Do you rollover all of your previous 401ks?

[chemeng]

Now that I've joined a new company, my slice and dice portfolio has gotten quite hectic with all of the various options I'm currently contributed to:



Some of these options within each 401k are excellent, which is why I've currently not rolled over from Company 1 to Company 2. But as I look to rebalance every year (or so), it's become more tricky to do so. I'm considering rolling over and consolidating. The total balance of these accounts is approx $300k.

What is everyone's strategy for rollovers and consolidations? I imagine I will be changing jobs occasionally in the future, which will further add to the complexity of managing all of these funds. Any suggestions?

[JerLon]

Roll to IRA.

*Unless, as pointed out below, you need to do a backdoor Roth. Then, new 401k is fine. If you happen to have another IRA (SEP...) or Solo 401k, I'd choose that over a limited 401k through an employer.

[TwstdSista]

Roll to IRA.

Only if you do not expect to need to utilize Backdoor Roth IRA contributions.

I would roll the old 401k into the new one for the sake of simplicity.

[livesoft]

I never rolled over my 403(b). I did roll over my 401(k) to my solo401(k).

[delamer]

I’d be inclined to rollover an old 401(k) into an IRA — and have — rather than a new employer’s 401(k).

With the IRA, you get an infinite number of investment options and easier access to the money in an emergency.

The only caveat is that in some states, 401(k) money has greater protection against creditors than money in an IRA. So you need to find out if that is the case in your state, and then plan accordingly.

[mervinj7]

Just rollover into the new 401k and call it a day. In general, I avoid Rollover IRAs for most folks here since you may need to do Backdoor IRAs at some point in your career. The fees are low enough that it doesn't matter.

[TwstdSista]

Another option might be to keep both 401k accounts, but simplify. Hold Bonds and International in 401k 1 and Total Market (and Extended Market) in 401k 2. Bring the HSA account down to one or two funds and you've much simplified the whole thing.

[jhfenton]

I have always rolled our 401(k)s over immediately, eager to unlock our each 401(k) balance from its investing shackles. Last time my wife switched jobs, we rolled hers over so fast from Schwab--all online via ACH to an IRA at TD Ameritrade--that we ended up having to do it a second time when they unexpectedly withheld her 401(k) deferral amount from her severance. (It was no big deal, but they had said that they wouldn't.)

Why do we roll over?

1. We've never had combined incomes that would disqualify us from contributing the full amount to our Roth IRAs, so there's never been any realistic possibility that we would need to do backdoor Roths.

2. We've never had a 401(k) with such outstanding mutual fund choices that we couldn't do better in an IRA.

[michaeljc70]

I always roll it over to an IRA. However, my last employer used Vanguard, had some good fund choices that fit in with my AA and I wasn't there long (small balance relative to my NW) so I'm not in a hurry.

[chemeng]

Unfortunately (or fortunately) I will need the backdoor roth, so rolling over to an IRA may not be the best option. But even if I didn't need the backdoor, I would not have access to the institutional shares that these 401ks offer. Why would I want to rollover to an IRA in this case?

[Northern Flicker]

As long as current 401K has been a good plan with low fee options, I have usually preferred to consolidate there so that everything is in one account. It is still just one rollover to move it to an IRA or different 401K upon termination.

[skylar]

If the new 401k is a decent plan (measured in expense and fund selection), isn't there an advantage to rolling the old 401k over into the new 401k rather than an IRA, since the money would be available at age 55 rather than 59.5?

[DesertDiva]

If the new 401k is a decent plan (measured in expense and fund selection), isn't there an advantage to rolling the old 401k over into the new 401k rather than an IRA, since the money would be available at age 55 rather than 59.5?

Sounds like you're referring to the "rule of 55":
https://www.irs.gov/taxtopics/tc558
https://www.forbes.com/sites/forbesfina ... 441697c6eb

[MathIsMyWayr]

If the new 401k is a decent plan (measured in expense and fund selection), isn't there an advantage to rolling the old 401k over into the new 401k rather than an IRA, since the money would be available at age 55 rather than 59.5?

+1.
Another reason is the current employer's 401(k) being exempt from RMD if this condition applies. However, you have to be mindful of NUA. There are more investment choices in IRA than in 401(k), but many is not necessarily better.

[hatchinganegg]

Only if you do not expect to need to utilize Backdoor Roth IRA contributions.

I would roll the old 401k into the new one for the sake of simplicity.

