Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

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Topic Author
catchinup
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Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

I recently accepted full time employment and am shutting down my solo 401k. (keeping it open is not an option as it's sponsored by my S-Corp and I'm shutting down my S-Corp .. this aspect is already decided.). One of the solo 401k sub-accounts is holding tax deferred positions. I'm trying to decide between rolling them into the new employer's 401k, or if I want to roll it into an IRA. My annual income is around $200k.

I already confirmed that if I roll it into my new employer's 401k, I will have to cash out of the market .. probably for several business days. An in-kind transfer is NOT possible as the new employer does not have exactly the same funds as my S-Corp sponsored individual 401k. Spending several days out of the market makes me super nervous. However, this way, all my tax deferred money will continue to be sheltered in the 401k, which means I could still do annual Back Door Roth contributions. (The new employer has funds that are equivalent to Vanguard's Total Stock Market and Total Bond Market funds, which is what the solo tax deferred 401k is holding right now.)

If I roll the funds into a Fidelity IRA, I *can* do an in-kind transfer, since my Solo 401k currently holds Fidelity and Vanguard funds. This makes me less nervous, but in this case, I would no longer be able to do the Back Door Roth contributions because of the pro-rata rules.

Additional note: I'm almost 62 and getting pretty close to retirement. Maybe around 3-4 years left?

Just curious what others would do in my situation? Thanks,
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ruralavalon
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by ruralavalon »

catchinup wrote: Mon Jan 16, 2023 2:34 pm I recently accepted full time employment and am shutting down my solo 401k. (keeping it open is not an option as it's sponsored by my S-Corp and I'm shutting down my S-Corp .. this aspect is already decided.). One of the solo 401k sub-accounts is holding tax deferred positions. I'm trying to decide between rolling them into the new employer's 401k, or if I want to roll it into an IRA. My annual income is around $200k.

I already confirmed that if I roll it into my new employer's 401k, I will have to cash out of the market .. probably for several business days. An in-kind transfer is NOT possible as the new employer does not have exactly the same funds as my S-Corp sponsored individual 401k. Spending several days out of the market makes me super nervous. However, this way, all my tax deferred money will continue to be sheltered in the 401k, which means I could still do annual Back Door Roth contributions. (The new employer has funds that are equivalent to Vanguard's Total Stock Market and Total Bond Market funds, which is what the solo tax deferred 401k is holding right now.)

If I roll the funds into a Fidelity IRA, I *can* do an in-kind transfer, since my Solo 401k currently holds Fidelity and Vanguard funds. This makes me less nervous, but in this case, I would no longer be able to do the Back Door Roth contributions because of the pro-rata rules.

Additional note: I'm almost 62 and getting pretty close to retirement. Maybe around 3-4 years left?

Just curious what others would do in my situation? Thanks,
Since the new employer's 401k plan offers good funds with low expense ratios I suggest a rollover into the new employer's plan.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
catchinup
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

ruralavalon wrote: Mon Jan 16, 2023 2:38 pm
catchinup wrote: Mon Jan 16, 2023 2:34 pm I recently accepted full time employment and am shutting down my solo 401k. (keeping it open is not an option as it's sponsored by my S-Corp and I'm shutting down my S-Corp .. this aspect is already decided.). One of the solo 401k sub-accounts is holding tax deferred positions. I'm trying to decide between rolling them into the new employer's 401k, or if I want to roll it into an IRA. My annual income is around $200k.

I already confirmed that if I roll it into my new employer's 401k, I will have to cash out of the market .. probably for several business days. An in-kind transfer is NOT possible as the new employer does not have exactly the same funds as my S-Corp sponsored individual 401k. Spending several days out of the market makes me super nervous. However, this way, all my tax deferred money will continue to be sheltered in the 401k, which means I could still do annual Back Door Roth contributions. (The new employer has funds that are equivalent to Vanguard's Total Stock Market and Total Bond Market funds, which is what the solo tax deferred 401k is holding right now.)

If I roll the funds into a Fidelity IRA, I *can* do an in-kind transfer, since my Solo 401k currently holds Fidelity and Vanguard funds. This makes me less nervous, but in this case, I would no longer be able to do the Back Door Roth contributions because of the pro-rata rules.

Additional note: I'm almost 62 and getting pretty close to retirement. Maybe around 3-4 years left?

Just curious what others would do in my situation? Thanks,
Since the new employer's 401k plan offers good funds with low expense ratios I suggest a rollover into the new employer's plan.
Thanks, so being out of the market for several days would not concern you?
Boatguy
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by Boatguy »

ruralavalon wrote: Mon Jan 16, 2023 2:38 pm
catchinup wrote: Mon Jan 16, 2023 2:34 pm I recently accepted full time employment and am shutting down my solo 401k. (keeping it open is not an option as it's sponsored by my S-Corp and I'm shutting down my S-Corp .. this aspect is already decided.). One of the solo 401k sub-accounts is holding tax deferred positions. I'm trying to decide between rolling them into the new employer's 401k, or if I want to roll it into an IRA. My annual income is around $200k.

