Vanguard Small Cap Index Fund NAESX 18.04 0.3

ASTON/Fairpointe Mid Cap N CHTTX 16.45 1.14
Goldman Sachs Mid Cap Value A GCMAX 18.03 1.15
Great-West T Rowe Price MidCap Gr Fund I MXMGX 13.68 1.04
Vanguard Mid Cap Index Inv VIMSX 15.8 0.24

American Funds Growth Fund of Amer R3 RGACX 20.2 0.98
Davis NY Venture A NYVTX 12.73 0.9
Fidelity Contrafund FCNTX 16.26 0.81
Fidelity Spartan 500 Index Inv FUSEX 15.93 0.095
T. Rowe Price Equity Income Fund PRFDX 17.25 0.68

Great-West US Govt Mortgage Secur Fund I MXGMX 3.22 0.6
Oppenheimer Global Strategic Income A OPSIX 13.49 0.94
PIMCO Total Return Admin PTRAX 10.08 0.71
Vanguard Total Bond Market Index VBMFX 4.05 0.22

I would appreciate if you please explain me what do you mean by backdoor Roth - how to do this if I go with 401K option?

Thanks.
-Dipesh
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Re: 401K Roll Over - Another 401K or IRA?

Postby jimkinny » Fri Feb 01, 2013 9:24 am

I would open an IRA at Vanguard and roll the money over to it from the 401. I do not know anything about a backdoor Roth.

I would roll over the money, not the funds. Call Vanguard, they have a service that will help you with this. It is very simple.

I would roll the money over to Vanguard because Vanguard has low cost index funds and low cost Target date funds based upon index funds. Check out the expense ratios at Vanguard vs your current options. Expenses matter as your portfolio increases and compounds over 20-40 years. Check Vanguards website for graphics that illustrate this.

The Boglehead Wiki has a lot of information. Check it out via the link at the top of this page. See the getting started link.

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Re: 401K Roll Over - Another 401K or IRA?

Postby JW Nearly Retired » Fri Feb 01, 2013 9:34 am

I would appreciate if you please explain me what do you mean by backdoor Roth - how to do this if I go with 401K option?

It's a way to make Roth IRA contributions even if your income is too high to make direct Roth contributions. However, it isn't profitable to do it if you already have a pre-tax traditional IRA, as a rollover would be. IMO, it's quite important to a higher income saver.

Put "backdoor Roth" into the google search box in the upper right.
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Re: 401K Roll Over - Another 401K or IRA?

Postby bdpb » Fri Feb 01, 2013 9:49 am

What funds are available in the old 401k?
What are the ER of those funds?
What are the additional maintenance fees?
It may still make sense to leave the money in your old 401k?
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Re: 401K Roll Over - Another 401K or IRA?

Postby WHL » Fri Feb 01, 2013 11:55 am

Your new 401k plan seems to have the available funds that would be required to duplicate the AA of the 3-fund portfolio, though it would be cheaper to do such directly at Vanguard in an IRA.

Only you can answer if this is a good decision or not. Do you need the availability of the backdoor Roth? I don't, so I've rolled all of my previous 401k's into a Vanguard IRA.
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Re: 401K Roll Over - Another 401K or IRA?

Postby retiredjg » Fri Feb 01, 2013 12:07 pm

Welcome to the forum!

You have 3 choices.

    -Leave it where it is. This is often a good idea, but in your case, there is no reason to do that.

    -Roll it into your new 401k. You have excellent choices there.

    -Roll it into an IRA. You would also have excellent (and unlimited) choices in an IRA, but it would interfere with back door contributions to Roth IRA (if that is something you should need or want to do).

Here are your excellent fund choices. How you mix them together depends on things we don't know at this point. These could be used to form a basic 3 fund portfolio (again, search the Wiki).

    Fidelity Spartan 500 Index Inv FUSEX 0.095
    Vanguard Mid Cap Index Inv VIMSX 0.24
    Vanguard Small Cap Index Fund NAESX 0.3
    Vanguard Total Intl Stock Index VGTSX 0.22
    Vanguard Total Bond Market Index VBMFX 0.22

Here's info on the back door. http://thefinancebuff.com/the-backdoor- ... ow-to.html

Here's how to get started. Wiki article link: Getting Started

P.S. forget formatting - it doesn't work and actually makes things harder
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Re: 401K Roll Over - Another 401K or IRA?

Postby learnfinance » Fri Feb 01, 2013 3:20 pm

Thanks for replying @jimkinny @JW Nearly Retired @bdpb @WHL @retiredjg

@jimkinny - Considering that I can move to IRA later (when I change this company or otherwise) and keeping other options (backdoor Roth) open, I'm leaning towards rolling it over to new 401K.

@bdpb - When I have called today to my ex company's 401K, I came to know that my company is moving 401K from that financial institution. So one more reason that I can't keep my money there.

@retiredjg - Thanks very much for providing links and breaking down my choices. I'm thinking to roll it to my new 401K and will most probably do 3 fund portfolio and will keep it more or the high growth side (80 (US Domestic Stock)-10 (International) -10 (bonds)).

Thanks once again.
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Re: 401K Roll Over - Another 401K or IRA?

Postby hoppy08520 » Fri Feb 01, 2013 4:23 pm

Here's a blog post from Oblivious Investor, a frequent poster here:

http://www.obliviousinvestor.com/should ... to-an-ira/

My take on this is, about the only advantage (aside from the possibly advantage of asset protection and the possibility of early retirement) of rolling over the old 401(k) to the new 401(k) is to keep your backdoor Roth IRA eligibility.

If you're above the Roth IRA income limits, then by all means roll the old 401(k) over to the new plan if the new plan is better, if that enables you to do backdoor Roth IRA.

But if you're under the limit, then I'd transfer to an IRA unless your 401(k) doesn't allow transfers in from an IRA; double-check this with your plan, as each plan can have different rules. If one day in the future you get to Backdoor Roth IRA territory, then you can just transfer your traditional IRA into the 401(k).

True, the fund expense ratios in the new plan are only a little bit higher than what you'd pay in an IRA, but find out for sure if you're not paying additional expenses for total assets under management (AUM) for the current 401(k). I've seen plenty of posts here with people who used to feel all happy about their 0.05% ER funds until they found out they're also paying a 0.35% AUM or more on top of that. That's why I'd be cautious about rolling over money into your new 401(k) plan until you're really sure what your expenses are.
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Re: 401K Roll Over - Another 401K or IRA?

Postby learnfinance » Sat Feb 02, 2013 1:39 am

@hoppy08520 - Thanks for replying and shedding some light on this aspect (rolling over 401K to IRA).

As you mentioned, I'm falling above the Roth IRA income limits this year & considering my new plan's choices are decent, I guess moving it to 401K is the best option now.

Thanks for informing about AUM - I have confirmed once again & found that they are same as I have listed above.

Thanks once again.
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