Transfering from 401K yearly into trad IRA question

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lepa71
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Transfering from 401K yearly into trad IRA question

Post by lepa71 » Tue Nov 13, 2018 8:27 pm

I'm going to a new company and currently have Fidelity with low index funds. I also have Vanguard for Brokerage and Trad IRA accounts. The new company has Principal with their 0.45 Year Target funds. So I'm I'm thinking to contribute to Trad 401K but on some kind of schedule to transfer money out of 401K in Vanguard.

What do you guys think? What are the pros and cons?

As for the old company's Fidelity account. Should I see if I should transfer it to Vanguard?

gtwhitegold
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Re: Transfering from 401K yearly into trad IRA question

Post by gtwhitegold » Tue Nov 13, 2018 8:43 pm

I would carefully review your employer's policy for withdrawals. They could suspend your ability to contribute for a specific time if you don't meet certain requirements.

Regarding switching from Fidelity, meh. I would only do so to simplify my portfolio.

ResearchMed
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Re: Transfering from 401K yearly into trad IRA question

Post by ResearchMed » Tue Nov 13, 2018 8:43 pm

lepa71 wrote:
Tue Nov 13, 2018 8:27 pm
I'm going to a new company and currently have Fidelity with low index funds. I also have Vanguard for Brokerage and Trad IRA accounts. The new company has Principal with their 0.45 Year Target funds. So I'm I'm thinking to contribute to Trad 401K but on some kind of schedule to transfer money out of 401K in Vanguard.

What do you guys think? What are the pros and cons?

As for the old company's Fidelity account. Should I see if I should transfer it to Vanguard?
Does the company allow in service transfers out?

Many (most?) don't.

RM
This signature is a placebo. You are in the control group.

lepa71
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Re: Transfering from 401K yearly into trad IRA question

Post by lepa71 » Tue Nov 13, 2018 8:46 pm

ResearchMed wrote:
Tue Nov 13, 2018 8:43 pm
lepa71 wrote:
Tue Nov 13, 2018 8:27 pm
I'm going to a new company and currently have Fidelity with low index funds. I also have Vanguard for Brokerage and Trad IRA accounts. The new company has Principal with their 0.45 Year Target funds. So I'm I'm thinking to contribute to Trad 401K but on some kind of schedule to transfer money out of 401K in Vanguard.

What do you guys think? What are the pros and cons?

As for the old company's Fidelity account. Should I see if I should transfer it to Vanguard?
Does the company allow in service transfers out?

Many (most?) don't.

RM
What do you mean? Are you asking from Principal to Vanguard or from Fidelity to Vanguard?

Dottie57
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Re: Transfering from 401K yearly into trad IRA question

Post by Dottie57 » Tue Nov 13, 2018 8:47 pm

ResearchMed wrote:
Tue Nov 13, 2018 8:43 pm
lepa71 wrote:
Tue Nov 13, 2018 8:27 pm
I'm going to a new company and currently have Fidelity with low index funds. I also have Vanguard for Brokerage and Trad IRA accounts. The new company has Principal with their 0.45 Year Target funds. So I'm I'm thinking to contribute to Trad 401K but on some kind of schedule to transfer money out of 401K in Vanguard.

What do you guys think? What are the pros and cons?

As for the old company's Fidelity account. Should I see if I should transfer it to Vanguard?
Does the company allow in service transfers out?

Many (most?) don't.

RM
My 401k is with a Mega Corp and I could not do in service transfers until 59.5 yo.

Get a copy of the plan summary which should give you good info.

ResearchMed
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Re: Transfering from 401K yearly into trad IRA question

Post by ResearchMed » Tue Nov 13, 2018 8:49 pm

lepa71 wrote:
Tue Nov 13, 2018 8:46 pm
ResearchMed wrote:
Tue Nov 13, 2018 8:43 pm
lepa71 wrote:
Tue Nov 13, 2018 8:27 pm
I'm going to a new company and currently have Fidelity with low index funds. I also have Vanguard for Brokerage and Trad IRA accounts. The new company has Principal with their 0.45 Year Target funds. So I'm I'm thinking to contribute to Trad 401K but on some kind of schedule to transfer money out of 401K in Vanguard.

What do you guys think? What are the pros and cons?

As for the old company's Fidelity account. Should I see if I should transfer it to Vanguard?
Does the company allow in service transfers out?

Many (most?) don't.

RM
What do you mean? Are you asking from Principal to Vanguard or from Fidelity to Vanguard?
It is what your Employer allows. Or not.

RM
This signature is a placebo. You are in the control group.

lepa71
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Re: Transfering from 401K yearly into trad IRA question

Post by lepa71 » Tue Nov 13, 2018 9:10 pm

Just to complicate it more.