I rolled all of my former 401K’s to IRA and only now realize I could have benefitted from ROTH conversions. When you roll over your money from an employer 401K to an IRA you effectively expose yourself to the IRA aggregation/pro-Rata rules.
This takes some pre-planning to understand your retirement goals and your withdrawal strategy. You can still do a ROTH conversion but may be taxed unnecessarily if your income keeps increasing.

[2cents2]

"What is everyone's strategy for rollovers and consolidations? I imagine I will be changing jobs occasionally in the future, which will further add to the complexity of managing all of these funds. Any suggestions?"

This is a good question.
Lots of good points already brought up.
Do you have to pay any fees on your accounts? In the past year or so, DH's 401k providers have tacked on quarterly fees. The fees along with our desire to do some conversions to Roth motivated us to do a rollover tIRA on his 401k#2 account. He expects to change employers in 2019. His current 401k#3 will either be rolled over to a tIRA or rolled into 401k#4 assuming it is allowed and depending on the investment choices.

[Darth Xanadu]

As previously discussed, since you need to utilize backdoor Roth IRA, you would not want to roll into an IRA.

Rolling over to a new 401k plan makes good sense, if investment options are reasonable. This simplifies things.

I have one old 401k which I did not roll over as this is at Fidelity with most of my other stuff and I like having the bulk of my assets in one place. If (when) I start a different job, I will also maintain my current 401k plan, which means I will have 3. The reason I expect to do this is because I have a mix of Roth 401k and traditional 401k contributions in it. My next 401k will be 100% pre-tax which will be better for managing my portfolio from an asset location perspective in that I will be able to (eventually) hold all my bonds in pre-tax space. I currently can't do this.

[2cents2]

Unfortunately (or fortunately) I will need the backdoor roth, so rolling over to an IRA may not be the best option. But even if I didn't need the backdoor, I would not have access to the institutional shares that these 401ks offer. Why would I want to rollover to an IRA in this case?

Right--you wouldn't want to rollover to an IRA if you want to do backdoor Roth. But, in regards to your other question-- Fidelity has a few funds which have a lower ER than what is offered in some 401Ks (for example, FZILX and FZROX). Recent discussion: viewtopic.php?p=4047219#p4047219

https://www.fidelity.com/mutual-funds/i ... ndex-funds

[bloom2708]

We roll old 401ks to Vanguard when we leave a company. Doesn't happen that often.

No back door Roth needs/issues here as the wife is stay at home during this period.

The next 401k might have just as good of options as Vanguard or most likely it won't. Nice to have things in one place + current 401k.

[WhiteMaxima]

No rolling. 401k has lower ER. Though IRA has more fund choice and stock trading option. You are more likely to stock trade and market timing in IRA. In 401k, you can rebalance to fixed AA target. In IRA, It is impossible to do a rebalance to a fixed %. If you have individual stock in IRA, things get more complicated.

[mervinj7]

Unfortunately (or fortunately) I will need the backdoor roth, so rolling over to an IRA may not be the best option. But even if I didn't need the backdoor, I would not have access to the institutional shares that these 401ks offer. Why would I want to rollover to an IRA in this case?

My wife's 403b has a fantastic core fund, the Vanguard S&P 500 Fund Institutional Plus Share Class. VIIIX has an ER of 0.02% with minimum investment of $100M (not an issue in a 403b). That said, her Roth IRA at Fidelity can use FXAIX (Fidelity 500 Index Fund Institutional Premium) or FSKAX (Fidelity Total Market Fund Institutional Premium) which has an even lower ER of 0.015% with $0 min. She can even use FZROX (Fidelity ZERO Total Market) with an ER of 0.0%. However, since we need to use the backdoor roth method, we still did the rollover of all previous 401ks into this 403b.

The weighted average ER on our Roth IRAs (0.028%) with the Institutional Premium Fidelity funds is still lower than our 403b (0.039%) even though it has ultra-low ER institutional share class Vanguard funds.

[beyou]

Unfortunately I did the rollover IRA many years ago before I ever heard of a backdoor IRA (15 years ago was my last rollover from 401k to rollover TIRA). I might have rolled to each successive 401k had I known about that, maybe not. I do like the fact that I am in complete control over most of my assets, not my employer. That alone is almost worth doing the IRA rollover.

Just so happens my current employer has an excellent 401k, not sure I would roll it anywhere if I leave (and when I leave may be to retire so no new 401k likely in my future, just have to decide if I should consolidate to my existing rollover IRA or not. Simplification but at the expense of paperwork and giving up on truly low cost funds (zero fees on current 401k plan, yes really free), and giving up custodian diversification. I serious lean towards not rolling over my current and maybe last 401k, but all prior ones were rolled over for reasons I state above.

[GoldStar]

No rolling. 401k has lower ER.

