Should I roll my old 401k to an IRA

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SDC20
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Should I roll my old 401k to an IRA

Post by SDC20 »

My old workplace 401 is through Fidelity and it has some good investment options so I planned on leaving it in there, but Fidelity is saying I should roll it to an IRA. I currently max out a backdoor Roth IRA each year and didn't know if this rollover would affect this Roth IRA.

I don't really know of any other advantages the IRA would provide. I did notice it would cost me 75 dollars to buy some of the Wellesley fund through the fidelity brokerage in my 401 but I don't know if there would be a way to buy this fund without a fee using the IRA?

Any other advantages or should I just keep it in the 401 plan ?
lakpr
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Re: Should I roll my old 401k to an IRA

Post by lakpr »

Is someone forcing you to move the money out of the 401k plan into an IRA? As long as you have *CONTRIBUTED* (not including growth) at least $5000 while employee of the company, no 401k plan can force you out of the plan. It is an IRS rule. They (old employer / old plan custodian) can make it unpleasant to stay by imposing additional maintenance fees for ex-employees and such, but such fees would have to be disclosed in the Summary Plan Description up front before you begin participating.

If you have been doing the backdoor Roth, then be prepared to say goodbye to that process if you roll the old 401k to Roth Rollover IRA. It would subject you to pro-rata rule, causing you to pay unnecessary extra taxes now compared with the situation of leaving it in the 401k. [ Edit -- thanks to @shess for pointing out my mistake ]

I see no definite reason to roll it to a Rollover IRA, and only harm if you do. If you must roll it out of the old employer plan, do it into your current employer plan. But check with the current employer plan if they would accept such an inbound rollover first. Plan rules vary from employer to employer ...

And no, Wellington fund can be bought without a fee only at Vanguard (or may be E*Trade and Schwab, where they allow you to buy funds from ONE fund family without fees). Does not matter whether it is a taxable account or an IRA
Last edited by lakpr on Wed Jun 09, 2021 11:49 am, edited 1 time in total.
Topic Author
SDC20
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Re: Should I roll my old 401k to an IRA

Post by SDC20 »

lakpr wrote: Wed Jun 09, 2021 11:19 am Is someone forcing you to move the money out of the 401k plan into an IRA? As long as you have *CONTRIBUTED* (not including growth) at least $5000 while employee of the company, no 401k plan can force you out of the plan. It is an IRS rule. They (old employer / old plan custodian) can make it unpleasant to stay by imposing additional maintenance fees for ex-employees and such, but such fees would have to be disclosed in the Summary Plan Description up front before you begin participating.

If you have been doing the backdoor Roth, then be prepared to say goodbye to that process if you roll the old 401k to Roth IRA. It would subject you to pro-rata rule, causing you to pay unnecessary extra taxes now compared with the situation of leaving it in the 401k.

I see no definite reason to roll it to a Rollover IRA, and only harm if you do. If you must roll it out of the old employer plan, do it into your current employer plan. But check with the current employer plan if they would accept such an inbound rollover first. Plan rules vary from employer to employer ...

And no, Wellington fund can be bought without a fee only at Vanguard (or may be E*Trade and Schwab, where they allow you to buy funds from ONE fund family without fees). Does not matter whether it is a taxable account or an IRA
Thanks for the advice they're not forcing me just trying to convince me it's the best option. I just didn't understand the process and didn't want to do anything that would stop me from contributing to my Roth. I'll just leave it in the 401 plan and let it grow.
shess
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Re: Should I roll my old 401k to an IRA

Post by shess »

lakpr wrote: Wed Jun 09, 2021 11:19 am If you have been doing the backdoor Roth, then be prepared to say goodbye to that process if you roll the old 401k to Roth IRA. It would subject you to pro-rata rule, causing you to pay unnecessary extra taxes now compared with the situation of leaving it in the 401k.
I'm guessing in the above where takpr says "roll the 401k to Roth IRA", they meant "Rollover IRA". Because if you rollover to a Roth IRA, then it won't have any impact on your ability to do backdoor Roth IRA contributions!

Of course, that only happens if your 401k is a Roth 401k, or if you convert your Rollover IRA to Roth IRA and pay taxes on it. Neither of those are usually the case.

