individual 401k to traditional ira question

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jafcorrea
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individual 401k to traditional ira question

Postby jafcorrea » Wed Apr 19, 2017 5:11 pm

can you transfer funds from i401k to tira to take advantage on lower er? (all in vanguard)

can i transfer employee and employer contribution?

thanks in advance, .... trying to help a colleague
Thanks JC

jayhawkerbeef
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Re: individual 401k to traditional ira question

Postby jayhawkerbeef » Wed Apr 19, 2017 5:23 pm

Are you an active current employee? If yes, then any contributions from your current employer plan can't be rolled out of the plan until you leave, get fired, etc.

Now if you transferred money from a rollover IRA into your current plan and now want to roll it out of the plan, that's possible. Be mindful that if you have or plan to have a Roth IRA and do a backdoor (not sure your income), those are not looked at as mutually exclusive and makes the backdoor messy.

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jafcorrea
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Re: individual 401k to traditional ira question

Postby jafcorrea » Wed Apr 19, 2017 5:43 pm

jayhawkerbeef wrote:Are you an active current employee? If yes, then any contributions from your current employer plan can't be rolled out of the plan until you leave, get fired, etc.

Now if you transferred money from a rollover IRA into your current plan and now want to roll it out of the plan, that's possible. Be mindful that if you have or plan to have a Roth IRA and do a backdoor (not sure your income), those are not looked at as mutually exclusive and makes the backdoor messy........she is self employed, and she just contributed for 2016
employee 18K and employer 16k, for the past 5 years almost the same contribution ... she also has a TIRA with 15k but no contribution for the last 5 year
s
Thanks JC

Spirit Rider
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Re: individual 401k to traditional ira question

Postby Spirit Rider » Wed Apr 19, 2017 6:39 pm

jayhawkerbeef wrote:Are you an active current employee? If yes, then any contributions from your current employer plan can't be rolled out of the plan until you leave, get fired, etc.

This is not entirely true.

IRS regulation prohibit 401k in-service withdrawal/rollovers of employee deferrals before age 59 1/2.

401k plans may, but only if expressly allowed in the plan documents; allow in-service withdrawal/rollover of employee deferrals after age 59 1/2 and vested employer contributions, after-tax employee contributions and previously rolled in assets prior to 59 1/2.

One-participant 401k employer contributions are always vested, so if your plan allows, they could be rolled over.

If you are not happy with the expense ratios of your current plan, why don't you just amend your plan to the lower cost custodian and transfer all funds to the new custodian. This is permitted, because the assets exist in your in your plan and are not restricted to a single custodian.

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jafcorrea
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Re: individual 401k to traditional ira question

Postby jafcorrea » Wed Apr 19, 2017 7:50 pm

Spirit Rider wrote:
jayhawkerbeef wrote:Are you an active current employee? If yes, then any contributions from your current employer plan can't be rolled out of the plan until you leave, get fired, etc.

This is not entirely true.

If you are not happy with the expense ratios of your current plan, why don't you just amend your plan to the lower cost custodian and transfer all funds to the new custodian. This is permitted, because the assets exist in your in your plan and are not restricted to a single custodian.... not really I checked, for example .... I401k TSM (VTSAX) ER 0.16% on TIRA VTSAX ER 0.05%
Thanks JC

Spirit Rider
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Re: individual 401k to traditional ira question

Postby Spirit Rider » Wed Apr 19, 2017 10:41 pm

jafcorrea wrote:
Spirit Rider wrote:
jayhawkerbeef wrote:Are you an active current employee? If yes, then any contributions from your current employer plan can't be rolled out of the plan until you leave, get fired, etc.

This is not entirely true.

If you are not happy with the expense ratios of your current plan, why don't you just amend your plan to the lower cost custodian and transfer all funds to the new custodian. This is permitted, because the assets exist in your in your plan and are not restricted to a single custodian.... not really I checked, for example .... I401k TSM (VTSAX) ER 0.16% on TIRA VTSAX ER 0.05%

You misunderstood me.

Employer contributions are fully vested in the Individual 401k and Vanguard's plan document does appear to allow you to do an in-service rollover of all employer contributions after five years. You should verify that with Vanguard, because sometimes there are special rules.

IRS regulations do not allow you to do in-service rollovers of employee deferrals prior to age 59 1/2, separation of employment or other special cases. However, you can amend your Vanguard Individual 401k plan to for example Fidelity's Self-Employed 401K and transfer the assets there. Fidelity does allow their SE 401k to invest in Fidelity's Premium Class index funds, which have expense ratios <= Vanguard Admiral share index funds, which Vanguard does not allow in their I 401k.

This would allow your employee deferrals and all future contributions to receive the lower expense ratios you desire. This is what I was talking about.

nolesrule
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Re: individual 401k to traditional ira question

Postby nolesrule » Thu Apr 20, 2017 8:07 am

As someone who moved a solo 401k from Vanguard to Fidelity, I agree with Spirit Rider. I did it for both the lower ER and also the ability to roll in TIRA balances (in order to enable backdoor Roth contributions). Those are the 2 advantages Fidelity has over Vanguard in the solo 401k department. Vanguard's advantage is they allow Roth employee contributions. So you have to weigh what's more important.

Either way, the ERs are still quite low.

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jafcorrea
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Re: individual 401k to traditional ira question

Postby jafcorrea » Thu Apr 20, 2017 9:50 am

planning to call vanguard and see if they allow tranfer the "employee" contribution to TIRA
Thanks JC


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