I don't understand this statement - the OP could roll to a new IRA at Fidelity and use the "$0" ER funds. It doesn't get any lower than that. I also don't understand your statement about not being able to rebalance. Rebalancing in an IRA is just as easy as in a 401K.

The biggest issue is the ones others have mentioned - it might prevent a backdoor Roth is important to the OP.

I left my first job in 1996 and rolled all that money into an IRA. Then in 1997 they invented the "Roth".
Now my funds are in the IRA and I can't do a back-door Roth unless I take the tax byte and convert.

[NYCPete]

Now that I've joined a new company, my slice and dice portfolio has gotten quite hectic with all of the various options I'm currently contributed to:



Some of these options within each 401k are excellent, which is why I've currently not rolled over from Company 1 to Company 2. But as I look to rebalance every year (or so), it's become more tricky to do so. I'm considering rolling over and consolidating. The total balance of these accounts is approx $300k.

What is everyone's strategy for rollovers and consolidations? I imagine I will be changing jobs occasionally in the future, which will further add to the complexity of managing all of these funds. Any suggestions?

OP, I think you could move old 401k to new, or leave as is. The options in both plans look really good.

As far as my strategy for consolidation? I've done a total 180 on the conventional Boglehead advice that one should generally always roll over 401ks into IRAs. Rollover IRAs are such a pain to have around if/when a person hits the Roth limit, so if one has money sitting in an old 401k that is workable and has decent options, I say keep it around. If you move to a company that has an outstanding 401k, that's the time to roll everything over to that new awesome 401k.

I never expected I would hit the Roth limit, so I never planned around needing to deal with it. Now I really wish I hadn't followed the oft repeated advice on Bogleheads that one should roll to IRA to simplify. Once I did, later I had a huge logistical headache and ultimately had to move money out of Vanguard into my currently pretty mediocre 401k plan so I could continue to fund my Roth (I know, first world problems...). The worst part about it was the plan I originally rolled over had stellar options. Yes, it was more complicated, but the options were better than what I have now. Even though I was nowhere close to the Roth income limits at the time, I think it was dumb to rollover purely for simplicity and I wish I hadn't done it. You know what's not simple? Trying to do a backdoor roth with rollover IRA money sitting around.

So I think default advice should be that one never roll a 401k into a rollover IRA unless there's a compelling and circumstantially specific reason to do so. For instance, egregiously high expense ratios (though different people will have different opinions on what is egregiously high), but even that may not be enough for some situations. I don't even think one's expectation that they'll never hit the Roth income limit is a good reason to roll over because incomes can go up, and income limits and one's circumstances can change. No one can know the future. Simplicity can be achieved in other ways besides the Rollover IRA. OP, like your situation, many 401ks allow rollovers from previous 401k plans. If the typical person moves jobs half a dozen times in their careers, then they'll have ample opportunity to pick and choose which 401k plan to consolidate everything. Once you find that great 401k, put all past 401ks into it. When you leave that job. Leave the money there, unless the new plan is even better.

OP, FWIW you're in a pretty enviable situation given those options in the two 401k plans.

Best,
Peter

[WhiteMaxima]

No rolling. 401k has lower ER.

I don't understand this statement - the OP could roll to a new IRA at Fidelity and use the "$0" ER funds. It doesn't get any lower than that. I also don't understand your statement about not being able to rebalance. Rebalancing in an IRA is just as easy as in a 401K.

The biggest issue is the ones others have mentioned - it might prevent a backdoor Roth is important to the OP.

I left my first job in 1996 and rolled all that money into an IRA. Then in 1997 they invented the "Roth".
Now my funds are in the IRA and I can't do a back-door Roth unless I take the tax byte and convert.

I don't know zero ER fund really cost zero. Maybe Fidelity loan them to shorters. Fidelity is a for profit company. It needs to pay employees and return profit to shareholders. Vanguard is share owner owned company. Of course, OP could roll 401k to zero ER fund. The performance is yet to be proved.

[GoldStar]

No rolling. 401k has lower ER.

I don't understand this statement - the OP could roll to a new IRA at Fidelity and use the "$0" ER funds. It doesn't get any lower than that. I also don't understand your statement about not being able to rebalance. Rebalancing in an IRA is just as easy as in a 401K.

The biggest issue is the ones others have mentioned - it might prevent a backdoor Roth is important to the OP.

I left my first job in 1996 and rolled all that money into an IRA. Then in 1997 they invented the "Roth".
Now my funds are in the IRA and I can't do a back-door Roth unless I take the tax byte and convert.

