Transfer into former employer's 401(k) possible?

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ma21n2
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Transfer into former employer's 401(k) possible?

Post by ma21n2 » Fri Oct 04, 2019 1:33 pm

I see a lot of stuff on the internet talking about whether to rollover your current employer 401(k) into your new employer 401(k) if you get a new job... but I am wondering if I can transfer my current employer 401(k) into my former employer 401(k) when I leave my current job.

I used to work for Company A, which has a great 401k plan. When I left Company A, I kept the 401k there (Charles Schwab).

My current company (Company B) has a 401k with Fidelity, and I don't like the fund selection.

I am leaving Company B to go to Company C, which doesn't seem to have a good selection either.

So when I leave my current Company B, I'd like to transfer my Company B 401k (Fidelity) to Company A 401k (Charles Schwab). I understand TSP accepts transfers even if you are a former Federal employee, but I'm not sure how it works with 401k's. Thanks!

Jags4186
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Re: Transfer into former employer's 401(k) possible?

Post by Jags4186 » Fri Oct 04, 2019 1:35 pm

Sounds like a question to ask the company that holds the 401k. I’ve never heard of anyone doing this, doesn’t meant it isn’t possible.

HomeStretch
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Re: Transfer into former employer's 401(k) possible?

Post by HomeStretch » Fri Oct 04, 2019 1:36 pm

Do you have online access to the Schwab plan where you can check your plan document which is usually available? Otherwise you would need to call Schwab to ask.

Every plan is different. None of my former employer plans accepted rollovers in after separation.

lakpr
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Re: Transfer into former employer's 401(k) possible?

Post by lakpr » Fri Oct 04, 2019 1:38 pm

To my knowledge, this is EXTREMELY rare in the private world. TSP program for the Federal government employees is the only one I know that allows inbound roll overs, even if the person is no longer a Fed employee.

I think, over the past 8 years on this board, I have seen only ONE post where the poster claimed his 401k plan allowed rollovers even after no longer being employed at that firm.

That said, Fidelity has usually EXCELLENT funds in their 401k line up. Specifically their FXAIX (500 Index) and FXNAX (Total US Bond) funds. You couldn't find these in the Company B's lineup? Do you want to post the available choices and their expense ratios for us to review?
Last edited by lakpr on Fri Oct 04, 2019 2:20 pm, edited 1 time in total.

Topic Author
ma21n2
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Re: Transfer into former employer's 401(k) possible?

Post by ma21n2 » Fri Oct 04, 2019 2:18 pm

Thanks everyone! I messaged Charles Schwab, so I'll share what I find out.

My current employer's 401k w/Fidelity isn't bad. It does have low cost Fidelity index funds:
- Fidelity 500 Index (FXAIX) 0.015%
- Fidelity Extended Market Index (FSMAX) 0.045%
- Fidelity Int'l Index (FSPSX) 0.035%
- Fidelity US Bond Index (FXNAX) 0.025%

I prefer Vanguard target retirement funds, and my former employer 401k has Vanguard 2045 fund for only 0.08% expense ratio. Current 401k has JP Morgan's target retirement funds with 0.23% ER.

I would have been fine with my current 401k if it had Total US Stock and Total Int'l Stock funds. They don't, so I'd have to buy both FXAIX and FSMAX in the right ratio to hold total US market in market cap, and I don't think FSPSX includes emerging markets.

I ended up buying FXAIX, FSPSX, and FXNAX. But that's missing international bonds and emerging markets, both of which are included in Vanguard TR funds (I skipped FSMAX since I am overweight on that category in my taxable account). Thanks!

lakpr
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Re: Transfer into former employer's 401(k) possible?

Post by lakpr » Fri Oct 04, 2019 2:23 pm

Personally, the loss of international bonds is not a great loss. That category is dominated by European bonds mostly, and as you know, they are having negative interest rates over there. The yield is not good. Plus, when US funds buy the international bonds, they are dollar hedged anyway. YOU, as a retail investor, have no advantage in holding them, it is only a drag on returns.

Emerging Markets are 5% of total world trade, so you are missing a 5% piece of the full puzzle. Not a big deal at all.

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ma21n2
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Re: Transfer into former employer's 401(k) possible?

Post by ma21n2 » Fri Oct 04, 2019 2:45 pm

Thanks. That makes sense.

