401k question

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WilliamRice
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Joined: Fri Nov 13, 2009 10:20 am

401k question

Post by WilliamRice »

My wife and I have both gone into new jobs. Her previous job she had a 401k at about 3900.00, the investment company has sent her information about what to do with the money ( rollover, keep it in the current fund, etc). My previous job job's 401k balance is about 50k.

We were both wondering if it's it's better to rollover into a new 401k in our new companies, roll into a Roth or just leave it as is. I haven't looked at the overall performance of the funds in a while (obviously I should as it's probably crucial to answering this question) but our thought is having too many funds spread over to many investment companies and keeping track of them all. Does anyone think this is any cause for concern? Thoughts?
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FNK
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Re: 401k question

Post by FNK »

Maybe. Post what investment options you have in old and new 401s, including expense ratios.
centrifuge41
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Re: 401k question

Post by centrifuge41 »

You'll want to look at the expense ratios of the funds offered in her old 401k and his old 401k. It's not the performance on the chart that matters per se - high volatility funds that just happened to be at a super low point 3 years ago will show very high performance, but it's just a big roller coaster.

In theory, the best choice is to leave the money with the old 401k if the expense ratios are lower than what you an get in an IRA. In practice, it may be best to keep rolling out any old job 401k into Rollover IRAs, one for you and one for her. It'd be an easy way to consolidate, it'd let you choose what you want to invest in, and you could keep costs low.

If you stay organized, you shouldn't need much more than a handful of funds to have good diversification.
Johm221122
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Re: 401k question

Post by Johm221122 »

WilliamRice wrote:My wife and I have both gone into new jobs. Her previous job she had a 401k at about 3900.00, the investment company has sent her information about what to do with the money ( rollover, keep it in the current fund, etc). My previous job job's 401k balance is about 50k.

We were both wondering if it's it's better to rollover into a new 401k in our new companies, roll into a Roth or just leave it as is. I haven't looked at the overall performance of the funds in a while (obviously I should as it's probably crucial to answering this question) but our thought is having too many funds spread over to many investment companies and keeping track of them all. Does anyone think this is any cause for concern? Thoughts?
Too me the extra funds would not be problem, just use biggest asset(large cap or total market) exspence ratio on funds is what matters
YDNAL
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Re: 401k question

Post by YDNAL »

WilliamRice wrote:We were both wondering if it's it's better to rollover into a new 401k in our new companies, roll into a Roth or just leave it as is.
1. It is "better" to have better choices, cheaper choices to carry-out your investment plan. Often neither an old 401K nor current 401K can match the options and costs found in IRAs at places like Vanguard or Fidelity (Spartan funds). Do you have an investment Plan?
http://www.bogleheads.org/wiki/Investme ... _Statement

2. Any transfer to a Roth IRA is a taxable event - you typically don't want to do that.
WilliamRice wrote:I haven't looked at the overall performance of the funds in a while (obviously I should as it's probably crucial to answering this question)......
Past performance is meaningless.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
NYBoglehead
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Re: 401k question

Post by NYBoglehead »

I'd go with a 401k rollover account with Vanguard to take advantage of the low expense ratios. The 50k you've got will get you admiral shares right away, so your ER will be even lower. The Roth conversions usually only make sense when the balances are low, since you'll be taxed for the entire amount. So a 50k conversion would be a pretty brutal tax hit.
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FNK
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Re: 401k question

Post by FNK »

NYBoglehead wrote:I'd go with a 401k rollover account with Vanguard to take advantage of the low expense ratios. The 50k you've got will get you admiral shares right away, so your ER will be even lower.
Unless the 401 has Vanguard Institutional funds.
Default User BR
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Re: 401k question

Post by Default User BR »

One reason to avoid an IRA rollover is if there is a decent chance that backdoor Roth will be in play at some point. Again, we need details. The problem description is too vague.


Brian
Johm221122
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Re: 401k question

Post by Johm221122 »

Default User BR wrote:One reason to avoid an IRA rollover is if there is a decent chance that backdoor Roth will be in play at some point. Again, we need details. The problem description is too vague.


Brian
What is the reason not to do rollover if there is a chance of Backdoor Roth?is it because income limits will apply
Default User BR
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Re: 401k question

Post by Default User BR »

Johm221122 wrote:What is the reason not to do rollover if there is a chance of Backdoor Roth?is it because income limits will apply
Because of the pro-rata rule, one would have to include the rollover IRA in the tax calculations. You can't just convert the non-deductible contributions. See this thread: http://www.bogleheads.org/forum/viewtop ... =1&t=99644


Brian
Johm221122
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Re: 401k question

Post by Johm221122 »

Default User BR wrote:
Johm221122 wrote:What is the reason not to do rollover if there is a chance of Backdoor Roth?is it because income limits will apply
Because of the pro-rata rule, one would have to include the rollover IRA in the tax calculations. You can't just convert the non-deductible contributions. See this thread: http://www.bogleheads.org/forum/viewtop ... =1&t=99644


Brian
Thank you
John
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