I already confirmed that if I roll it into my new employer's 401k, I will have to cash out of the market .. probably for several business days. An in-kind transfer is NOT possible as the new employer does not have exactly the same funds as my S-Corp sponsored individual 401k. Spending several days out of the market makes me super nervous. However, this way, all my tax deferred money will continue to be sheltered in the 401k, which means I could still do annual Back Door Roth contributions. (The new employer has funds that are equivalent to Vanguard's Total Stock Market and Total Bond Market funds, which is what the solo tax deferred 401k is holding right now.)

If I roll the funds into a Fidelity IRA, I *can* do an in-kind transfer, since my Solo 401k currently holds Fidelity and Vanguard funds. This makes me less nervous, but in this case, I would no longer be able to do the Back Door Roth contributions because of the pro-rata rules.

Additional note: I'm almost 62 and getting pretty close to retirement. Maybe around 3-4 years left?

Just curious what others would do in my situation? Thanks,
Since the new employer's 401k plan offers good funds with low expense ratios I suggest a rollover into the new employer's plan.
I agree. Having been lucky enough to have a new 401k plan that accepted my large enough IRA when I was around the same age as you, I’ve been grateful to have the ability to do backdoor Roths since that time. No downside whatsoever for me.
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ruralavalon
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by ruralavalon »

catchinup wrote: Mon Jan 16, 2023 2:56 pm
ruralavalon wrote: Mon Jan 16, 2023 2:38 pm
catchinup wrote: Mon Jan 16, 2023 2:34 pm I recently accepted full time employment and am shutting down my solo 401k. (keeping it open is not an option as it's sponsored by my S-Corp and I'm shutting down my S-Corp .. this aspect is already decided.). One of the solo 401k sub-accounts is holding tax deferred positions. I'm trying to decide between rolling them into the new employer's 401k, or if I want to roll it into an IRA. My annual income is around $200k.

I already confirmed that if I roll it into my new employer's 401k, I will have to cash out of the market .. probably for several business days. An in-kind transfer is NOT possible as the new employer does not have exactly the same funds as my S-Corp sponsored individual 401k. Spending several days out of the market makes me super nervous. However, this way, all my tax deferred money will continue to be sheltered in the 401k, which means I could still do annual Back Door Roth contributions. (The new employer has funds that are equivalent to Vanguard's Total Stock Market and Total Bond Market funds, which is what the solo tax deferred 401k is holding right now.)

If I roll the funds into a Fidelity IRA, I *can* do an in-kind transfer, since my Solo 401k currently holds Fidelity and Vanguard funds. This makes me less nervous, but in this case, I would no longer be able to do the Back Door Roth contributions because of the pro-rata rules.

Additional note: I'm almost 62 and getting pretty close to retirement. Maybe around 3-4 years left?

Just curious what others would do in my situation? Thanks,
Since the new employer's 401k plan offers good funds with low expense ratios I suggest a rollover into the new employer's plan.
Thanks, so being out of the market for several days would not concern you?
No. We don't know if the market will go up, down or sideways on those days.

There are benefits to keep in the money in a 401k, ERISA protections, availability of a Stable Value Fund or Guaranteed Income fund, and keeping the option of a backdoor Roth IRA.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
ClassOf2021
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by ClassOf2021 »

I would roll over to 401k. And if you have existing low risk investments in 401k (e.g. stable value), you could shift those to equities (e.g. total stock market) since while the money is being rolled in it will be in cash at that time keeping your AA more constant.
w5000
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by w5000 »

I say it depends on the balance in your Solo 401(k) -- it can take a week or more for the transfer to complete. (Try to get the check sent via overnight mail; you might have to pay for that, but it's probably worth the $40) And you could easily lose (or gain) 1-2% while being out of the market that week. So if you've got a $1M balance, is it worth losing $10,000-20,000 to be able to get your $7,500 backdoor Roth done (and how many more years are you going to do a backdoor Roth)? I would guess probably it's not worth it at that level. But if it's like $100K balance, I think it'd be worth it. (Figure any loss due to being out of the market is spread over the remaining number of backdoor Roth contributions you're going to do.) You can try to time the market with your transfer, and you might get lucky, or not.
MrJedi
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by MrJedi »

Do you have any other accounts that can be used to rebalance during the rollover so that equity exposure remains relatively constant? I.e. rebalance bonds into stocks when the old 401k gets liquidated. You lose some bond exposure during the rollover but that's not nearly as sensitive as equity exposure.
w5000
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by w5000 »