One thing I forgot to mention is, my current employer 401k charges like $40/year in recordkeeping fees, which is about 0.05% of account balance. So even though those Fidelity funds have low ER, I think I can do better with a Vanguard IRA. I'll probably move it to Vanguard IRA or new employer's 401k.

lakpr
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Re: Transfer into former employer's 401(k) possible?

Post by lakpr » Fri Oct 04, 2019 2:52 pm

ma21n2 wrote:
Fri Oct 04, 2019 2:45 pm
Thanks. That makes sense.

One thing I forgot to mention is, my current employer 401k charges like $40/year in recordkeeping fees, which is about 0.05% of account balance. So even though those Fidelity funds have low ER, I think I can do better with a Vanguard IRA. I'll probably move it to Vanguard IRA or new employer's 401k.
Welcome to the club! My current employer 401k charges $60 per year, levied $15 per quarter. But this is just noise. If you are maxing out the $19000 per year for the 401k, $60 fees is approximately 0.3% for first year, 0.15% the second year, 0.075% the third year and then on it barely registers. That is assuming zero growth. With growth that additional fees comes down further as a percentage of the total assets.

I'd not pay attention to the record keeping fees as long as it is less than $100 per year, *a flat fee and not levied as a percentage of the balance* as some plans do.

If you roll the 401k into a Vanguard IRA, you will lose the ability to do the Backdoor Roth <==== this will only be a concern if you are in the 24% bracket, or close to it.

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Wiggums
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Re: Transfer into former employer's 401(k) possible?

Post by Wiggums » Fri Oct 04, 2019 6:20 pm

Mine charged $75 annually after being free for 25 years.

Topic Author
ma21n2
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Re: Transfer into former employer's 401(k) possible?

Post by ma21n2 » Fri Oct 04, 2019 6:34 pm

Mine was free until last year, but they just started charging this year. Well, I guess it wasn't ever free. They said record keeping fees were previously included as part of funds' expenses, but it doesn't look like they lowered the ER for US Stock index funds and bond funds even after they began charging record keeping fees separately.

Boatguy
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Re: Transfer into former employer's 401(k) possible?

Post by Boatguy » Fri Oct 04, 2019 7:04 pm

On the subject of rollovers into a former employer’s plan, GE changed their 401k plan on August 1 to allow separated employees to rollover qualified money into their plan. So, there are some companies that allow this. My current employer’s plan doesn’t accept tIRA rollovers, so I thought my Roth conversion future was doomed. I checked back with GE one last time, and sure enough they changed. No idea why.

lakpr
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Re: Transfer into former employer's 401(k) possible?

Post by lakpr » Fri Oct 04, 2019 7:07 pm

@Boatguy,

Yes I remember that thread, that was the one instance, I said above, where I remember in the private world a plan that would accept rollovers even if you are an ex employee. Couldn’t recall the GE name.

But I don’t know of any other plan that would allow it.

MathIsMyWayr
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Re: Transfer into former employer's 401(k) possible?

Post by MathIsMyWayr » Fri Oct 04, 2019 11:57 pm

ma21n2 wrote:
Fri Oct 04, 2019 2:45 pm
Thanks. That makes sense.

One thing I forgot to mention is, my current employer 401k charges like $40/year in recordkeeping fees, which is about 0.05% of account balance. So even though those Fidelity funds have low ER, I think I can do better with a Vanguard IRA. I'll probably move it to Vanguard IRA or new employer's 401k.
Are you trying to go through a trouble to save $40/year? You will save much more by clipping coupons or skipping a couple of hair cuts.

Topic Author
ma21n2
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Re: Transfer into former employer's 401(k) possible?

Post by ma21n2 » Sat Oct 05, 2019 12:40 am

MathIsMyWayr wrote:
Fri Oct 04, 2019 11:57 pm
ma21n2 wrote:
Fri Oct 04, 2019 2:45 pm
Thanks. That makes sense.

One thing I forgot to mention is, my current employer 401k charges like $40/year in recordkeeping fees, which is about 0.05% of account balance. So even though those Fidelity funds have low ER, I think I can do better with a Vanguard IRA. I'll probably move it to Vanguard IRA or new employer's 401k.
Are you trying to go through a trouble to save $40/year? You will save much more by clipping coupons or skipping a couple of hair cuts.
No. I just want to have Vanguard TR fund with 0.08% ER.