Personally, I usually rolled over old 401k plans either because the plan kinda sucked in terms of offerings or fees, or because I didn't want to worry about the long-term viability of the employer the plan was associated with. My last employer actually had a quite reasonable plan, so I just consolidated everything there, including my Rollover IRA accounts. Since you mention that you'd like to continue doing backdoor Roth IRA, that implies you'll continue to have earned income, so maybe just wait a bit and see how you like the plan at your new place of work?
retiredjg
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Re: Should I roll my old 401k to an IRA

Post by retiredjg »

SDC20 wrote: Wed Jun 09, 2021 11:14 am My old workplace 401 is through Fidelity and it has some good investment options so I planned on leaving it in there, but Fidelity is saying I should roll it to an IRA. I currently max out a backdoor Roth IRA each year and didn't know if this rollover would affect this Roth IRA.
Yes, the presence of an IRA would interfere with the backdoor process. You do not want to do that if you have a choice.

I don't really know of any other advantages the IRA would provide. I did notice it would cost me 75 dollars to buy some of the Wellesley fund through the fidelity brokerage in my 401 but I don't know if there would be a way to buy this fund without a fee using the IRA?
Vanguard mutual funds have a transaction fee at Fido. Don't do that either.
retiredjg
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Re: Should I roll my old 401k to an IRA

Post by retiredjg »

SDC20 wrote: Wed Jun 09, 2021 11:26 am Thanks for the advice they're not forcing me just trying to convince me it's the best option.
It is only the best option for you if the 401k plan charges significant fees.

I suspect a Fidelity advisor is trying to lure you over into some funds in an IRA that benefit the advisor, not you.
lakpr
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Re: Should I roll my old 401k to an IRA

Post by lakpr »

shess wrote: Wed Jun 09, 2021 11:37 am
lakpr wrote: Wed Jun 09, 2021 11:19 am If you have been doing the backdoor Roth, then be prepared to say goodbye to that process if you roll the old 401k to Roth IRA. It would subject you to pro-rata rule, causing you to pay unnecessary extra taxes now compared with the situation of leaving it in the 401k.
I'm guessing in the above where lakpr says "roll the 401k to Roth IRA", they meant "Rollover IRA". Because if you rollover to a Roth IRA, then it won't have any impact on your ability to do backdoor Roth IRA contributions!
Duh, I should be writing the posts more carefully. Yes I meant Rollover IRA, will correct my previous post.
Faith20879
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Re: Should I roll my old 401k to an IRA

Post by Faith20879 »

lakpr wrote: Wed Jun 09, 2021 11:19 am Is someone forcing you to move the money out of the 401k plan into an IRA? As long as you have *CONTRIBUTED* (not including growth) at least $5000 while employee of the company, no 401k plan can force you out of the plan. It is an IRS rule.
I have seen this being mentioned before on this board. Do you have a link where I can get more details about it? Thank you!

The reason I am asking is that my mid-size employer (~1000 ) requires a total rollover within 18 months of termination regardless of balance. They usually are very good about following the ERISA dos and don'ts. I would like to stay if I could because my State has a preferential tax code for 401k withdrawal.
retiredjg
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Re: Should I roll my old 401k to an IRA

Post by retiredjg »

I too am under the impression they cannot force you out except for too small a balance (or termination of the plan).

https://www.irs.gov/retirement-plans/pl ... tion-rules
  • In certain circumstances, the plan administrator must obtain your consent before making a distribution. Generally, if your account balance exceeds $5,000, the plan administrator must obtain your consent before making a distribution.
This does not specifically state they cannot force you out, but maybe implies it a little. If your plan is doing that consistently, there must be more to the story that we don't know yet.
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ruralavalon
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Re: Should I roll my old 401k to an IRA

Post by ruralavalon »

SDC20 wrote: Wed Jun 09, 2021 11:14 am My old workplace 401 is through Fidelity and it has some good investment options so I planned on leaving it in there, but Fidelity is saying I should roll it to an IRA. I currently max out a backdoor Roth IRA each year and didn't know if this rollover would affect this Roth IRA.

I don't really know of any other advantages the IRA would provide. I did notice it would cost me 75 dollars to buy some of the Wellesley fund through the fidelity brokerage in my 401 but I don't know if there would be a way to buy this fund without a fee using the IRA?

Any other advantages or should I just keep it in the 401 plan ?
Does your current employer's plan offer good funds with low expense ratios, and will it permit an incoming rollover from your old employer's plan?