MrJedi wrote: Tue Jan 17, 2023 10:26 am Do you have any other accounts that can be used to rebalance during the rollover so that equity exposure remains relatively constant? I.e. rebalance bonds into stocks when the old 401k gets liquidated. You lose some bond exposure during the rollover but that's not nearly as sensitive as equity exposure.
Good point -- my gain/lose figure of 1-2% assumes the account is mostly equities, without the flexibility to shift things around so that you're effectively transferring bonds/cash instead.
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KingRiggs
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by KingRiggs »

w5000 wrote: Tue Jan 17, 2023 9:11 am I say it depends on the balance in your Solo 401(k) -- it can take a week or more for the transfer to complete. (Try to get the check sent via overnight mail; you might have to pay for that, but it's probably worth the $40) And you could easily lose (or gain) 1-2% while being out of the market that week. So if you've got a $1M balance, is it worth losing $10,000-20,000 to be able to get your $7,500 backdoor Roth done (and how many more years are you going to do a backdoor Roth)? I would guess probably it's not worth it at that level. But if it's like $100K balance, I think it'd be worth it. (Figure any loss due to being out of the market is spread over the remaining number of backdoor Roth contributions you're going to do.) You can try to time the market with your transfer, and you might get lucky, or not.
This. I remember reading an analysis (by Kitces, I believe) that backdoor Roth results in about $1,000 per year of benefit compared to taxable account for those in highest marginal brackets. If you only plan to do the backdoor Roth for, say, 5 more years, you’ll need to guess whether losses from time out of the market would likely exceed the benefit of 5 more years of Roth IRA contributions. That depends on the size of your portfolio and how wildly the market might swing while you’re out, which no one can know…
Advice = noun | Advise = verb | | Roth, not ROTH | | "Remember, there's always money in the banana stand." - George Bluth, Sr.
Navillus1968
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by Navillus1968 »

catchinup wrote: Mon Jan 16, 2023 2:34 pm I recently accepted full time employment and am shutting down my solo 401k. (keeping it open is not an option as it's sponsored by my S-Corp and I'm shutting down my S-Corp .. this aspect is already decided.). One of the solo 401k sub-accounts is holding tax deferred positions. I'm trying to decide between rolling them into the new employer's 401k, or if I want to roll it into an IRA. My annual income is around $200k.

I already confirmed that if I roll it into my new employer's 401k, I will have to cash out of the market .. probably for several business days. An in-kind transfer is NOT possible as the new employer does not have exactly the same funds as my S-Corp sponsored individual 401k. Spending several days out of the market makes me super nervous. However, this way, all my tax deferred money will continue to be sheltered in the 401k, which means I could still do annual Back Door Roth contributions. (The new employer has funds that are equivalent to Vanguard's Total Stock Market and Total Bond Market funds, which is what the solo tax deferred 401k is holding right now.)

If I roll the funds into a Fidelity IRA, I *can* do an in-kind transfer, since my Solo 401k currently holds Fidelity and Vanguard funds. This makes me less nervous, but in this case, I would no longer be able to do the Back Door Roth contributions because of the pro-rata rules.

Additional note: I'm almost 62 and getting pretty close to retirement. Maybe around 3-4 years left?

Just curious what others would do in my situation? Thanks,
Do the rollover, $7,500 x 3-4 years of additional Roth funding (with catch-up now inflation adjusted) is pretty sweet.

If it will help you sleep at night, maybe you should dollar-cost average the rollover. Split the rollover into 4-5-6-7-8 chunks and do one transfer a week until all your Solo 401k rollover is complete.
This way, only 12.5% to 25% of your money is out of the market at any one time, lessening the magnitude of any market swings, up or down.

Have you asked your Solo 401k custodian if they offer ACH or wire transfer options for the rollover into the new 401k? Electrons move faster than airplanes, most of the time. If not, pay for overnight delivery if the sum(s) are large, as others have suggested.
Topic Author
catchinup
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

ruralavalon wrote: Mon Jan 16, 2023 3:02 pm
catchinup wrote: Mon Jan 16, 2023 2:56 pm
ruralavalon wrote: Mon Jan 16, 2023 2:38 pm
catchinup wrote: Mon Jan 16, 2023 2:34 pm I recently accepted full time employment and am shutting down my solo 401k. (keeping it open is not an option as it's sponsored by my S-Corp and I'm shutting down my S-Corp .. this aspect is already decided.). One of the solo 401k sub-accounts is holding tax deferred positions. I'm trying to decide between rolling them into the new employer's 401k, or if I want to roll it into an IRA. My annual income is around $200k.

I already confirmed that if I roll it into my new employer's 401k, I will have to cash out of the market .. probably for several business days. An in-kind transfer is NOT possible as the new employer does not have exactly the same funds as my S-Corp sponsored individual 401k. Spending several days out of the market makes me super nervous. However, this way, all my tax deferred money will continue to be sheltered in the 401k, which means I could still do annual Back Door Roth contributions. (The new employer has funds that are equivalent to Vanguard's Total Stock Market and Total Bond Market funds, which is what the solo tax deferred 401k is holding right now.)

If I roll the funds into a Fidelity IRA, I *can* do an in-kind transfer, since my Solo 401k currently holds Fidelity and Vanguard funds. This makes me less nervous, but in this case, I would no longer be able to do the Back Door Roth contributions because of the pro-rata rules.

