401k planning if switching jobs?

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cpan00b
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Joined: Wed May 10, 2017 9:39 pm

401k planning if switching jobs?

Post by cpan00b » Mon Jan 13, 2020 1:35 pm

Hi, I am looking around the the job market for new opportunities and realized that I don't understand what happens specifically with respect to my 401k. I have a few questions I hope you can help answer:

1. I generally always max out my 401k in the beginning of the year, contributing up to 75% of my paycheck until it's maxed. With bonuses being paid out by Jan 31, what this effectively means is that my 401k will be maxed out by that date. Is there a problem with this? What if a new job offers 401k matching (right now my employer has no such benefit). Will I just get no company match and lose out on free $ since my 401k was already maxed out prior to joining the new job? This is my biggest concern and makes me think I should change my contributions ASAP.

2. Once I start a new job and join the employer's 401k plan, I can just roll my current account into the new plan? I currently have my 401k with Fidelity. For my personal brokerage account I use Vanguard.

3. Any other things I need to consider? Thank you!

Jack FFR1846
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Re: 401k planning if switching jobs?

Post by Jack FFR1846 » Mon Jan 13, 2020 1:55 pm

1) I've been in your position. In the then-current job, I dropped my contributions to zero. Like you, it had no match. New job did have a match and I was able to collect the match for the entire year there.

2) Most 401k plans allow roll ins.

3) Funds and fees with the new 401k. If it's one of the high cost companies with huge fees, don't roll anything into it. If that were the case, you could leave the account where it is or create an IRA to roll it into.
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simpleliving1
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Re: 401k planning if switching jobs?

Post by simpleliving1 » Mon Jan 13, 2020 2:00 pm

1. In your new job if the employer offers 401K matching you will not get any company match and lose on free$ since you won't be able to contribute to 401K. My employer matches 6% on my contribution and to take full advantage of this I do not max my account during the year and in the last paycheck of the year, contribute extra to meet the max limit.

2. You can either your existing account the way it is or you can roll the current account into the new plan.

3. Check with your new employer if the match will be 100% vested or not. Congratulations on the new job! :sharebeer

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Tamarind
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Re: 401k planning if switching jobs?

Post by Tamarind » Mon Jan 13, 2020 2:04 pm

Depends on conditions of 401k where you are going, and the time of year when you are changing jobs.

If fees are higher at new company 401k, might not want to roll in. If new company limits participation in 401k until time has passed, might want to make sure you max out at the old company. If you're switching late in year, does the new company limit contributions as a percentage of pay?

In general, act first to maximize your contributions and second to maximize your match. You can wait to make the decision on rolling over old 401k until you have taken the time to carefully determine the fees.

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Wiggums
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Re: 401k planning if switching jobs?

Post by Wiggums » Mon Jan 13, 2020 2:07 pm

1. I had an employer that had no percentage limit for the 401k deduction and payroll would stop taking 401k deductions once you contributed the irs limit. We also got the company match on the contribution do it would also get the max in two paychecks. Similar to what you described.

I had another employer that limited the amount of match per paycheck to force you to take the 401k match all year round. That meant if you left at the end of June, you only had half the maximum 401k contribution and only half the company match.


2. Most 401k accept money from your old 401k. If the new employer will accept the old 401k, you can do that. I’m aware of limits of in service distributions. I never had an employer that would not take your old 401k.

Topic Author
cpan00b
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Joined: Wed May 10, 2017 9:39 pm

Re: 401k planning if switching jobs?

Post by cpan00b » Mon Jan 13, 2020 2:24 pm

Thanks all. I've changed my election in my 401k to 0% right now while I figure out what is happening with my job situation. Right now since I get no benefit from my employer, It sounds like it would be waste for me to fill up my 401k and forego the opportunity to contribute to it in a new job that has a potential match. Payday is on the 15th, so likely I've already screwed up by doing it too late so will have unfortunately contribute $6500 this week.

The only question I have for changing my 401k into a rollover IRA is how will this affect my roth conversions? Each year I backdoor roth the max limit, so it seems to me that each year I will have to pay a pro-rata portion of taxes on the gain that I've had in this IRA account (former 401k).

livesoft
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Re: 401k planning if switching jobs?

Post by livesoft » Mon Jan 13, 2020 2:29 pm

Don't forget that many employers don't allow new hires to participate in the 401(k) plan until 3-, 6-, 12-months after the hire date. If that's the case, then front-loading your current 401(k) may not be a bad idea.
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