I have 2 401k's need some advice.

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smr1619
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Joined: Fri Aug 10, 2018 11:42 am

I have 2 401k's need some advice.

Post by smr1619 » Fri Aug 10, 2018 12:41 pm

I currently have 2 401k's. Should I move over my old 401k that's with a different company or keep it there and move it to an Roth IRA or would there be a better option for me to look in to. I'm 44 and married and wife also has a 401k. Thanks in advance

annebert
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Joined: Fri Jul 20, 2018 5:39 pm

Re: I have 2 401k's need some advice.

Post by annebert » Fri Aug 10, 2018 3:29 pm

More details would be helpful.

There is no obligation to do anything with a 401(k) when you leave a job. If the new job 401(k) offers better funds or service, you could roll the old one into that. Or you could leave it where it is. If you move a 401(k) to a Roth, you'll have to pay taxes on it, probably not what you want to do.

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ruralavalon
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Location: Illinois

Re: I have 2 401k's need some advice.

Post by ruralavalon » Fri Aug 10, 2018 4:02 pm

Welcome to the forum :) .

smr1619 wrote:
Fri Aug 10, 2018 12:41 pm
I currently have 2 401k's. Should I move over my old 401k that's with a different company or keep it there and move it to an Roth IRA or would there be a better option for me to look in to. I'm 44 and married and wife also has a 401k. Thanks in advance
It depends almost entirely on expenses and funds offered, information not provided in your post. There are three basic choices.

1) If the funds offered in the old 401k are good with low expense ratios, and there is no account maintenance fee charged for keeping the account there or only a small fee, then it may be best to leave the old 401k where it is.

2) If the new 401k offers better funds with lower expense ratios, and will accept a rollover from the old 401k, then it may be best to roll the old 401k over into the new 401k.

3) If neither 401k offers good funds with low expense ratios then it may be best to roll the old 401k over to an IRA at a low cost provider like Vanguard or Fidelity.

Wiki article, 401k, ”Rollover to IRA".

Additional considerations include:

1) the convenience of having one fewer account to keep track and manage, if you move the old 401k into the new plan or an IRA;

2) depending on your state, a 401k plan may have greater protection from creditors than does an IRA; and

3) if you may be retiring early at 55 years old or older, then you can withdraw from the 401(k) without paying the 10% early withdrawal payment that normally applies to withdrawals made before age 59.5. If you rollover the assets to an IRA, then you cannot withdraw penalty-free until age 59.5.

BE AWARE that if you move a traditional 401k to a Roth IRA then you will you will have to pay income tax. You can rollover a traditional 401k to a traditional IRA without any income tax liability. IRS, "Rollover Chart".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

sixty40
Posts: 220
Joined: Sat Dec 06, 2014 11:53 am

Re: I have 2 401k's need some advice.

Post by sixty40 » Fri Aug 10, 2018 4:55 pm

I would move it to a IRA (you mention Roth IRA but you will pay taxes on all of it), unless there is a good reason to leave it. Some states may offer better protection for 401Ks vs IRAs, such as for divorce or wage garnishment or being sued. I administer a 401K plan for our small company and there is always an extra fee for a 401K. Even VG charges extra fees for 401Ks, not necessarily as an fund expense but as a fee to the company, which may end up being passed onto the employee.

PFInterest
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Joined: Sun Jan 08, 2017 12:25 pm

Re: I have 2 401k's need some advice.

Post by PFInterest » Fri Aug 10, 2018 4:59 pm

sixty40 wrote:
Fri Aug 10, 2018 4:55 pm
I would move it to a IRA (you mention Roth IRA but you will pay taxes on all of it), unless there is a good reason to leave it. Some states may offer better protection for 401Ks vs IRAs, such as for divorce or wage garnishment or being sued. I administer a 401K plan for our small company and there is always an extra fee for a 401K. Even VG charges extra fees for 401Ks, not necessarily as an fund expense but as a fee to the company, which may end up being passed onto the employee.
i wouldnt but thats because of the prorata rule.

sixty40
Posts: 220
Joined: Sat Dec 06, 2014 11:53 am

Re: I have 2 401k's need some advice.