I don't know zero ER fund really cost zero. Maybe Fidelity loan them to shorters. Fidelity is a for profit company. It needs to pay employees and return profit to shareholders. Vanguard is share owner owned company. Of course, OP could roll 401k to zero ER fund. The performance is yet to be proved.

Even taking Fidelity off the table you can have ERs in an IRA that are exactly the same as the ERs in your 401K. 401K ERs aren't necessarily lower.

[chemeng]

Appreciate it! Interestingly, my consideration in the OP was never to roll over to an IRA due to the backdoor Roth factor, but this discussion turned much into that.

My main questions were:
1. How do you strategize your rollovers in general as you acquire more accounts (401ks, HSAs, etc), for the sake of simplicity?
2. Considering only the 401k in Company 1 vs 401k in Company 2, is it worthwhile to rollover into Company 2? I ask because there are some great options in 401k #1 that are better than 401k #2. Would the small differences in expense ratio make a difference in the long run? Is it worth the potential "headache" of managing another set of accounts?

[Northern Flicker]

If the new 401k is a decent plan (measured in expense and fund selection), isn't there an advantage to rolling the old 401k over into the new 401k rather than an IRA, since the money would be available at age 55 rather than 59.5?

+1.
Another reason is the current employer's 401(k) being exempt from RMD if this condition applies.

I can’t find any authoritative reference to confirm this. Aren’t all 401K assets (including Roth 401K assets) subject to RMDs starting in the year you turn 70.5?

[fennewaldaj]

No rolling. 401k has lower ER.

I don't understand this statement - the OP could roll to a new IRA at Fidelity and use the "$0" ER funds. It doesn't get any lower than that. I also don't understand your statement about not being able to rebalance. Rebalancing in an IRA is just as easy as in a 401K.

The biggest issue is the ones others have mentioned - it might prevent a backdoor Roth is important to the OP.

I left my first job in 1996 and rolled all that money into an IRA. Then in 1997 they invented the "Roth".
Now my funds are in the IRA and I can't do a back-door Roth unless I take the tax byte and convert.

I don't know zero ER fund really cost zero. Maybe Fidelity loan them to shorters. Fidelity is a for profit company. It needs to pay employees and return profit to shareholders. Vanguard is share owner owned company. Of course, OP could roll 401k to zero ER fund. The performance is yet to be proved.

Even taking Fidelity off the table you can have ERs in an IRA that are exactly the same as the ERs in your 401K. 401K ERs aren't necessarily lower.

Yeah it seems the things that are sometimes much cheaper are institutional shares of active funds (vs like say A shares). But bogleheads don't tend to buy those anyway. For example my wife's 401k has AB high income and john hancock bond at ERs in the .45 range when some of there share classes go well above 1%. Now those funds are fine and I am willing to use them but it not like they are something I would seek out. DFA funds are a reason to not role over for those that are interested in that sort of thing as is the TSP G fund. We have old accounts for DFA and G fund access.

[2cents2]

+1.
Another reason is the current employer's 401(k) being exempt from RMD if this condition applies.

I can’t find any authoritative reference to confirm this. Aren’t all 401K assets (including Roth 401K assets) subject to RMDs starting in the year you turn 70.5?

I believe it is up to the plan.
Here is a link to an article: https://www.irahelp.com/slottreport/10- ... -exception

Here is a quote from the IRS 401(k) Resource Guide - Plan Sponsors - General Distribution Rules:
The required beginning date is April 1 of the first year after the later of the following years:

Calendar year in which the participant reaches age 70½.
Calendar year in which the participant retires.

However, a plan may require that the participant begin receiving distributions by April 1 of the year after the participant reaches age 70½, even if the participant has not retired.

If the participant is a 5% owner of the employer maintaining the plan, then the participant must begin receiving distributions by April 1 of the first year after the calendar year in which the participant reaches age 70½. Additional information to help determine a participant’s required beginning date is included in Publication 575.
Quote taken from this link: "https://www.irs.gov/retirement-plans/pl ... tion-rules"

[2cents2]

Appreciate it! Interestingly, my consideration in the OP was never to roll over to an IRA due to the backdoor Roth factor, but this discussion turned much into that.

My main questions were:
1. How do you strategize your rollovers in general as you acquire more accounts (401ks, HSAs, etc), for the sake of simplicity?
2. Considering only the 401k in Company 1 vs 401k in Company 2, is it worthwhile to rollover into Company 2? I ask because there are some great options in 401k #1 that are better than 401k #2. Would the small differences in expense ratio make a difference in the long run? Is it worth the potential "headache" of managing another set of accounts?

