What to do with Old 401K

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Dojo
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What to do with Old 401K

Post by Dojo » Tue Mar 07, 2017 8:55 pm

Hello Friends,

I wanted some advice on what to do with my existing 401K. I have few options, I can either rollover my existing 401K from my old employer to an IRA managed by Northwestern Mutual or I can roll it over to my new employer.

What are the Tax consequences ? and what would experts recommend to do. Dollar amount would be close to 130K. What makes sense in the long run?

Thanks for the help in advance.

macheta
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Re: What to do with Old 401K

Post by macheta » Tue Mar 07, 2017 9:01 pm

What are the funds and expense ratios in the old and current employer?

pkcrafter
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Re: What to do with Old 401K

Post by pkcrafter » Tue Mar 07, 2017 9:53 pm

Welcome, I just wanted to clarify your situation. You have a 401k from an old employer and you are wondering if you should roll it to current employer's 401k or roll it over to an IRA.

As Macheta already noted, a decision to roll to current employer depends on cost of funds in that plan. Can you list some of the lower fund options with tickers if they have them. Does the old 401k have any low cost options?

You can also roll the old 401k to an IRA, and it does not have to be Northwestern, and probably should not go there because you can get much better options at Vanguard, Fidelity or Schwab.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Spirit Rider
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Re: What to do with Old 401K

Post by Spirit Rider » Wed Mar 08, 2017 1:01 am

An insurance company would be my last choice of somewhere to rollover an old 401k.

Dojo
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Re: What to do with Old 401K

Post by Dojo » Wed Mar 08, 2017 6:28 pm

Thank You all for your help. New 401K is through John Hancock and it has some really good investment options...Some of the funds included are (VSG) Vanguard Small Cap, (VIS), (GFA), T.Rowe Price Spectrum (INC) to name a few, there are a lot of options in Aggressive Growth, Growth, G&I & Bond funds included. I am definitely leaning towards rolling it over to John Hancock as opposed to North Western Mutual.

Plus Northwestern charges 1.65% annual fee of the 401K amount. John Hancock fees seem to be around 0.55%. Only reason I was thinking about Northwestern was because of my financial planner who works with them.

pkcrafter
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Re: What to do with Old 401K

Post by pkcrafter » Wed Mar 08, 2017 6:43 pm

John Hancock fees seem to be around 0.55%
That may not be the total in fees and it doesn't include the expense ratios of the funds. Can you list some of the available funds with lowest expense ratios and ticker symbols, if any.

Is there any match in the new 401k?

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Dojo
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Re: What to do with Old 401K

Post by Dojo » Wed Mar 08, 2017 7:22 pm

Here are the funds with lowest expense ratios

(IND) : 0.63%
(VIS) : 0.68%
(MCI) : 0.66%
(VSG) : 0.68%
(EQI) : 0.81%
(DVA) : 0.85%
(FBF) : 0.85%
(SIM) : 0.85%
(HYF) : 0.87%
Target Date Funds at 0.97%

Yes, there is a 4% match from employer. Thanks for your help.

Nummerkins
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Re: What to do with Old 401K

Post by Nummerkins » Wed Mar 08, 2017 7:35 pm

Why not roll it over to Vanguard or Fidelity? Your fees can be 0.10% or lower in the right index funds. You have unlimited flexibility then.

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Kenkat
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Re: What to do with Old 401K

Post by Kenkat » Wed Mar 08, 2017 7:57 pm

Nummerkins wrote:Why not roll it over to Vanguard or Fidelity? Your fees can be 0.10% or lower in the right index funds. You have unlimited flexibility then.
Yes, you should be able to roll the old 401(k) to a rollover IRA at Vanguard or Fidelity. There are no rules that the previous employer can impose on you as to where you can move your money.

mortfree
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Re: What to do with Old 401K

Post by mortfree » Wed Mar 08, 2017 7:59 pm

Dojo wrote:
Plus Northwestern charges 1.65% annual fee of the 401K amount. John Hancock fees seem to be around 0.55%. Only reason I was thinking about Northwestern was because of my financial planner who works with them.

Stay on here and read up. You will no longer want a "planner" after you realize how much he is making off of you.