If so then consider a rollover of your account from the old employer into your current employer's plan.
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Faith20879
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Re: Should I roll my old 401k to an IRA

Post by Faith20879 »

retiredjg wrote: Wed Jun 09, 2021 12:37 pm I too am under the impression they cannot force you out except for too small a balance (or termination of the plan).

https://www.irs.gov/retirement-plans/pl ... tion-rules
  • In certain circumstances, the plan administrator must obtain your consent before making a distribution. Generally, if your account balance exceeds $5,000, the plan administrator must obtain your consent before making a distribution.
This does not specifically state they cannot force you out, but maybe implies it a little. If your plan is doing that consistently, there must be more to the story that we don't know yet.
That's my suspicion too. I am hoping to gather enough evidence before bringing the issue to them. Thanks!
go2run
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Re: Should I roll my old 401k to an IRA

Post by go2run »

Faith20879 wrote: Wed Jun 09, 2021 3:21 pm
retiredjg wrote: Wed Jun 09, 2021 12:37 pm I too am under the impression they cannot force you out except for too small a balance (or termination of the plan).

https://www.irs.gov/retirement-plans/pl ... tion-rules
  • In certain circumstances, the plan administrator must obtain your consent before making a distribution. Generally, if your account balance exceeds $5,000, the plan administrator must obtain your consent before making a distribution.
This does not specifically state they cannot force you out, but maybe implies it a little. If your plan is doing that consistently, there must be more to the story that we don't know yet.
That's my suspicion too. I am hoping to gather enough evidence before bringing the issue to them. Thanks!
I would be interested to see what the Summary Plan Description says.

From the IRS website:
Full termination
A plan termination requires more than deciding to discontinue the plan

The IRS considers a 401(k) plan terminated only if:

The date of termination is established (this can take the form of a plan amendment, board of directors’ resolution, or complete discontinuance of contributions);
The benefits and liabilities under the plan are determined as of the date of plan termination; and
All assets are distributed as soon as administratively feasible, generally within one year after the date of plan termination.
A 401(k) plan that has not distributed its assets as soon as administratively feasible is considered an ongoing plan and must continue to meet the qualification requirements, including amending the plan document for law changes. If you maintain another plan, you may have to transfer employees’ elective deferral accounts to the other plan rather than distributing them to employees.

See Terminating a Retirement Plan for the required steps.

Generally, the process of terminating a 401(k) plan includes amending the plan document, distributing all assets, notifying employees, filing a final 5500-series form and possibly filing a Form 5310 PDF, Application for Determination for Terminating Plan, to ask the IRS to make a determination on the plan's qualification status at the plan termination date.
shess
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Re: Should I roll my old 401k to an IRA

Post by shess »

Faith20879 wrote: Wed Jun 09, 2021 3:21 pm
retiredjg wrote: Wed Jun 09, 2021 12:37 pm I too am under the impression they cannot force you out except for too small a balance (or termination of the plan).

https://www.irs.gov/retirement-plans/pl ... tion-rules
  • In certain circumstances, the plan administrator must obtain your consent before making a distribution. Generally, if your account balance exceeds $5,000, the plan administrator must obtain your consent before making a distribution.
This does not specifically state they cannot force you out, but maybe implies it a little. If your plan is doing that consistently, there must be more to the story that we don't know yet.
That's my suspicion too. I am hoping to gather enough evidence before bringing the issue to them. Thanks!
That said ... personally, I would not trust my 401k funds with an employer plan which took this position, even if they wrongly understand the regulations. As a practical matter, I'd take that as a signal that they will not be helpful if any problems ever come up, and that they will generally make an effort to interpret regulations in a way contrary to my interests. If a Rollover IRA were my only choice, I'd take it and give up backdoor Roth IRA access.
KineticSync
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Re: Should I roll my old 401k to an IRA

Post by KineticSync »

Another consideration depending on the state you're in is ERISA anti-alienation protections. It's a bit confusing for me trying to get clear and up to date information about which states have what kind of protections on rollover accounts against seizure for debts, but the federal ERISA protections seem pretty strong.
lakpr
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Re: Should I roll my old 401k to an IRA

Post by lakpr »

shess wrote: Wed Jun 09, 2021 4:02 pm
Faith20879 wrote: Wed Jun 09, 2021 3:21 pm
retiredjg wrote: Wed Jun 09, 2021 12:37 pm I too am under the impression they cannot force you out except for too small a balance (or termination of the plan).

