Retirement accounts transfer question

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Financequest
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Joined: Mon Sep 10, 2018 9:00 pm

Retirement accounts transfer question

Post by Financequest » Mon Sep 10, 2018 9:26 pm

I need help in deciding whether to transfer my and my wife's retirement account. I'll describe them separately to avoid confusion.

1. I had been a resident at one of the hospitals for 5 years. I have Fidelity 403b with them. Currently, I have another 403b account ( Fidelity also) with my new employer ( I'll be for one year with this employer due to the duration of fellowship) who has much better 403b investment options. Next year, I'll be joining a job with a 403b option with TIAA. Best investment options are with the 2nd employer and worst options are in the first employer plan.
I was thinking of transferring the 403b money from the first employer to 2nd and keep it there to have better options as well to help in rebalancing.

I would really appreciate feedback with pros and cons. Also, can I transfer to a new employer or do I need to transfer to my individual retirement account with vanguard?

2. My wife is in the same situation with not so good options in 403b from her residency ( Fidelity account). She has another 403b account with Vanguard with decent options. She will have the third 403b with another employer with TIAA. 2nd option with vanguard has the best options. Is transferring her first retirement account in Fidelity to 2nd retirement account in Vanguard a good option?

Thank you

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Kevin M
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Re: Retirement accounts transfer question

Post by Kevin M » Mon Sep 10, 2018 10:05 pm

Yes to both. I'd try to maximize the assets in the plan with the best options.

Kevin
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JBTX
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Re: Retirement accounts transfer question

Post by JBTX » Mon Sep 10, 2018 10:47 pm

Financequest wrote:
Mon Sep 10, 2018 9:26 pm
I need help in deciding whether to transfer my and my wife's retirement account. I'll describe them separately to avoid confusion.

1. I had been a resident at one of the hospitals for 5 years. I have Fidelity 403b with them. Currently, I have another 403b account ( Fidelity also) with my new employer ( I'll be for one year with this employer due to the duration of fellowship) who has much better 403b investment options. Next year, I'll be joining a job with a 403b option with TIAA. Best investment options are with the 2nd employer and worst options are in the first employer plan.
I was thinking of transferring the 403b money from the first employer to 2nd and keep it there to have better options as well to help in rebalancing.

I would really appreciate feedback with pros and cons. Also, can I transfer to a new employer or do I need to transfer to my individual retirement account with vanguard?

2. My wife is in the same situation with not so good options in 403b from her residency ( Fidelity account). She has another 403b account with Vanguard with decent options. She will have the third 403b with another employer with TIAA. 2nd option with vanguard has the best options. Is transferring her first retirement account in Fidelity to 2nd retirement account in Vanguard a good option?

Thank you
Seems like transferring to best plan and leaving it there is best option, in both cases.

The only downside is sometimes if a 401k from a former employer has a relatively small amount, say less than $5000, the employer may eventually require you take distribution, either to an IRA, or possibly to your new 401k.

Financequest
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Re: Retirement accounts transfer question

Post by Financequest » Mon Sep 10, 2018 10:54 pm

Thank you, Kevin and JBTX. The amount is significant in both the accounts and can affect the rebalancing process.

Financequest
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Re: Retirement accounts transfer question

Post by Financequest » Mon Sep 10, 2018 11:26 pm

Another question on the same topic. Since we are doing backdoor Roth IRA, transferring these accounts to traditional IR would not be wise due to pro rata rule. Is that correct?

krow36
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Re: Retirement accounts transfer question

Post by krow36 » Tue Sep 11, 2018 12:56 am

Yes, that's correct.

Financequest
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Re: Retirement accounts transfer question

Post by Financequest » Tue Sep 11, 2018 7:28 am

krow36 wrote:
Tue Sep 11, 2018 12:56 am
Yes, that's correct.
Thank you!

vtMaps
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Re: Retirement accounts transfer question

Post by vtMaps » Tue Sep 11, 2018 8:54 am

Financequest wrote:
Mon Sep 10, 2018 9:26 pm
I was thinking of transferring the 403b money from the first employer to 2nd
I don't believe there are any laws or regulations that give you the right to do that. Some (not all) employer plans do not permit rollovers from other plans. Check with your future employer's plan before assuming that you can do such a roll-over.

--vtMaps
The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true. --James Branch Cabell

afan
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Re: Retirement accounts transfer question

Post by afan » Tue Sep 11, 2018 1:34 pm

It will be worth moving money from the bad former employer account to the good new employer account. But with you both going from fellowship to practice the amounts in the future employer accounts are going to be much more than what you could accumulated during training. Makes sense to maximize what you can, but your future will depend on the future employer accounts.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Kevin M
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Re: Retirement accounts transfer question

Post by Kevin M » Tue Sep 11, 2018 3:34 pm

Another thing to keep in mind is that plans can change, sometimes for the better, and sometimes for the worse. If the plan that currently is the best gets worse than whatever newer plan(s) you have, you could then do the transfers to the best newer plan, assuming the new plan accepts rollovers from old 401k/403b plans.

Example: my daughter had an old 401k with a good stable value fund, so we left the money there, primarily to take advantage of that. Then they changed, and no longer had a good stable value fund, and her new plan actually added a decent stable value fund, and already had other excellent choices as well. So at that point we transferred everything from the old plan to the new plan.