Thanks for the clarification. It sounds like your desire is to simplify, but you don't want to do it at the expense of more expenses.
Have you done a weighted ER for your funds to calculate the actual cost difference if you were to consolidate? What we don't know is how much is in each 401k. For example, let's say company 1's 401k only held 10K with no opportunity to do a roll in. Would it be worth the aggravation of maintaining another account? That is something that you have to decide.
I think NYCPete provided a pretty thoughtful answer. But, really I don't think you can go wrong either way (consolidate into one 401k with low expenses or keep everything as it is).
Honestly, if DH's 401k providers had not added a quarterly fee (and our plan to do conversions to Roth) we probably would have left things as they were. We use an excel spread sheet to calculate our asset allocation across our retirement accounts, so adding another account is not that big of a deal. So far, we don't have any plans to make any changes to his 401K#1 because I think it is nice to have some redundancy (in case someone hacks into 1 retirement account--they won't have access to all the assets in one place). But, I am not sure that is a necessary precaution.

[Frank Grimes]

My old 401k has great investment options and is all pre-tax contributions (as opposed to my current plan where I've made both pre and after tax contributions). So I just use that to hold Total Bond Market in accordance with my AA. Never considered rolling over to an IRA in order to preserve backdoor ability. Not really any need to roll it to my current 401k since it only holds one position that I never have to tweak.

[ruralavalon]

Now that I've joined a new company, my slice and dice portfolio has gotten quite hectic with all of the various options I'm currently contributed to:



Some of these options within each 401k are excellent, which is why I've currently not rolled over from Company 1 to Company 2. But as I look to rebalance every year (or so), it's become more tricky to do so. I'm considering rolling over and consolidating. The total balance of these accounts is approx $300k.

What is everyone's strategy for rollovers and consolidations? I imagine I will be changing jobs occasionally in the future, which will further add to the complexity of managing all of these funds. Any suggestions?

I always rolled over into an IRA, but until the very end of my working years I never had a work-based plan which offered good fund options.

It looks like both of your 401k plans have good fund options with very low expense ratios, so the better choice may be to roll the old 401k over into your current employer's 401k. That gives you a portfolio that is easy to manage, keeps open the ability to use a backdoor Roth IRA, preserves the ability to withdraw from the account at age 55, and in some states gives better protection from creditors than an IRA.

In general I favor rollovers for the sake of simplicity. Small differences in expense ratio, a few hundredths of a percent, are probably immaterial in the long run. Other fund differences like the index used, securities lending policy, and tracking error can outweigh tiny differences in expense ratio.

The rollover decision depends almost entirely on the funds offered in each account, and the expenses.

Is there an annual account maintenance fee charged by the old 401k plan?

Will the current employer's plan accept a rollover from the old 401k? Does the current employer's 401k offer all of the fund types you want at low expense? If so then consolidating in the current employer's plan is probably better.

[chemeng]

Now that I've joined a new company, my slice and dice portfolio has gotten quite hectic with all of the various options I'm currently contributed to:



Some of these options within each 401k are excellent, which is why I've currently not rolled over from Company 1 to Company 2. But as I look to rebalance every year (or so), it's become more tricky to do so. I'm considering rolling over and consolidating. The total balance of these accounts is approx $300k.

What is everyone's strategy for rollovers and consolidations? I imagine I will be changing jobs occasionally in the future, which will further add to the complexity of managing all of these funds. Any suggestions?

I always rolled over into an IRA, but until the very end of my working years I never had a work-based plan which offered good fund options.

It looks like both of your 401k plans have good fund options with very low expense ratios, so the better choice may be to roll the old 401k over into your current employer's 401k. That gives you a portfolio that is easy to manage, keeps open the ability to use a backdoor Roth IRA, preserves the ability to withdraw from the account at age 55, and in some states gives better protection from creditors than an IRA.

In general I favor rollovers for the sake of simplicity. Small differences in expense ratio, a few hundredths of a percent, are probably immaterial in the long run. Other fund differences like the index used, securities lending policy, and tracking error can outweigh tiny differences in expense ratio.

The rollover decision depends almost entirely on the funds offered in each account, and the expenses.

Is there an annual account maintenance fee charged by the old 401k plan?

Will the current employer's plan accept a rollover from the old 401k? Does the current employer's 401k offer all of the fund types you want at low expense? If so then consolidating in the current employer's plan is probably better.

There are no fees with the old 401k plan. But I do agree consolidating looks better. Taking a weighted expense average of the old 401k vs that of the new 401k as I continue to add to the new 401k does not appear to have any significant impact (i.e., accepting the marginally higher expense ratio of the new plan will not likely impact long term growth).