https://www.irs.gov/retirement-plans/pl ... tion-rules
  • In certain circumstances, the plan administrator must obtain your consent before making a distribution. Generally, if your account balance exceeds $5,000, the plan administrator must obtain your consent before making a distribution.
This does not specifically state they cannot force you out, but maybe implies it a little. If your plan is doing that consistently, there must be more to the story that we don't know yet.
That's my suspicion too. I am hoping to gather enough evidence before bringing the issue to them. Thanks!
That said ... personally, I would not trust my 401k funds with an employer plan which took this position, even if they wrongly understand the regulations. As a practical matter, I'd take that as a signal that they will not be helpful if any problems ever come up, and that they will generally make an effort to interpret regulations in a way contrary to my interests. If a Rollover IRA were my only choice, I'd take it and give up backdoor Roth IRA access.
This is a very good point, indeed. Something I can definitely get behind
Faith20879
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Re: Should I roll my old 401k to an IRA

Post by Faith20879 »

go2run wrote: Wed Jun 09, 2021 4:02 pm
Faith20879 wrote: Wed Jun 09, 2021 3:21 pm
retiredjg wrote: Wed Jun 09, 2021 12:37 pm I too am under the impression they cannot force you out except for too small a balance (or termination of the plan).

https://www.irs.gov/retirement-plans/pl ... tion-rules
  • In certain circumstances, the plan administrator must obtain your consent before making a distribution. Generally, if your account balance exceeds $5,000, the plan administrator must obtain your consent before making a distribution.
This does not specifically state they cannot force you out, but maybe implies it a little. If your plan is doing that consistently, there must be more to the story that we don't know yet.
That's my suspicion too. I am hoping to gather enough evidence before bringing the issue to them. Thanks!
I would be interested to see what the Summary Plan Description says.

From the IRS website:
Full termination
A plan termination requires more than deciding to discontinue the plan

The IRS considers a 401(k) plan terminated only if:

The date of termination is established (this can take the form of a plan amendment, board of directors’ resolution, or complete discontinuance of contributions);
The benefits and liabilities under the plan are determined as of the date of plan termination; and
All assets are distributed as soon as administratively feasible, generally within one year after the date of plan termination.
A 401(k) plan that has not distributed its assets as soon as administratively feasible is considered an ongoing plan and must continue to meet the qualification requirements, including amending the plan document for law changes. If you maintain another plan, you may have to transfer employees’ elective deferral accounts to the other plan rather than distributing them to employees.

See Terminating a Retirement Plan for the required steps.

Generally, the process of terminating a 401(k) plan includes amending the plan document, distributing all assets, notifying employees, filing a final 5500-series form and possibly filing a Form 5310 PDF, Application for Determination for Terminating Plan, to ask the IRS to make a determination on the plan's qualification status at the plan termination date.
I was referring to termination of employment, not termination of the plan. Sorry about the confusion.

Apology to OP for hijacking the thread. I will stop now.
go2run
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Re: Should I roll my old 401k to an IRA

Post by go2run »

Faith20879 wrote: Thu Jun 10, 2021 7:52 am
I was referring to termination of employment, not termination of the plan. Sorry about the confusion.

Apology to OP for hijacking the thread. I will stop now.
No worries and I didn't think you were hijacking the thread. For the OP, there are two considerations of "termination". One is employee and the other is plan termination. When the plan terminates, the participant must distribute the funds. When the employee terminates, the employee should be able to remain in the plan and distributions must be taken when RMD's hit. I checked the Summary Plan Description for my employer 401k and the language matches what the IRS states.

That is odd that the plan administrator (Fidelity in this case) would be directing the participant to rollover the 401k to an IRA. If the plan fees and fund fees are low and the OP is happy with the offerings, there is no (legal) reason to rollover the funds. I would leave it and continue to keep the tIRA balance at zero to take advantage of the Backdoor Roth IRA contributions.
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anon_investor
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Re: Should I roll my old 401k to an IRA

Post by anon_investor »

go2run wrote: Thu Jun 10, 2021 8:32 am
Faith20879 wrote: Thu Jun 10, 2021 7:52 am
I was referring to termination of employment, not termination of the plan. Sorry about the confusion.

Apology to OP for hijacking the thread. I will stop now.
No worries and I didn't think you were hijacking the thread. For the OP, there are two considerations of "termination". One is employee and the other is plan termination. When the plan terminates, the participant must distribute the funds. When the employee terminates, the employee should be able to remain in the plan and distributions must be taken when RMD's hit. I checked the Summary Plan Description for my employer 401k and the language matches what the IRS states.