Additional note: I'm almost 62 and getting pretty close to retirement. Maybe around 3-4 years left?

Just curious what others would do in my situation? Thanks,
Since the new employer's 401k plan offers good funds with low expense ratios I suggest a rollover into the new employer's plan.
Thanks, so being out of the market for several days would not concern you?
No. We don't know if the market will go up, down or sideways on those days.

There are benefits to keep in the money in a 401k, ERISA protections, availability of a Stable Value Fund or Guaranteed Income fund, and keeping the option of a backdoor Roth IRA.
Thanks. I don't think my new employer offers a stable value or guaranteed income fund but I'll double check.
Topic Author
catchinup
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

w5000 wrote: Tue Jan 17, 2023 9:11 am I say it depends on the balance in your Solo 401(k) -- it can take a week or more for the transfer to complete. (Try to get the check sent via overnight mail; you might have to pay for that, but it's probably worth the $40) And you could easily lose (or gain) 1-2% while being out of the market that week. So if you've got a $1M balance, is it worth losing $10,000-20,000 to be able to get your $7,500 backdoor Roth done (and how many more years are you going to do a backdoor Roth)? I would guess probably it's not worth it at that level. But if it's like $100K balance, I think it'd be worth it. (Figure any loss due to being out of the market is spread over the remaining number of backdoor Roth contributions you're going to do.) You can try to time the market with your transfer, and you might get lucky, or not.
As of today I have around $890k in the 401k. It's invested 55% in a Fidelity Total Stock Market fund and the rest in Total Bond Market funds.

My Solo 401k is at Fidelity which is also the custodian of my company 401k plan. I can call and ask how quickly the funds could be moved in that case.
Topic Author
catchinup
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

To provide some further detail, I currently have around $890k in my Solo 401k.
Also, here's a list of available investment options in the new employer's 401k plan. I omitted several Black Rock target retirement funds from the list. Obviously many fewer options as compared to a Rollover IRA account at Fidelity. But mostly I invest in Total Stock Market and Total Bond Market Index funds, so I can use the Vanguard options below for that.

Large Cap VANG INST TOTL SK TR
Large Cap VANG INST 500 TRUST
Mid-Cap VANG MD CP IDX IS PL
Small Cap VANG SM CP IDX IS PL
International BR EMERG MKT IDX F
International NTN GLB STNBLTY IDX
International BLKRK EAFE EQ IDX
Income VANG INST TOTL BD TR
Mid-Cap BARON GROWTH UNITIZD
International FID DIVSFD INTL POOL
Income BTC TOTAL RET BOND M
Short-Term Investments VANG CR FED MM ADM
little_star
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by little_star »

catchinup wrote: Fri Jan 20, 2023 3:52 am
w5000 wrote: Tue Jan 17, 2023 9:11 am I say it depends on the balance in your Solo 401(k) -- it can take a week or more for the transfer to complete. (Try to get the check sent via overnight mail; you might have to pay for that, but it's probably worth the $40) And you could easily lose (or gain) 1-2% while being out of the market that week. So if you've got a $1M balance, is it worth losing $10,000-20,000 to be able to get your $7,500 backdoor Roth done (and how many more years are you going to do a backdoor Roth)? I would guess probably it's not worth it at that level. But if it's like $100K balance, I think it'd be worth it. (Figure any loss due to being out of the market is spread over the remaining number of backdoor Roth contributions you're going to do.) You can try to time the market with your transfer, and you might get lucky, or not.
As of today I have around $890k in the 401k. It's invested 55% in a Fidelity Total Stock Market fund and the rest in Total Bond Market funds.

My Solo 401k is at Fidelity which is also the custodian of my company 401k plan. I can call and ask how quickly the funds could be moved in that case.
If you are willing to do the transfer in 3 steps, you could minimize the market risk by doing the following

(1) Sell all bond funds (40% of your portfolio) and send check to new 401k plan.
(2) Invest above in total stock in new 401k plan; sell a corresponding amount of total stock in old 401k; send check to new 401k plan
(3) invest #2 into mixture of total stock and bond funds at new 401k (at least as much in total stock as is left at old 401k); sell all remaining funds in old 401k and sent check to new 401k plan
(4) invest #3 as appropriate to restore original balance between total stock and total bonds
(5) file appropriate paperwork to close solo-401k plan

While doing the transfer, be careful to avoid wash sales created by selling substantially identical funds in a taxable account.
Topic Author
catchinup
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

Update.. I spoke with Fidelity again today. They say that they would need to liquidate the 401k and mail a check to me. Then I would mail the check back into Fidelity and ask it to be placed in the new employer's 401K. Yikes! And they said when this happens it also can cause confusion and delays. Last time I spoke to them they did not explain all of this to me.