Shmom
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Re: Transfer into former employer's 401(k) possible?

Post by Shmom » Sat Oct 05, 2019 4:10 am

Why not just roll it into a self directed IRA?

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oldcomputerguy
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Re: Transfer into former employer's 401(k) possible?

Post by oldcomputerguy » Sat Oct 05, 2019 5:24 am

Shmom wrote:
Sat Oct 05, 2019 4:10 am
Why not just roll it into a self directed IRA?
In a self-directed IRA, the Vanguard Target Retirement 2045 fund will be the retail version (VTIVX) with an ER of 0.15%. Just a guess, but the fund version in the previous employer's 401(k) may be the Institutional version (VITLX), with a lower ER (OP says 0.08% above, Vanguard quotes 0.09%), roughly half as much. Over the long haul, I suppose that may be significant.
"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." (Aaron Sorkin)

aristotelian
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Re: Transfer into former employer's 401(k) possible?

Post by aristotelian » Sat Oct 05, 2019 9:01 am

ma21n2 wrote:
Fri Oct 04, 2019 2:18 pm
Thanks everyone! I messaged Charles Schwab, so I'll share what I find out.

My current employer's 401k w/Fidelity isn't bad. It does have low cost Fidelity index funds:
- Fidelity 500 Index (FXAIX) 0.015%
- Fidelity Extended Market Index (FSMAX) 0.045%
- Fidelity Int'l Index (FSPSX) 0.035%
- Fidelity US Bond Index (FXNAX) 0.025%

I prefer Vanguard target retirement funds, and my former employer 401k has Vanguard 2045 fund for only 0.08% expense ratio. Current 401k has JP Morgan's target retirement funds with 0.23% ER.

I would have been fine with my current 401k if it had Total US Stock and Total Int'l Stock funds. They don't, so I'd have to buy both FXAIX and FSMAX in the right ratio to hold total US market in market cap, and I don't think FSPSX includes emerging markets.
Wow, you are a tough customer. The cheapest index fund in my plan has a 0.35% expense ratio. I would be thrilled to have your options, and delighted to piece together a couple of funds to replicate the total market. When you say that Company C "doesn't have a good selection either", what are we talking about? If it is anything like the above options, I would also ask to see if rolling in to Company C is an option.
Shmom wrote:
Sat Oct 05, 2019 4:10 am
Why not just roll it into a self directed IRA?
That would preclude backdoor Roth if that is a concern.

Topic Author
ma21n2
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Re: Transfer into former employer's 401(k) possible?

Post by ma21n2 » Sat Oct 05, 2019 9:06 am

The problem with IRA is the higher ER as well as interference with backdoor Roth IRA.

My previous employer 401k has “Vanguard TR 2045 Trust II.” Not sure how these “Trusts” are different from traditional mutual funds.

https://content.schwabplan.com/funddetail/VTR45.pdf

I googled and it looks like Vanguard has TR Trust I, TR Trust II, TR Trust Plus, etc.

Topic Author
ma21n2
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Re: Transfer into former employer's 401(k) possible?

Post by ma21n2 » Sat Oct 05, 2019 9:13 am

aristotelian wrote:
Sat Oct 05, 2019 9:01 am
Wow, you are a tough customer. The cheapest index fund in my plan has a 0.35% expense ratio. I would be thrilled to have your options, and delighted to piece together a couple of funds to replicate the total market. When you say that Company C "doesn't have a good selection either", what are we talking about? If it is anything like the above options, I would also ask to see if rolling in to Company C is an option.
Haha, I think I’m just spoiled because my previous employer 401k had such a great selection of Vanguard funds (both target retirement and index funds) with low ER. For example it has VIIIX (S&P 500) which has 0.02% ER.

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ruralavalon
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Re: Transfer into former employer's 401(k) possible?

Post by ruralavalon » Sat Oct 05, 2019 9:42 am

ma21n2 wrote:
Fri Oct 04, 2019 1:33 pm
I see a lot of stuff on the internet talking about whether to rollover your current employer 401(k) into your new employer 401(k) if you get a new job... but I am wondering if I can transfer my current employer 401(k) into my former employer 401(k) when I leave my current job.

I used to work for Company A, which has a great 401k plan. When I left Company A, I kept the 401k there (Charles Schwab).