That is odd that the plan administrator (Fidelity in this case) would be directing the participant to rollover the 401k to an IRA. If the plan fees and fund fees are low and the OP is happy with the offerings, there is no (legal) reason to rollover the funds. I would leave it and continue to keep the tIRA balance at zero to take advantage of the Backdoor Roth IRA contributions.
I bet you Fidelity wants to get the OP to rollover 401k funds to a Fidelity tIRA, so that Fidelity can convince the OP to buy some high expense ratio mutual funds. I only say this, because this is what happened to one of my coworkers. Fidelity convinced him to rollover his 401k to a Fidelity tIRA, then someone cold called him when there was a pile of cash sitting in his settlement account, and "recommended" him a bunch of high fee Fidelity actively managed mutual funds. :shock:
backpacker61
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Re: Should I roll my old 401k to an IRA

Post by backpacker61 »

go2run wrote: Thu Jun 10, 2021 8:32 am That is odd that the plan administrator (Fidelity in this case) would be directing the participant to rollover the 401k to an IRA. If the plan fees and fund fees are low and the OP is happy with the offerings, there is no (legal) reason to rollover the funds. I would leave it and continue to keep the tIRA balance at zero to take advantage of the Backdoor Roth IRA contributions.
It's not odd at all; IRA's are more profitable for a brokerage firm than a 401K account.

And the nature of the relationship changes.

401K

you <=> your employer <=> Fidelity

IRA

you <=> Fidelity
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retiredjg
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Re: Should I roll my old 401k to an IRA

Post by retiredjg »

go2run wrote: Thu Jun 10, 2021 8:32 am That is odd that the plan administrator (Fidelity in this case) would be directing the participant to rollover the 401k to an IRA.
It is not clear it was the plan administrator who made the suggestion. The original poster just said "Fidelity". That could be a Fidelity advisor trolling for business.
Willmunny
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Re: Should I roll my old 401k to an IRA

Post by Willmunny »

The way I've always viewed this choice is keeping the funds in the old plan gives me the most options. Once I roll it over into an IRA, there are consequences and I can't put the wine back in the bottle because I can't move the money back to a company I no longer work for. I may be able to move it from the IRA to a new employer plan, but maybe that plan isn't as good or doesn't accept rollovers. Also, I have to work for a company that has a plan to do that. I know that fits most people, but there are many people who don't (e.g., self employed, unemployed, retired, disabled). As long as I keep the wine in the bottle, I always have the option at any point in the future to either: (1) rollover to IRA; or (2) rollover to new employer plan (to the extent I work for a new employer with a plan in the future).

Obviously, the analysis changes if the old plan is bad in the sense of high fees or poor investment choices. But if things are roughly equivalent in terms of fees and investment options, I've always left it where the funds in the old employer plan.
lakpr
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Re: Should I roll my old 401k to an IRA

Post by lakpr »

Willmunny wrote: Fri Jun 11, 2021 7:13 am The way I've always viewed this choice is keeping the funds in the old plan gives me the most options. Once I roll it over into an IRA, there are consequences and I can't put the wine back in the bottle because I can't move the money back to a company I no longer work for. I may be able to move it from the IRA to a new employer plan, but maybe that plan isn't as good or doesn't accept rollovers. Also, I have to work for a company that has a plan to do that. I know that fits most people, but there are many people who don't (e.g., self employed, unemployed, retired, disabled). As long as I keep the wine in the bottle, I always have the option at any point in the future to either: (1) rollover to IRA; or (2) rollover to new employer plan (to the extent I work for a new employer with a plan in the future).

Obviously, the analysis changes if the old plan is bad in the sense of high fees or poor investment choices. But if things are roughly equivalent in terms of fees and investment options, I've always left it where the funds in the old employer plan.
Very elegantly stated! << I know I am not adding anything of value with this reply, but I did want to express my appreciation of putting the issue succinctly and straight to the point >>
LeslieSmiley
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Re: Should I roll my old 401k to an IRA

Post by LeslieSmiley »

Unless you want to invest in funds that are not available in your 401k, and that you are not being charged a significant maintenance fee, rolling over to a roll over IRA might not give you much benefits.