However if I roll into an IRA instead, they could do transfer in kind.
Topic Author
catchinup
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

little_star wrote: Fri Jan 20, 2023 11:40 am
catchinup wrote: Fri Jan 20, 2023 3:52 am
w5000 wrote: Tue Jan 17, 2023 9:11 am I say it depends on the balance in your Solo 401(k) -- it can take a week or more for the transfer to complete. (Try to get the check sent via overnight mail; you might have to pay for that, but it's probably worth the $40) And you could easily lose (or gain) 1-2% while being out of the market that week. So if you've got a $1M balance, is it worth losing $10,000-20,000 to be able to get your $7,500 backdoor Roth done (and how many more years are you going to do a backdoor Roth)? I would guess probably it's not worth it at that level. But if it's like $100K balance, I think it'd be worth it. (Figure any loss due to being out of the market is spread over the remaining number of backdoor Roth contributions you're going to do.) You can try to time the market with your transfer, and you might get lucky, or not.
As of today I have around $890k in the 401k. It's invested 55% in a Fidelity Total Stock Market fund and the rest in Total Bond Market funds.

My Solo 401k is at Fidelity which is also the custodian of my company 401k plan. I can call and ask how quickly the funds could be moved in that case.
If you are willing to do the transfer in 3 steps, you could minimize the market risk by doing the following

(1) Sell all bond funds (40% of your portfolio) and send check to new 401k plan.
(2) Invest above in total stock in new 401k plan; sell a corresponding amount of total stock in old 401k; send check to new 401k plan
(3) invest #2 into mixture of total stock and bond funds at new 401k (at least as much in total stock as is left at old 401k); sell all remaining funds in old 401k and sent check to new 401k plan
(4) invest #3 as appropriate to restore original balance between total stock and total bonds
(5) file appropriate paperwork to close solo-401k plan

While doing the transfer, be careful to avoid wash sales created by selling substantially identical funds in a taxable account.
Thanks for this.
Freeadvice
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by Freeadvice »

catchinup wrote: Fri Jan 20, 2023 11:23 am To provide some further detail, I currently have around $890k in my Solo 401k.
Also, here's a list of available investment options in the new employer's 401k plan. I omitted several Black Rock target retirement funds from the list. Obviously many fewer options as compared to a Rollover IRA account at Fidelity. But mostly I invest in Total Stock Market and Total Bond Market Index funds, so I can use the Vanguard options below for that.

Large Cap VANG INST TOTL SK TR
Large Cap VANG INST 500 TRUST
Mid-Cap VANG MD CP IDX IS PL
Small Cap VANG SM CP IDX IS PL
International BR EMERG MKT IDX F
International NTN GLB STNBLTY IDX
International BLKRK EAFE EQ IDX
Income VANG INST TOTL BD TR
Mid-Cap BARON GROWTH UNITIZD
International FID DIVSFD INTL POOL
Income BTC TOTAL RET BOND M
Short-Term Investments VANG CR FED MM ADM
Can you first exchange your solo 401k funds to any of the above funds before moving to the new plan?
rkhusky
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by rkhusky »

The stock market has gained on average about 0.04%/day. That’s about $400/day for $1M in stocks.
Navillus1968
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by Navillus1968 »

catchinup wrote: Fri Jan 20, 2023 9:28 pm Update.. I spoke with Fidelity again today. They say that they would need to liquidate the 401k and mail a check to me. Then I would mail the check back into Fidelity and ask it to be placed in the new employer's 401K. Yikes! And they said when this happens it also can cause confusion and delays. Last time I spoke to them they did not explain all of this to me.

However if I roll into an IRA instead, they could do transfer in kind.
Convoluted, but maybe ask Fidelity if you can transfer in kind Solo 401k to Trad IRA, then rollover the IRA electronically in 3-4 chunks of cash to Fidelity employer 401k, while staying equities on both ends until the last chunk gets transferred?

Also, have you read this BH thread? Similar situation to yours. viewtopic.php?t=387556

"Fidelity specifically calls out in their FAQ there is no limit for a roll over check through mobile deposit. I’ve used it about 3 time for large checks without issue. I’d honestly prefer the mobile route if getting a check

The second option of moving the IRA to the existing custodian is probably best/fastest. We did this for my DW on a recent 401k roll over into her new employer 401k. Old 401k rolled over into an ira at Merrill Edge, ACATS to fidelity, liquidate to cash at fidelity. Call and have them process the rollover from the IRA to the new 401k."

You should be able to do something similar, albeit with fewer steps since it's all at Fidelity.
annebert
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by annebert »

I find this concern about market losses sort of odd in a group that is all about passive investment and resisting market timing. You could as easily save money as lose it by being out of the market for some days. To me the most important thing is keeping your money in a 401(k) with ERISA protections, since not all state laws fully protect rollover IRAs from creditors, California being a notable example.
Topic Author
catchinup
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

Freeadvice wrote: Fri Jan 20, 2023 9:32 pm
catchinup wrote: Fri Jan 20, 2023 11:23 am To provide some further detail, I currently have around $890k in my Solo 401k.
Also, here's a list of available investment options in the new employer's 401k plan. I omitted several Black Rock target retirement funds from the list. Obviously many fewer options as compared to a Rollover IRA account at Fidelity. But mostly I invest in Total Stock Market and Total Bond Market Index funds, so I can use the Vanguard options below for that.

