Company 401(k) Actually Better Than IRA? (Fidelity)

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wraith_legion
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Company 401(k) Actually Better Than IRA? (Fidelity)

Post by wraith_legion » Fri Jun 15, 2018 8:57 am

Hi,

I've just started with a new company who offers a Fidelity 401(k). My previous employer had some really bad American Funds options (lowest expense ratio: 0.38% for an S&P 500 fund). Still, I took advantage of the match and now have about $10k in Roth contributions and earnings and $3k pretax that I'm looking to roll over.

Looking over the list of options in my new plan, I'm struck by how... reasonable everything is. All the target date funds are 0.06%, and they have a Fidelity Class F S&P 500 fund for 0.01%. A Small/Mid Index is 0.05%.
There's a TIPS bond fund and a Total Bond Market fund for 0.03% apiece. I'm 26 and comfortable with an all-equity position for the time being, but will slowly add bonds as I age (haven't figured out that schedule yet).

My original plan was to roll over my Roth money into an IRA, and buy something like FSTVX (Fidelity's total stock market fund) at 0.035% (since I have the $10k for their premium shares).

However, I'm very tempted to just roll it into my employer's plan. The expense ratios all seem lower than what I can get outside the plan. Plus, I can take a loan from the plan, if needed, unlike an IRA. The plan also offers Fidelity BrokerageLink, so I can also buy other funds if they decide to change the offerings at some point in the future.

All this being said, is there anything I'm missing? Any reason to rollover to an IRA over this plan?

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oldcomputerguy
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Re: Company 401(k) Actually Better Than IRA? (Fidelity)

Post by oldcomputerguy » Fri Jun 15, 2018 9:25 am

Does the new employer's 401(k) include a Roth 401(k) option? If so, absolutely roll over to the employer's plan. You won't ever again find an S&P500 fund at 0.01%.

That said, there's nothing wrong with rolling the Roth portion of your old 401(k) over to a Roth IRA if you want. The 0.035% ER of FSTVX is not as good obviously as the 0.01%, but it's not bad by any stretch of the imagination.

Congratulations on having truly exceptional 401(k) options.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

Rupert
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Re: Company 401(k) Actually Better Than IRA? (Fidelity)

Post by Rupert » Fri Jun 15, 2018 9:27 am

Do you mean you have a Roth 401k sponsored by your previous employer? Does your new employer also sponsor a Roth 401k? (I, and another poster I now see, are asking this because you can't commingle Roth funds with non-Roth funds). If your new employer doesn't sponsor a Roth 401k, your only options would be to roll the old Roth 401k money into a Roth IRA or to leave it where it is.

wraith_legion
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Re: Company 401(k) Actually Better Than IRA? (Fidelity)

Post by wraith_legion » Fri Jun 15, 2018 9:38 am

Thanks for the replies. To clarify, both old and new employer have Roth 401(k) options.

My current balance with the old employer has both a Roth and a pre-tax portion, since the company match counts as a pre-tax contribution. My new plan will be set up much the same way. I'm going to elect Roth contributions, and the match will go in a pre-tax (non-Roth) portion of the account.

I'm currently working with my old employer to make sure the rollover amounts will be split up appropriately so nothing is commingled.

crg11
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Re: Company 401(k) Actually Better Than IRA? (Fidelity)

Post by crg11 » Fri Jun 15, 2018 9:52 am

I'm fairly certain (was told in another thread recently) that you cannot roll a Roth IRA into a Roth 401K. https://www.irs.gov/retirement-plans/re ... onversions seems to agree on that part.
Can I roll over my IRA into my retirement plan at work?

You can roll over your IRA into a qualified retirement plan (for example, a 401(k) plan), assuming the retirement plan has language allowing it to accept this type of rollover. Roth IRAs can only be rolled over to another Roth IRA.
Otherwise, what the OP stated is exactly what I'm doing. My employer's Fidelity 401k plan is so good ER wise (and in fact, includes a bunch of Vanguard index funds at institutional rates), I'm just rolling my Traditional IRA into it. Should simplify monitoring things, which is always nice. Additionally, it opens the door for me to do a Backdoor Roth next year when my income (likely) exceeds the Roth IRA limits, as now I will have an empty Traditional IRA to utilize.

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oldcomputerguy
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Re: Company 401(k) Actually Better Than IRA? (Fidelity)

Post by oldcomputerguy » Fri Jun 15, 2018 10:55 am

crg11 wrote:
Fri Jun 15, 2018 9:52 am
I'm fairly certain (was told in another thread recently) that you cannot roll a Roth IRA into a Roth 401K. https://www.irs.gov/retirement-plans/re ... onversions seems to agree on that part.
Agreed. This is further substantiated by this IRS chart. However, I don't believe that rolling a Roth IRA into a Roth 401(k) was one of the scenarios that the OP asked about; the question was specifically whether to roll funds from the previous 401(k) into the new employer's 401(k) or into an IRA, and according to the linked chart both these options are allowed.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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ruralavalon
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Re: Company 401(k) Actually Better Than IRA? (Fidelity)

Post by ruralavalon » Fri Jun 15, 2018 2:18 pm

Does the new offer a low ER international stock index fund? Is there any fund which you need/want which is not offered in your new 401k plan?

In my opinion rolling the old 401k over into your new 401k is a good idea.
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