My current company (Company B) has a 401k with Fidelity, and I don't like the fund selection.

I am leaving Company B to go to Company C, which doesn't seem to have a good selection either.

So when I leave my current Company B, I'd like to transfer my Company B 401k (Fidelity) to Company A 401k (Charles Schwab). I understand TSP accepts transfers even if you are a former Federal employee, but I'm not sure how it works with 401k's. Thanks!
aristotelian wrote:
Sat Oct 05, 2019 9:01 am
ma21n2 wrote:
Fri Oct 04, 2019 2:18 pm
Thanks everyone! I messaged Charles Schwab, so I'll share what I find out.

My current employer's 401k w/Fidelity isn't bad. It does have low cost Fidelity index funds:
- Fidelity 500 Index (FXAIX) 0.015%
- Fidelity Extended Market Index (FSMAX) 0.045%
- Fidelity Int'l Index (FSPSX) 0.035%
- Fidelity US Bond Index (FXNAX) 0.025%

I prefer Vanguard target retirement funds, and my former employer 401k has Vanguard 2045 fund for only 0.08% expense ratio. Current 401k has JP Morgan's target retirement funds with 0.23% ER.

I would have been fine with my current 401k if it had Total US Stock and Total Int'l Stock funds. They don't, so I'd have to buy both FXAIX and FSMAX in the right ratio to hold total US market in market cap, and I don't think FSPSX includes emerging markets.
Wow, you are a tough customer. The cheapest index fund in my plan has a 0.35% expense ratio. I would be thrilled to have your options, and delighted to piece together a couple of funds to replicate the total market. When you say that Company C "doesn't have a good selection either", what are we talking about? If it is anything like the above options, I would also ask to see if rolling in to Company C is an option.
Shmom wrote:
Sat Oct 05, 2019 4:10 am
Why not just roll it into a self directed IRA?
That would preclude backdoor Roth if that is a concern.
Are you currently eligible to contribute to a Roth IRA? Is future ability to use a backdoor Roth IRA a concern for you?

I understand the attraction of Vanguard 2045 fund for only 0.08% expense ratio as offered in the old 401k.


The shortcomings of the current 401k are very minor in my opinion.

Domestic stocks.
In my opinion Fidelity 500 Index (FXAIX) 0.015% is fine by itself for domestic stocks. . "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations".

In my opinion in a plan that lacks a total stock market index fund, a S&P 500 index fund is good enough by itself for a domestic stock allocation. A S&P 500 index fund covers 82% of the U.S. stock market, investing in stocks of selected large-cap and mid-cap U.S. companies. In the 27 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph (1992 – 2019), VTSAX vs VFIAX. In the first 10 years the S&P 500 fund did better, in the last 10 years the they have been about the same (on a $10,000 investment the difference was $13 a year), and over the 27 years the total market fund gave a little more return. So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little difference in performance.

See also:
1) Allan Roth, CBS Moneywatch (02/03/2010), "John C. Bogle on the S&P 500 vs. the Total Stock Market"; and
2) Wall Street Physician (01/17/2019), "Should You Invest in the S&P 500 or the Total Stock Market?".


International stocks.
You are correct that Fidelity Int'l Index (FSPSX) 0.035% includes only developed markets, and excludes emerging markets.


International bonds.
In my opinion international bonds add no readily apparent benefit to a portfolio. Vanguard Total International Bond Index Fund Admiral Shares (VTABX) was introduced May 31, 2013.The fund is U.S. dollar hedged.

Cost, U.S. dollar hedging. International bonds are not recommended because of "the cost for retail investors to access this market" (Rick Ferri post, 05/26/2014). The cost of currency hedging is about 0.15% (Rick Ferri post, 05/26/2014), so that that international bond funds are not helpful when hedged to the U.S. dollar. Trading costs such as hedging expense are not a component of the expense ratio.

Credit risk."[T]here are two main types of fixed income risks that we might want to diversify: credit and interest rate risk." "[T]he U.S. capital markets are so broad and deep that investors can easily obtain broad diversification without having to add international assets. While international fixed income investing has intuitive appeal, at least from the perspective of credit risk, there's no need to look abroad." Larry Swedroe, Seeking Alpha (05/08/2014), "Should you include international bonds in your portfolio? - part 1".

interest rate risk, U.S. dollar hedged. "If the instrument is a U.S. dollar bond, its price movement (other than a movement caused by a change in credit risk) will reflect the movement in U.S. interest rates. Thus, no diversification benefit, in terms of interest rate risk, is provided." Larry Swedroe, Seeking Alpha (05/08/2014), "Should you include international bonds in your portfolio? - part 1".