The company I worked for got acquired about 10 months ago. We had ESOP pension plan where I had $350K. The current company has Fidelity 401K. It is not bad. Has some low index funds. There was a change announced for next year that the fees will be paid more by an employee shortly but we get more low-cost funds like Vanguard Target Retirement funds replacing costly JP Morgan Target Retirement funds in Fidelity. I couldn't transfer all $350K at ones, it had to be split into 2 steps. Step 1 was to transfer around $260K into FIdelity from escrow that was held at Principal at 0% interest. So I still $90K at Principal at 0% interest. I'm pretty sure Principal is using our money to make some for themselves but this is for another story. So once I switch jobs I will have to move that $90K into some kind of IRA. On this one, I have a choice to transfer $90K to Vanguard IRA. I'm linning towards that because I don't know if I can transfer to Fidelity as I won't be with that company anymore. I could, however, transfer it into Principal under new company 401K. I don't know what is better???

lepa71
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Re: Transfering from 401K yearly into trad IRA question

Post by lepa71 » Tue Nov 13, 2018 9:49 pm

What are the advantages and disadvantages to transfer 401K funds into Trad IRA in general?

sawhorse
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Re: Transfering from 401K yearly into trad IRA question

Post by sawhorse » Tue Nov 13, 2018 11:15 pm

lepa71 wrote:
Tue Nov 13, 2018 9:49 pm
What are the advantages and disadvantages to transfer 401K funds into Trad IRA in general?
Advantages: Greater control over your investment options. With 401ks you are limited to the options and fees your employer offers. You can also potentially transfer from your IRA to a 401k or TSP at a future job with better options although you theoretically just do the old 401k - - > IRA - -> new 401k transfer process then rather than now, and some places let you directly transfer from one 401k to another.

Disadvantages: 401ks are protected from lawsuits in all states whereas IRA protection depends on the state. Doing a backdoor Roth is complicated when you have pretax money in your IRA. In fact it's commonly suggested that if you want to do a backdoor Roth, you should clear your pretax IRA first by transferring that to a 401k.

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LadyGeek
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Re: Transfering from 401K yearly into trad IRA question

Post by LadyGeek » Tue Nov 13, 2018 11:36 pm

This thread is now in the Investing - Help with Personal Investments forum (portfolio help).
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nolesrule
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Re: Transfering from 401K yearly into trad IRA question

Post by nolesrule » Wed Nov 14, 2018 8:14 am

Generally, you cannot make in-service withdrawals or rollovers of pre-tax 401k balances to an IRA under the age of 59.5.

Some of the exceptions, depending on your plan, may include after-tax contributions, company match, or roll-ins from other plans.

Spirit Rider
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Re: Transfering from 401K yearly into trad IRA question

Post by Spirit Rider » Wed Nov 14, 2018 9:46 am

OP, you can not do what you want period. It has nothing to do with your employer's 401k plan rules.

IRS regulations prohibit the non-hardship in-service withdrawal/rollover of employee elective deferrals and non-vested employer contributions prior to age 59 1/2.

In-service withdrawals/rollovers of vested employer contributions and employee after-tax contributions prior to age 59 1/2 are allowed but not required by IRS regulations.

It is more common now for employer 401k plans to allow the in-service withdrawal/rollover of employee after-tax contributions, but it is still not common for 401k plans to allow the In-service withdrawal/rollover of vested employer contributions prior to 59 1/2.

lepa71
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Re: Transfering from 401K yearly into trad IRA question

Post by lepa71 » Wed Nov 14, 2018 10:00 am

OK. I understand now that I can't do it.

The other question. I believe because I'm switching company I can rollover current company 401K funds into IRA instead of new company 401k. I also understand that I can just leave it in the current 401k plan. Can I transfer current 401k funds later( any time) since I would no longer be with that company?

Spirit Rider
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Re: Transfering from 401K yearly into trad IRA question

Post by Spirit Rider » Wed Nov 14, 2018 10:16 am

Yes, separation always makes your 401k distributable. You can roll it over to another qualified plan or IRA. You can also leave it in the prior plan, but if the balance is < $5K, the plan can force you out. You can leave the funds in the plan an indefinite length of time and rollover much later.

If you have a former employer's plan with good investment options/low expenses. It may make sense to leave it there if your current plan has poor investment options/high expenses. If you rollover to an IRA and need to do a Backdoor Roth, it is unlikely you can rollover back to that plan if no longer employed.
Last edited by Spirit Rider on Wed Nov 14, 2018 10:24 am, edited 1 time in total.

lepa71
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Re: Transfering from 401K yearly into trad IRA question

Post by lepa71 » Wed Nov 14, 2018 10:21 am

It's more than 5K.
Can I do it at any time? Let say the fees are good right now but in a year the plan will start charging more fees or funds selection would change for worth.
Also, if you saw I still have that 90K that I will have to roll over somewhere in April next year. Can I roll it over into current company 401K even though I wouldn't with them anymore?

Spirit Rider
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Re: Transfering from 401K yearly into trad IRA question

Post by Spirit Rider » Wed Nov 14, 2018 10:26 am

Whether you can rollover to a previous employer's plan is up to them. With the notable exception of the TSP, it is less common for plans to allows this.

lepa71
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Re: Transfering from 401K yearly into trad IRA question

Post by lepa71 » Wed Nov 14, 2018 10:29 am

What is TSP? Those 90K are in escrow at Principal but it came from the original internal pension plan before the acquisition. Does it make any difference?

Dottie57
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Re: Transfering from 401K yearly into trad IRA question

Post by Dottie57 » Wed Nov 14, 2018 10:58 am

lepa71 wrote:
Wed Nov 14, 2018 10:29 am
What is TSP? Those 90K are in escrow at Principal but it came from the original internal pension plan before the acquisition. Does it make any difference?
TSP Is only for Federal workers / military.

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Earl Lemongrab
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Re: Transfering from 401K yearly into trad IRA question

Post by Earl Lemongrab » Wed Nov 14, 2018 5:04 pm

To clarify, as many people said that it's up to the plan, for employEE pretax or Roth contribution it against the law to roll them over unless you are age 59-1/2. You flat out can't do it. Other contributions, like after-tax (non-Roth) or employER contributions that is at the plan discretion.
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