Kevin
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CRTR
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Re: Retirement accounts transfer question

Post by CRTR » Tue Sep 11, 2018 3:58 pm

Just to complicate matters, I have another option . . . . open an i401k (with Etrade, just to name one option) and roll over the 403B funds to the i401k. I established an i401k years ago as a sole proprietor, expecting to earn some $ moonlighting . . . I never did. I rolled over my old employer 401k plans to my i401k. I received conflicting advice from my CFP and CPA as to whether I needed to "terminate" the plan when the moonlighting gig fell through. So, I called the IRS and was told that for the self-employed, if the business entity is an c Corp, S Corp or LLC, the plan must be terminated within a year of dissolution of the corporate entity. On the other hand, for a sole proprietor, there is NOT a set termination rule because there is not a set date for dissolution of a SoleP. It did NOT matter that my Sole P business never made even a penny. The Sole P continued to exist as long as I just thought about moonlighting. The CFP recommended I keep a business account open in the name of the Sole P, just in case to demonstrate intent. Following this strategy, I kept my i401k open, without generating any Sole P income for quite a few years. I don't see any reason why you can't do the same thing . . . .form a Sole P with the good faith intent of generating additional income but things just didn't work out . . . .
By doing the above, it allows you to roll over the first 2 employer 403b accounts to the i401k. You can choose cheaper/better investments than currently available through the employer plans and it won't interfere with a Back-Door IRA strategy. In addition, if you want to retire before age 59.5, you can take penalty-free distributions from a i401k at age 55.

Financequest
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Re: Retirement accounts transfer question

Post by Financequest » Tue Sep 11, 2018 8:59 pm

vtMaps wrote:
Tue Sep 11, 2018 8:54 am
Financequest wrote:
Mon Sep 10, 2018 9:26 pm
I was thinking of transferring the 403b money from the first employer to 2nd
I don't believe there are any laws or regulations that give you the right to do that. Some (not all) employer plans do not permit rollovers from other plans. Check with your future employer's plan before assuming that you can do such a roll-over.

--vtMaps
Great point. I didn't think about it.

Financequest
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Joined: Mon Sep 10, 2018 9:00 pm

Re: Retirement accounts transfer question

Post by Financequest » Tue Sep 11, 2018 9:02 pm

afan wrote:
Tue Sep 11, 2018 1:34 pm
It will be worth moving money from the bad former employer account to the good new employer account. But with you both going from fellowship to practice the amounts in the future employer accounts are going to be much more than what you could accumulated during training. Makes sense to maximize what you can, but your future will depend on the future employer accounts.
I completely agree with your point. But since I am trying to take control of my finances after losing money in WHOLE LIFE INSURANCE, I am trying to just go step by step for all the accounts.

Financequest
Posts: 33
Joined: Mon Sep 10, 2018 9:00 pm

Re: Retirement accounts transfer question

Post by Financequest » Tue Sep 11, 2018 9:03 pm

Kevin M wrote:
Tue Sep 11, 2018 3:34 pm
Another thing to keep in mind is that plans can change, sometimes for the better, and sometimes for the worse. If the plan that currently is the best gets worse than whatever newer plan(s) you have, you could then do the transfers to the best newer plan, assuming the new plan accepts rollovers from old 401k/403b plans.

Example: my daughter had an old 401k with a good stable value fund, so we left the money there, primarily to take advantage of that. Then they changed, and no longer had a good stable value fund, and her new plan actually added a decent stable value fund, and already had other excellent choices as well. So at that point we transferred everything from the old plan to the new plan.

Kevin
Good point. I thought about it as well. But the first employer options are really bad. I am hoping anything in the future with will be better than that.

Financequest
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Joined: Mon Sep 10, 2018 9:00 pm

Re: Retirement accounts transfer question

Post by Financequest » Tue Sep 11, 2018 9:06 pm

CRTR wrote:
Tue Sep 11, 2018 3:58 pm
Just to complicate matters, I have another option . . . . open an i401k (with Etrade, just to name one option) and roll over the 403B funds to the i401k. I established an i401k years ago as a sole proprietor, expecting to earn some $ moonlighting . . . I never did. I rolled over my old employer 401k plans to my i401k. I received conflicting advice from my CFP and CPA as to whether I needed to "terminate" the plan when the moonlighting gig fell through. So, I called the IRS and was told that for the self-employed, if the business entity is an c Corp, S Corp or LLC, the plan must be terminated within a year of dissolution of the corporate entity. On the other hand, for a sole proprietor, there is NOT a set termination rule because there is not a set date for dissolution of a SoleP. It did NOT matter that my Sole P business never made even a penny. The Sole P continued to exist as long as I just thought about moonlighting. The CFP recommended I keep a business account open in the name of the Sole P, just in case to demonstrate intent. Following this strategy, I kept my i401k open, without generating any Sole P income for quite a few years. I don't see any reason why you can't do the same thing . . . .form a Sole P with the good faith intent of generating additional income but things just didn't work out . . . .
By doing the above, it allows you to roll over the first 2 employer 403b accounts to the i401k. You can choose cheaper/better investments than currently available through the employer plans and it won't interfere with a Back-Door IRA strategy. In addition, if you want to retire before age 59.5, you can take penalty-free distributions from a i401k at age 55.
Thank you for suggesting another option. I had no clue about this one. I need to learn more about it.

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