Post by sixty40 » Fri Aug 10, 2018 5:37 pm

PFInterest wrote:
Fri Aug 10, 2018 4:59 pm
sixty40 wrote:
Fri Aug 10, 2018 4:55 pm
I would move it to a IRA (you mention Roth IRA but you will pay taxes on all of it), unless there is a good reason to leave it. Some states may offer better protection for 401Ks vs IRAs, such as for divorce or wage garnishment or being sued. I administer a 401K plan for our small company and there is always an extra fee for a 401K. Even VG charges extra fees for 401Ks, not necessarily as an fund expense but as a fee to the company, which may end up being passed onto the employee.
i wouldnt but thats because of the prorata rule.
What is the prorata rule on transferring 401K to IRA?

PFInterest
Posts: 2252
Joined: Sun Jan 08, 2017 12:25 pm

Re: I have 2 401k's need some advice.

Post by PFInterest » Fri Aug 10, 2018 5:51 pm

sixty40 wrote:
Fri Aug 10, 2018 5:37 pm
PFInterest wrote:
Fri Aug 10, 2018 4:59 pm
sixty40 wrote:
Fri Aug 10, 2018 4:55 pm
I would move it to a IRA (you mention Roth IRA but you will pay taxes on all of it), unless there is a good reason to leave it. Some states may offer better protection for 401Ks vs IRAs, such as for divorce or wage garnishment or being sued. I administer a 401K plan for our small company and there is always an extra fee for a 401K. Even VG charges extra fees for 401Ks, not necessarily as an fund expense but as a fee to the company, which may end up being passed onto the employee.
i wouldnt but thats because of the prorata rule.
What is the prorata rule on transferring 401K to IRA?
there isnt. you can search this forum about what scenario the prorata rule is important for.

joemcgin
Posts: 1
Joined: Fri Aug 10, 2018 6:12 pm

Re: I have 2 401k's need some advice.

Post by joemcgin » Fri Aug 10, 2018 6:20 pm

One thing to consider, and someone please correct me if I'm wrong, is if you want to convert a future IRA to a Roth IRA, all IRAs are considered in the conversion. If you only have 401ks, this would not be an issue.

I was looking to do a "backdoor" Roth conversion but I read that since I already rolled a previous 401k to an IRA, there was an issue with the amount I could convert.

JBTX
Posts: 4039
Joined: Wed Jul 26, 2017 12:46 pm

Re: I have 2 401k's need some advice.

Post by JBTX » Fri Aug 10, 2018 6:21 pm

sixty40 wrote:
Fri Aug 10, 2018 5:37 pm
PFInterest wrote:
Fri Aug 10, 2018 4:59 pm
sixty40 wrote:
Fri Aug 10, 2018 4:55 pm
I would move it to a IRA (you mention Roth IRA but you will pay taxes on all of it), unless there is a good reason to leave it. Some states may offer better protection for 401Ks vs IRAs, such as for divorce or wage garnishment or being sued. I administer a 401K plan for our small company and there is always an extra fee for a 401K. Even VG charges extra fees for 401Ks, not necessarily as an fund expense but as a fee to the company, which may end up being passed onto the employee.
i wouldnt but thats because of the prorata rule.
What is the prorata rule on transferring 401K to IRA?
The pro rata rule is applicable if you have both traditional IRAS (including rollover IRAS) and traditional non deductible IRAS. If you have both and decide to do a backdoor Roth IRA, then you have to prorate between the deductible and non deductible income for tax purposes. So you have a tax mess and unwanted taxable income.

Bottom line is if you ever want to do a backdoor Roth then it is best not to have traditional IRAS. If you don't ever expect to exceed the Roth income phase out limit (something like 180k) then traditional IRAS are fine.

JBTX
Posts: 4039
Joined: Wed Jul 26, 2017 12:46 pm

Re: I have 2 401k's need some advice.

Post by JBTX » Fri Aug 10, 2018 6:26 pm

smr1619 wrote:
Fri Aug 10, 2018 12:41 pm
I currently have 2 401k's. Should I move over my old 401k that's with a different company or keep it there and move it to an Roth IRA or would there be a better option for me to look in to. I'm 44 and married and wife also has a 401k. Thanks in advance
To get a better answer you would need to share:

What are the expense ratios of each of your 401k?
What are the fund choices in the 401k?
Whst state do you live in?
Do you have any other traditional IRAS?
What is your AGI and what tax bracket are you in.

The answer can be quite different depending on those answers.

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