- 401k provides more protection from bankruptcy
- 401k funds typically have lower expense ratio

As for why Fido recommended you to roll over, there could be a few reasons:

- simplicity
- more investment choices in case you might want to change your holdings
- but most likely, it’s their incentive/business model to make such recommendation because they can pitch to you Fido managed funds with higher expense ratios and fees.
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ruralavalon
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Re: Should I roll my old 401k to an IRA

Post by ruralavalon »

LeslieSmiley wrote: Fri Jun 11, 2021 8:05 am Unless you want to invest in funds that are not available in your 401k, and that you are not being charged a significant maintenance fee, rolling over to a roll over IRA might not give you much benefits.

- 401k provides more protection from bankruptcy
- 401k funds typically have lower expense ratio

As for why Fido recommended you to roll over, there could be a few reasons:

- simplicity
- more investment choices in case you might want to change your holdings
- but most likely, it’s their incentive/business model to make such recommendation because they can pitch to you Fido managed funds with higher expense ratios and fees.
I don't believe that "401k funds typically have lower expense ratio", a common problem is high expenses in a company plan, the main reason for rolling over to an IRA is poor fund choices and high expenses.

"According to the 401 (k) Book of Averages, a company with 2,000 employees can expect to see an average 0.78% total expense ratio. In comparison, small businesses plans with 50 employees have an average expense ratio of 1.26%. At 25 employees, it’s 1.35%*." Guideline (1/10/2020), "How much should you pay in 401(k) plan fees?" , link.
Last edited by ruralavalon on Fri Jun 11, 2021 10:24 am, edited 1 time in total.
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LeslieSmiley
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Re: Should I roll my old 401k to an IRA

Post by LeslieSmiley »

ruralavalon wrote: Fri Jun 11, 2021 10:09 am
LeslieSmiley wrote: Fri Jun 11, 2021 8:05 am Unless you want to invest in funds that are not available in your 401k, and that you are not being charged a significant maintenance fee, rolling over to a roll over IRA might not give you much benefits.

- 401k provides more protection from bankruptcy
- 401k funds typically have lower expense ratio

As for why Fido recommended you to roll over, there could be a few reasons:

- simplicity
- more investment choices in case you might want to change your holdings
- but most likely, it’s their incentive/business model to make such recommendation because they can pitch to you Fido managed funds with higher expense ratios and fees.
I don't believe that "401k funds typically have lower expense ratio", a common problem is high expenses in a company plan, the main reason for rolling over to an IRA is poor fund choices demand high expenses.

"According to the 401 (k) Book of Averages, a company with 2,000 employees can expect to see an average 0.78% total expense ratio. In comparison, small businesses plans with 50 employees have an average expense ratio of 1.26%. At 25 employees, it’s 1.35%*." Guideline (1/10/2020), "How much should you pay in 401(k) plan fees?" , link.
Maybe not typical, but i do know that CIF (Collective Investment Trust) offered by 401k plans do have lower expense ration than their counterpart retail funds that have the identical holdings and track the identical index.
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ruralavalon
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Re: Should I roll my old 401k to an IRA

Post by ruralavalon »

LeslieSmiley wrote: Fri Jun 11, 2021 10:18 am
ruralavalon wrote: Fri Jun 11, 2021 10:09 am
LeslieSmiley wrote: Fri Jun 11, 2021 8:05 am Unless you want to invest in funds that are not available in your 401k, and that you are not being charged a significant maintenance fee, rolling over to a roll over IRA might not give you much benefits.

- 401k provides more protection from bankruptcy
- 401k funds typically have lower expense ratio

As for why Fido recommended you to roll over, there could be a few reasons:

- simplicity
- more investment choices in case you might want to change your holdings
- but most likely, it’s their incentive/business model to make such recommendation because they can pitch to you Fido managed funds with higher expense ratios and fees.
I don't believe that "401k funds typically have lower expense ratio", a common problem is high expenses in a company plan, the main reason for rolling over to an IRA is poor fund choices demand high expenses.

"According to the 401 (k) Book of Averages, a company with 2,000 employees can expect to see an average 0.78% total expense ratio. In comparison, small businesses plans with 50 employees have an average expense ratio of 1.26%. At 25 employees, it’s 1.35%*." Guideline (1/10/2020), "How much should you pay in 401(k) plan fees?" , link.
Maybe not typical, but i do know that CIF (Collective Investment Trust) offered by 401k plans do have lower expense ration than their counterpart retail funds that have the identical holdings and track the identical index.
You are right the company plans which offer CITs do have very low expense ratios, and CITs are becoming more common, but are far from typical.
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