Large Cap VANG INST TOTL SK TR
Large Cap VANG INST 500 TRUST
Mid-Cap VANG MD CP IDX IS PL
Small Cap VANG SM CP IDX IS PL
International BR EMERG MKT IDX F
International NTN GLB STNBLTY IDX
International BLKRK EAFE EQ IDX
Income VANG INST TOTL BD TR
Mid-Cap BARON GROWTH UNITIZD
International FID DIVSFD INTL POOL
Income BTC TOTAL RET BOND M
Short-Term Investments VANG CR FED MM ADM
Can you first exchange your solo 401k funds to any of the above funds before moving to the new plan?
That's a good idea. I'll see if that's possible. I don't see a ticker for them when I log into the company 401k web site though.
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ruralavalon
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Location: Illinois

Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by ruralavalon »

catchinup wrote: Sat Jan 21, 2023 4:34 pm
Freeadvice wrote: Fri Jan 20, 2023 9:32 pm
catchinup wrote: Fri Jan 20, 2023 11:23 am To provide some further detail, I currently have around $890k in my Solo 401k.
Also, here's a list of available investment options in the new employer's 401k plan. I omitted several Black Rock target retirement funds from the list. Obviously many fewer options as compared to a Rollover IRA account at Fidelity. But mostly I invest in Total Stock Market and Total Bond Market Index funds, so I can use the Vanguard options below for that.

Large Cap VANG INST TOTL SK TR
Large Cap VANG INST 500 TRUST
Mid-Cap VANG MD CP IDX IS PL
Small Cap VANG SM CP IDX IS PL
International BR EMERG MKT IDX F
International NTN GLB STNBLTY IDX
International BLKRK EAFE EQ IDX
Income VANG INST TOTL BD TR
Mid-Cap BARON GROWTH UNITIZD
International FID DIVSFD INTL POOL
Income BTC TOTAL RET BOND M
Short-Term Investments VANG CR FED MM ADM
Can you first exchange your solo 401k funds to any of the above funds before moving to the new plan?
That's a good idea. I'll see if that's possible. I don't see a ticker for them when I log into the company 401k web site though.
Can you add the expense ratios for each as offered in your new employer's plan?

Several of those are Collective Investment Trusts, and will not have ticker symbols. Others appear to be Institutional funds. You cannot invest in the trusts or institutional funds other than in the new employer's plan. So I don't see how that can work to alleviate your concerns about being out of the market during a rollover.

In my opinion it's not reasonable to be so concerned about a couple of days out of the market during a rollover to the new employer's plan. The new employer's plan offers excellent, very diversified funds with very low expense ratios. The expense ratios will be lower than you can get in an IRA. It's worthwhile to do a rollover into the new employer's plan in my opinion.
Last edited by ruralavalon on Sat Jan 21, 2023 5:04 pm, edited 1 time in total.
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Navillus1968
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by Navillus1968 »

ruralavalon wrote: Sat Jan 21, 2023 4:48 pm
catchinup wrote: Sat Jan 21, 2023 4:34 pm
Freeadvice wrote: Fri Jan 20, 2023 9:32 pm
catchinup wrote: Fri Jan 20, 2023 11:23 am To provide some further detail, I currently have around $890k in my Solo 401k.
Also, here's a list of available investment options in the new employer's 401k plan. I omitted several Black Rock target retirement funds from the list. Obviously many fewer options as compared to a Rollover IRA account at Fidelity. But mostly I invest in Total Stock Market and Total Bond Market Index funds, so I can use the Vanguard options below for that.

Large Cap VANG INST TOTL SK TR
Large Cap VANG INST 500 TRUST
Mid-Cap VANG MD CP IDX IS PL
Small Cap VANG SM CP IDX IS PL
International BR EMERG MKT IDX F
International NTN GLB STNBLTY IDX
International BLKRK EAFE EQ IDX
Income VANG INST TOTL BD TR
Mid-Cap BARON GROWTH UNITIZD
International FID DIVSFD INTL POOL
Income BTC TOTAL RET BOND M
Short-Term Investments VANG CR FED MM ADM
Can you first exchange your solo 401k funds to any of the above funds before moving to the new plan?
That's a good idea. I'll see if that's possible. I don't see a ticker for them when I log into the company 401k web site though.
Several of those are Collective Investment Trusts, and will not have ticker symbols. Others appear to be Institutional funds. You cannot invest in the trusts or institutional funds other than in the new employer's plan. So I don't see how that can work to alleviate your concerns about being out of the market during a rollover.

