Should I rollover my 401k to an IRA? Same fund choices in both.

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Topic Author
Lucky_Ducky
Posts: 2
Joined: Thu Oct 15, 2020 11:14 pm

Should I rollover my 401k to an IRA? Same fund choices in both.

Post by Lucky_Ducky »

What makes this question interesting is that fund choice isn't a factor here. I am allowed to use any normal taxable Fidelity mutual fund in my 401k (Fidelity BrokerageLink) and my 401k does not have any mutual funds better than the normal taxable Fidelity mutual funds.

BACKGROUND
Single, no kids, retired, 45 years old, no debt

Taxable account at Vanguard:
2.2 million

Retirement accounts at Fidelity:
$250k pre-tax 401k
$25k Roth 401k
$125k Roth IRA

PROS of rolling over my 401k to an IRA
1) Eliminates $75/year cost for my 401k account ($50/year 401k record keeping fees + $25 partial distribution fee for my yearly pre-tax 401k to Roth IRA conversion)
2) I would perform brokerage transfer bonuses with my IRA (viewtopic.php?t=196884). With that large IRA account balance, I could earn ~$1k/year switching my IRA between brokerages, all while keeping my existing 3-fund Fidelity ETFs.
3) Simpler portfolio (3 account types vs 4 account types). In addition, having a 401k that doesn't use fund choices from the company 401k (I'm using Fidelity BrokerageLink) complicates my account overview screen and various other little things.

CONS to rolling over my 401k to an IRA
1) Possibly less legal protection of IRAs compared to 401ks. I say "possibly" because I currently live in a state that provides equal legal protection but who knows could I could move to in the future. I'm not sure how relevant this con is since I carry a 3 million umbrella insurance policy, I don't lead a risky lifestyle and my taxable account is 5x the size of my retirement account.
2) Irreversible decision. 401k/IRA treatment (and my own personal factors) could change in the future.

Did I leave out any pros or cons?

From my perspective, it doesn't appears there is a compelling reason one way or another for my specific situation. I am leaning on rolling over my 401k to an IRA though. What would you guys recommend?
johnny
Posts: 91
Joined: Fri Dec 07, 2018 9:31 am

Re: Should I rollover my 401k to an IRA? Same fund choices in both.

Post by johnny »

If you're already retired then there is probably not much difference in the accounts. 401k does offer the potential to use the rule of 55 for withdrawal.

I rolled my 401k over to an existing tIRA just for simplicity.
User avatar
anon_investor
Posts: 3502
Joined: Mon Jun 03, 2019 1:43 pm

Re: Should I rollover my 401k to an IRA? Same fund choices in both.

Post by anon_investor »

Lucky_Ducky wrote: Fri Oct 16, 2020 12:35 am What makes this question interesting is that fund choice isn't a factor here. I am allowed to use any normal taxable Fidelity mutual fund in my 401k (Fidelity BrokerageLink) and my 401k does not have any mutual funds better than the normal taxable Fidelity mutual funds.

BACKGROUND
Single, no kids, retired, 45 years old, no debt

Taxable account at Vanguard:
2.2 million

Retirement accounts at Fidelity:
$250k pre-tax 401k
$25k Roth 401k
$125k Roth IRA

PROS of rolling over my 401k to an IRA
1) Eliminates $75/year cost for my 401k account ($50/year 401k record keeping fees + $25 partial distribution fee for my yearly pre-tax 401k to Roth IRA conversion)
2) I would perform brokerage transfer bonuses with my IRA (viewtopic.php?t=196884). With that large IRA account balance, I could earn ~$1k/year switching my IRA between brokerages, all while keeping my existing 3-fund Fidelity ETFs.
3) Simpler portfolio (3 account types vs 4 account types). In addition, having a 401k that doesn't use fund choices from the company 401k (I'm using Fidelity BrokerageLink) complicates my account overview screen and various other little things.

CONS to rolling over my 401k to an IRA
1) Possibly less legal protection of IRAs compared to 401ks. I say "possibly" because I currently live in a state that provides equal legal protection but who knows could I could move to in the future. I'm not sure how relevant this con is since I carry a 3 million umbrella insurance policy, I don't lead a risky lifestyle and my taxable account is 5x the size of my retirement account.
2) Irreversible decision. 401k/IRA treatment (and my own personal factors) could change in the future.

Did I leave out any pros or cons?

From my perspective, it doesn't appears there is a compelling reason one way or another for my specific situation. I am leaning on rolling over my 401k to an IRA though. What would you guys recommend?
Does your 401k offer a stable value fund? In this low interest rate world, there are still some stable value funds offering a guaranteed 2% interest plus. That is something that does not exist outside the 401k world. That being said, $100 in annual fees seems like a lot in a world where everything is free. :mrgreen:

Just don't move to a state that does not offer liability protections to an IRA! :twisted:

Since your 401k is using a fidelity brokeragelink, are you able to transfer in kind to an IRA (to avoid being out of the market)?
retired@50
Posts: 3467
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Should I rollover my 401k to an IRA? Same fund choices in both.

Post by retired@50 »

Lucky_Ducky wrote: Fri Oct 16, 2020 12:35 am ...
PROS of rolling over my 401k to an IRA
1) Eliminates $75/year cost for my 401k account ($50/year 401k record keeping fees + $25 partial distribution fee for my yearly pre-tax 401k to Roth IRA conversion)
...
What would you guys recommend?
I find these fees annoying. I'd switch to an IRA since you're already carrying an umbrella policy.

As you look to the future, you may want to make more than one distribution from the 401k / IRA account per year, so the $25 fee could be multiplied. I'm thinking of qualified charitable distributions (QCDs) or taking RMDs on a steady monthly basis to smooth your income in retirement. Having to navigate around an annoying fee would turn me off.

Regards,
This is one person's opinion. Nothing more.
Topic Author
Lucky_Ducky
Posts: 2
Joined: Thu Oct 15, 2020 11:14 pm

Re: Should I rollover my 401k to an IRA? Same fund choices in both.

Post by Lucky_Ducky »

johnny wrote: Fri Oct 16, 2020 6:50 am 401k does offer the potential to use the rule of 55 for withdrawal.
That's a good point and something I didn't consider. However, I don't think I'll be using feature that since I'll be withdrawing from my much larger taxable account first.

anon_investor wrote: Fri Oct 16, 2020 7:19 am Does your 401k offer a stable value fund?
Not any good ones.

anon_investor wrote: Fri Oct 16, 2020 7:19 am Since your 401k is using a fidelity brokeragelink, are you able to transfer in kind to an IRA (to avoid being out of the market)?
No.

retired@50 wrote: Fri Oct 16, 2020 7:22 am As you look to the future, you may want to make more than one distribution from the 401k / IRA account per year, so the $25 fee could be multiplied.
Good point.


Thanks for everyone's help so far!
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