Impact on volatility, U.S. dollar hedged. The Vanguard paper (02/2014) giving its case for international bonds is "Global fixed income: Considerations for U.S. Investors". Figure 7 on page 10 gives historical figures for volatility reduction when using currency hedged international bonds in 60/40 stock/bond portfolio.

For a 50% international stock allocation using 30% of bonds in international bonds reduced annualized standard deviation of monthly returns (volatility) from 9.6 to 9.5.

For a 40% international stock allocation using 30% of bonds in international bonds reduced annualized standard deviation of monthly returns (volatility) from 9.6 to 9.4.

For a 30% international stock allocation using 30% of bonds in international bonds reduced annualized standard deviation of monthly returns (volatility) from 9.4 to 9.3

Nisiprius post (01/15/2018), in the forum discussion "Do people in The forum hold foreign bonds?"

In summary there has been little or no readily apparent benefit to using international bonds, but adding the fund increases complexity and adds expense.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
ma21n2
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Re: Transfer into former employer's 401(k) possible?

Post by ma21n2 » Sat Oct 05, 2019 9:52 am

Thanks for that thorough summary! I can’t contribute directly to Roth IRA, so I don’t want to move my current 401k to IRA when I leave my current job.

I’ll decide what to do once I hear back from Schwab re whether my former employer will let me rollover my current 401k into their plan (seems unlikely) and also get some more details on future employer 401k plan.

Student2
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Re: Transfer into former employer's 401(k) possible?

Post by Student2 » Sat Oct 05, 2019 8:40 pm

Just fyi, re: rollovers into former employers, my 403(b) at TIAA allows rollovers even after detachment. Given the availability of TIAA's RE fund, along with their other funds at institutional fee rates, I consider myself very fortunate especially now that you tell me how rare this is.

simas
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Re: Transfer into former employer's 401(k) possible?

Post by simas » Sun Oct 06, 2019 5:06 pm

ma21n2 wrote:
Sat Oct 05, 2019 9:52 am

I’ll decide what to do once I hear back from Schwab re whether my former employer will let me rollover my current 401k into their plan (seems unlikely) and also get some more details on future employer 401k plan.
Please post here once you find out, I am in similar boat. I went through the SPD (Summary Plan Description) document that I still have access to (I can login, rebalance, buy/sell investments, etc) but it is silent on the rollovers to the plan

simas
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Re: Transfer into former employer's 401(k) possible?

Post by simas » Sun Oct 06, 2019 5:06 pm

ma21n2 wrote:
Sat Oct 05, 2019 9:52 am

I’ll decide what to do once I hear back from Schwab re whether my former employer will let me rollover my current 401k into their plan (seems unlikely) and also get some more details on future employer 401k plan.
Please post here once you find out, I am in similar boat. I went through the SPD (Summary Plan Description) document that I still have access to (I can login, rebalance, buy/sell investments, etc) but it is silent on the rollovers to the plan

Topic Author
ma21n2
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Re: Transfer into former employer's 401(k) possible?

Post by ma21n2 » Mon Oct 07, 2019 9:13 am

simas wrote:
Sun Oct 06, 2019 5:06 pm
ma21n2 wrote:
Sat Oct 05, 2019 9:52 am

I’ll decide what to do once I hear back from Schwab re whether my former employer will let me rollover my current 401k into their plan (seems unlikely) and also get some more details on future employer 401k plan.
Please post here once you find out, I am in similar boat. I went through the SPD (Summary Plan Description) document that I still have access to (I can login, rebalance, buy/sell investments, etc) but it is silent on the rollovers to the plan
Unfortunately, Schwab confirmed that as a separated employee, I am not eligible to roll additional funds into the former employer's 401k plan.

HomeStretch
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Re: Transfer into former employer's 401(k) possible?

Post by HomeStretch » Mon Oct 07, 2019 9:19 am

Although you don’t like the funds, your current Company B’s funds and ERs are very good. That plan is a good Plan B for what you want to do.

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