In my opinion it's not reasonable to be so concerned about a couple of days out of the market during a rollover to the new employer's plan. The new employer's plan offers excellent, very diversified funds with very low expense ratios. It's worthwhile to do a rollover into the new employer's plan in my opinion.
:thumbsup Where's the 'Like' button, Boglehead dot org?
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catchinup
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

annebert wrote: Sat Jan 21, 2023 10:06 am I find this concern about market losses sort of odd in a group that is all about passive investment and resisting market timing. You could as easily save money as lose it by being out of the market for some days. To me the most important thing is keeping your money in a 401(k) with ERISA protections, since not all state laws fully protect rollover IRAs from creditors, California being a notable example.
I appreciate your point about ERISA protections. At the same time, I currently have $1.2m in my taxable accounts, and around $200k in Roth IRAs, and I own my home worth around $1m. What can I do to protect those from creditors or a liability lawsuit, besides carry umbrella insurance, which I do carry. I live in California.
Topic Author
catchinup
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

ruralavalon wrote: Sat Jan 21, 2023 4:48 pm
catchinup wrote: Sat Jan 21, 2023 4:34 pm
Freeadvice wrote: Fri Jan 20, 2023 9:32 pm
catchinup wrote: Fri Jan 20, 2023 11:23 am To provide some further detail, I currently have around $890k in my Solo 401k.
Also, here's a list of available investment options in the new employer's 401k plan. I omitted several Black Rock target retirement funds from the list. Obviously many fewer options as compared to a Rollover IRA account at Fidelity. But mostly I invest in Total Stock Market and Total Bond Market Index funds, so I can use the Vanguard options below for that.

Large Cap VANG INST TOTL SK TR
Large Cap VANG INST 500 TRUST
Mid-Cap VANG MD CP IDX IS PL
Small Cap VANG SM CP IDX IS PL
International BR EMERG MKT IDX F
International NTN GLB STNBLTY IDX
International BLKRK EAFE EQ IDX
Income VANG INST TOTL BD TR
Mid-Cap BARON GROWTH UNITIZD
International FID DIVSFD INTL POOL
Income BTC TOTAL RET BOND M
Short-Term Investments VANG CR FED MM ADM
Can you first exchange your solo 401k funds to any of the above funds before moving to the new plan?
That's a good idea. I'll see if that's possible. I don't see a ticker for them when I log into the company 401k web site though.
Can you add the expense ratios for each as offered in your new employer's plan?

Several of those are Collective Investment Trusts, and will not have ticker symbols. Others appear to be Institutional funds. You cannot invest in the trusts or institutional funds other than in the new employer's plan. So I don't see how that can work to alleviate your concerns about being out of the market during a rollover.

In my opinion it's not reasonable to be so concerned about a couple of days out of the market during a rollover to the new employer's plan. The new employer's plan offers excellent, very diversified funds with very low expense ratios. The expense ratios will be lower than you can get in an IRA. It's worthwhile to do a rollover into the new employer's plan in my opinion.
I appreciate your point, but to clarify based on today's telephone conversation I had with Fidelity, it sounded like it would take more than a couple of days to do this transfer. They would have to cash out the solo 401k and mail me a check, at which point I would overnight the check back to Fidelity to redeposit in the new employers 401K plan. The Fidelity rep I spoke to told me this typically creates confusion since the Fidelity check came from Fidelity to begin with. The rep I spoke to today is trying to verify if the employers 401k will even accept this transfer. I was previously told by my new employer that the 401K does accept transfers, however the Fidelity rep wants to double check because my solo 401K is in what's called a non-prototype account meaning that it's not a fidelity plan. It's a plan that I purchased and I just hold the money at fidelity.
Topic Author
catchinup
Posts: 436
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

MrJedi wrote: Tue Jan 17, 2023 10:26 am Do you have any other accounts that can be used to rebalance during the rollover so that equity exposure remains relatively constant? I.e. rebalance bonds into stocks when the old 401k gets liquidated. You lose some bond exposure during the rollover but that's not nearly as sensitive as equity exposure.
I just realized, yes I do. The 401K today is worth $902k, but only $509k of that is invested in equities (Total Market Index fund). The rest is in Fidelity & Vanguard Total Bond Market Index.

I also have an inherited IRA, worth today $565k. So I could do overnight exchanges in both accounts, to swap $509k out of equity and into bonds, and vice versa.
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riverant
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by riverant »

catchinup wrote: Fri Jan 20, 2023 9:28 pm Update.. I spoke with Fidelity again today. They say that they would need to liquidate the 401k and mail a check to me. Then I would mail the check back into Fidelity and ask it to be placed in the new employer's 401K. Yikes! And they said when this happens it also can cause confusion and delays. Last time I spoke to them they did not explain all of this to me.

However if I roll into an IRA instead, they could do transfer in kind.
Do an in kind transfer into a IRA. Then roll the IRA into the 401k
Topic Author
catchinup
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

Someone asked for the expense ratios of my new employer 401k funds. I have added them below next to each fund. I wish there were some stable value fund option, but unfortunately not.