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oldcomputerguy
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Re: What to do with Old 401K

Post by oldcomputerguy » Wed Mar 08, 2017 8:31 pm

Dojo wrote:Here are the funds with lowest expense ratios

(IND) : 0.63%
(VIS) : 0.68%
(MCI) : 0.66%
(VSG) : 0.68%
(EQI) : 0.81%
(DVA) : 0.85%
(FBF) : 0.85%
(SIM) : 0.85%
(HYF) : 0.87%
Target Date Funds at 0.97%

Yes, there is a 4% match from employer. Thanks for your help.
Can you give fund titles? These tickers don't seem to make sense. For example, you mentioned VSG and called it Vanguard Small Cap. But according to Morningstar, VSG is the ticker for Vanguard Canadian Short-term Bond ETF. It would help to know what these funds actually are.
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lazydavid
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Re: What to do with Old 401K

Post by lazydavid » Thu Mar 09, 2017 9:10 am

Dojo wrote:Here are the funds with lowest expense ratios

(IND) : 0.63%
(VIS) : 0.68%
(MCI) : 0.66%
(VSG) : 0.68%
(EQI) : 0.81%
(DVA) : 0.85%
(FBF) : 0.85%
(SIM) : 0.85%
(HYF) : 0.87%
Target Date Funds at 0.97%

Yes, there is a 4% match from employer. Thanks for your help.
Is the 0.55% over and above these already fairly high ERs? So DVA, FBF, or SIM would actually cost you 1.4%? Either way, the standard recommendation is the right one here:

1) Contribute enough to your 401k to max out the 4% match
2) Max out Roth or Traditional IRA, depending on your situation
3) Contribute more to 401k

Presumably you won't be with this employer forever, so the bad ERs won't drag on your returns all the way to retirement. Whenever you move on, you can roll everything in your (not so great) 401k over to a better one at a new employer, or into an IRA. Speaking of that, you definitely DO NOT want to roll your old 401k into this one, or to NWML. As has been said previously, roll it into a traditional IRA at either Vanguard or Fidelity.

Mr.Wu
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Re: What to do with Old 401K

Post by Mr.Wu » Thu Mar 09, 2017 9:38 am

What are the expense ratios of the funds in your old 401k? Can you leave them there since the new 401k's expense is so high?

If you decide to roll it over to IRAs, ask yourself if you are going to do backdoor Roth IRA in the future. The traditional IRA that rolled over from your pretax contribution or company matching in your old 401K will give you headache in backdoor Roth IRA. That was the reason I rolled over my old 401k to new 401k when I switched job (aside from the fact that my new 401k offers vanguard institutional plus shares with unbelievably low expense ratio :wink: )
Last edited by Mr.Wu on Thu Mar 09, 2017 10:43 am, edited 2 times in total.

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BL
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Re: What to do with Old 401K

Post by BL » Thu Mar 09, 2017 10:04 am

Welcome to Bogleheads!

As you may soon see, we are all about investing with as low cost as possible in a simple and diversified manner. You may have to do the best you can with what you have in the 401k, but for IRAs and taxable investing you have the easy choice of buying very low ER (expense ratio) index funds (from 0.04 to 0.20%) at no additional cost whatsoever! Costs matter, and this could save you a huge % of your retirement money over time. Suggest you read Bogleheads' Guide to Investing or another recommended book.

If you roll it into an IRA with high ERs and other fees, it may cost you more than leaving it where it is. If you roll it to a brokerage like Vanguard or Fidelity, you can get low cost index funds so it could be worthwhile.

Have you looked carefully at the fees, loads, 12b-1 kickbacks (part of your ER) that your "advisor" is getting? Once you wake up to that, things may never be the same.

bloom2708
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Re: What to do with Old 401K

Post by bloom2708 » Thu Mar 09, 2017 10:27 am

Nummerkins wrote:Why not roll it over to Vanguard or Fidelity? Your fees can be 0.10% or lower in the right index funds. You have unlimited flexibility then.
+1 When we leave a job/career, we roll the 401k to our Rollover IRA/Roth IRA at Vanguard. That we we only have Vanguard + Current job 401k. I have yet to have a job that has any Vanguard funds as available options. Going to Vanguard has worked so far.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

targ
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Re: What to do with Old 401K

Post by targ » Thu Mar 09, 2017 11:21 am

+1 on considering the back door Roth prior to making a decision.

I effectively closed the door on myself when I left a MegaCorp job and rolled the 401k into an IRA. Now, I can't do a back door Roth without significant tax implications.
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