Large Cap VANG INST TOTL SK TR - 0.011%
Large Cap VANG INST 500 TRUST - 0.012%
Mid-Cap VANG MD CP IDX IS PL - 0.03%
Small Cap VANG SM CP IDX IS PL - 0.03%
International BR EMERG MKT IDX F - 0.0799%
International NTN GLB STNBLTY IDX - 0.1954%
International BLKRK EAFE EQ IDX - 0.0333%
Income VANG INST TOTL BD TR - 0.022% Weighted average Maturity: 8.90 Years Duration: 6.47 Years
Mid-Cap BARON GROWTH UNITIZD - 0.8799%
International FID DIVSFD INTL POOL - 0.58%
Income BTC TOTAL RET BOND M - 0.19%
Short-Term Investments VANG CR FED MM ADM - 0.1%

New contributions are currently going into Large Cap VANG INST 500 TRUST @55% and Income VANG INST TOTL BD TR at 45%.

The plan also offers several BlackRock target retirement funds that I'm not considering. Most look like they have expense ratios around 0.0472%
Topic Author
catchinup
Posts: 436
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by catchinup »

riverant wrote: Sat Jan 28, 2023 5:31 pm Do an in kind transfer into a IRA. Then roll the IRA into the 401k
After reading your suggestion, I decided to inquire. But I was told all transfers in must be in cash.
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riverant
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Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by riverant »

catchinup wrote: Sat Jan 28, 2023 5:34 pm
riverant wrote: Sat Jan 28, 2023 5:31 pm Do an in kind transfer into a IRA. Then roll the IRA into the 401k
After reading your suggestion, I decided to inquire. But I was told all transfers in must be in cash.
I personally wouldn’t think twice about being out of the market for a week or so. Good as even it’ll go down as it would up. However, if you really want the backdoor option and are nervous about being out of the market, I suppose you could make say 5 separate rollovers of 1/5 your balance one after another to quasi-DCA your rollovers. 5 obviously could be any number above 1 depending on your preference.
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ruralavalon
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Location: Illinois

Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by ruralavalon »

catchinup wrote: Sat Jan 28, 2023 5:32 pm Someone asked for the expense ratios of my new employer 401k funds. I have added them below next to each fund. I wish there were some stable value fund option, but unfortunately not.

Large Cap VANG INST TOTL SK TR - 0.011%
Large Cap VANG INST 500 TRUST - 0.012%
Mid-Cap VANG MD CP IDX IS PL - 0.03%
Small Cap VANG SM CP IDX IS PL - 0.03%
International BR EMERG MKT IDX F - 0.0799%
International NTN GLB STNBLTY IDX - 0.1954%
International BLKRK EAFE EQ IDX - 0.0333%
Income VANG INST TOTL BD TR - 0.022% Weighted average Maturity: 8.90 Years Duration: 6.47 Years
Mid-Cap BARON GROWTH UNITIZD - 0.8799%
International FID DIVSFD INTL POOL - 0.58%
Income BTC TOTAL RET BOND M - 0.19%
Short-Term Investments VANG CR FED MM ADM - 0.1%

New contributions are currently going into Large Cap VANG INST 500 TRUST @55% and Income VANG INST TOTL BD TR at 45%.

The plan also offers several BlackRock target retirement funds that I'm not considering. Most look like they have expense ratios around 0.0472%
Because new employer's 401k plan offers excellent funds with very low expense ratios, including I suggest a rollover into the new employer's plan. The new employer's plan offers some Collective Investment Trusts with extremely low expense ratios, lower than you could get in an IRA.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
fyre4ce
Posts: 2201
Joined: Sun Aug 06, 2017 11:29 am

Re: Roll into new 401k OR Roll into IRA and Lose Backdoor Roth?

Post by fyre4ce »

About the concern about being out of the market for a week- yes, it’s possible for market will go up or down by a few percent, but these would seem to wash each other out. I think about expected return though. Say you are rolling over $400k that is mostly in stocks, with an expected return of 10%. That’s about $110/day. Ten calendar days out of the market will cost about $1,100. That’s why I always pay for expedited processing and overnight mailing when doing rollovers of significant size.

This would seem a small price to pay to get erisa protection and the ability to do Backdoor Roth IRAs. There is a general comparison between IRAs and employer plans on the wiki here. There is also value in having fewer accounts- easier to rebalance, fewer opportunities for problems, simpler if someone has to take over if you die or become incapacitated, etc.

Edit: I just noticed the new 401k has lower expense ratio funds than the IRA. The savings looks to be about 2.9 basis points (4 basis points in VTSAX, 1.1 in the 401k fund). That will make up the difference over time, although it will take a little while because both expense ratios are so low. Looks like the answer is about six years: $400k x (1+10%-0.04%)^6 = $707,080; $400k x (1+10%-0.011%)^6 = $708,199. $708,199 - $707,180 = $1,120.
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