Any reasons not to rollover my 401k?

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berg
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Any reasons not to rollover my 401k?

Post by berg »

I just started a new job and am considering rolling over two old 401ks. When I started my last job I did not rollover from two jobs ago because the investment options were limited. So I now have two old Fidleity 401ks (one with $300k, one with $200k) with more limited options than my current employer.

My new employer is with Merrill Lynch and has the following options which looks great:

FXAIX - Fidelity 500
FSMAX- Fidelity Extended Market
FTIHX - Fidelity Total International
FXNAX - Fidelity US Bond

Seems like I can make a simple three fund low cost index portfolio all in here. Any reason not to? This is my first experience with Merrill Lynch. Any questions I should be asking to be sure with the new plan.
livesoft
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Re: Any reasons not to rollover my 401k?

Post by livesoft »

Unless there are other significant fees that you didn't tell us about I would do the rollovers. Even if other fees were small I would probably still do the rollovers.
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retired@50
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Re: Any reasons not to rollover my 401k?

Post by retired@50 »

berg wrote: Sun Feb 11, 2024 8:10 am ... Any questions I should be asking to be sure with the new plan.
Read the summary plan description, keeping an eye out for recurring fees or assets under management fees. Sometimes these are taken quarterly, or annually. Maybe also ask a new co-worker.

If it all looks good, then roll into the new 401k plan.

Regards,
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260chrisb
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Re: Any reasons not to rollover my 401k?

Post by 260chrisb »

berg wrote: Sun Feb 11, 2024 8:10 am I just started a new job and am considering rolling over two old 401ks. When I started my last job I did not rollover from two jobs ago because the investment options were limited. So I now have two old Fidleity 401ks (one with $300k, one with $200k) with more limited options than my current employer.

My new employer is with Merrill Lynch and has the following options which looks great:

FXAIX - Fidelity 500
FSMAX- Fidelity Extended Market
FTIHX - Fidelity Total International
FXNAX - Fidelity US Bond

Seems like I can make a simple three fund low cost index portfolio all in here. Any reason not to? This is my first experience with Merrill Lynch. Any questions I should be asking to be sure with the new plan.
Why would you not roll them into a self directed IRA and not into the new plan?
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retired@50
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Re: Any reasons not to rollover my 401k?

Post by retired@50 »

260chrisb wrote: Sun Feb 11, 2024 10:25 am
Why would you not roll them into a self directed IRA and not into the new plan?
An IRA could create a small obstacle (pro-rata rule) for people who use the backdoor Roth strategy.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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yatesd
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Re: Any reasons not to rollover my 401k?

Post by yatesd »

I personally would only choose to rollover into an IRA that I personally controlled. This gives you complete control and most likely additional benefits. Schwab & Fidelity might even give you a transfer bonus.

At Schwab, I get free checking, discounts on my Amex Platinum, discounts on a mortgage if needed, 24 hour support, etc. I would not want to be restricted by the employer's program, especially since you are required to stay with them throughout your employment.
yules
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Re: Any reasons not to rollover my 401k?

Post by yules »

260chrisb wrote: Sun Feb 11, 2024 10:25 am
berg wrote: Sun Feb 11, 2024 8:10 am I just started a new job and am considering rolling over two old 401ks. When I started my last job I did not rollover from two jobs ago because the investment options were limited. So I now have two old Fidleity 401ks (one with $300k, one with $200k) with more limited options than my current employer.

My new employer is with Merrill Lynch and has the following options which looks great:

FXAIX - Fidelity 500
FSMAX- Fidelity Extended Market
FTIHX - Fidelity Total International
FXNAX - Fidelity US Bond

Seems like I can make a simple three fund low cost index portfolio all in here. Any reason not to? This is my first experience with Merrill Lynch. Any questions I should be asking to be sure with the new plan.
Why would you not roll them into a self directed IRA and not into the new plan?
Because 401ks have advantages, like loans and legal protections, that IRAs do not, that’s why.
260chrisb
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Re: Any reasons not to rollover my 401k?

Post by 260chrisb »

yules wrote: Sun Feb 11, 2024 10:53 am
260chrisb wrote: Sun Feb 11, 2024 10:25 am
berg wrote: Sun Feb 11, 2024 8:10 am I just started a new job and am considering rolling over two old 401ks. When I started my last job I did not rollover from two jobs ago because the investment options were limited. So I now have two old Fidleity 401ks (one with $300k, one with $200k) with more limited options than my current employer.

My new employer is with Merrill Lynch and has the following options which looks great:

FXAIX - Fidelity 500
FSMAX- Fidelity Extended Market
FTIHX - Fidelity Total International
FXNAX - Fidelity US Bond

Seems like I can make a simple three fund low cost index portfolio all in here. Any reason not to? This is my first experience with Merrill Lynch. Any questions I should be asking to be sure with the new plan.
Why would you not roll them into a self directed IRA and not into the new plan?
Because 401ks have advantages, like loans and legal protections, that IRAs do not, that’s why.
I still think I'd rather control it outside the 401K if given a chance. The fund costs won't make a difference but the plan costs via ML may.
yules
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Re: Any reasons not to rollover my 401k?

Post by yules »

260chrisb wrote: Sun Feb 11, 2024 11:57 am
yules wrote: Sun Feb 11, 2024 10:53 am
260chrisb wrote: Sun Feb 11, 2024 10:25 am
berg wrote: Sun Feb 11, 2024 8:10 am I just started a new job and am considering rolling over two old 401ks. When I started my last job I did not rollover from two jobs ago because the investment options were limited. So I now have two old Fidleity 401ks (one with $300k, one with $200k) with more limited options than my current employer.

My new employer is with Merrill Lynch and has the following options which looks great:

FXAIX - Fidelity 500
FSMAX- Fidelity Extended Market
FTIHX - Fidelity Total International
FXNAX - Fidelity US Bond

Seems like I can make a simple three fund low cost index portfolio all in here. Any reason not to? This is my first experience with Merrill Lynch. Any questions I should be asking to be sure with the new plan.
Why would you not roll them into a self directed IRA and not into the new plan?
Because 401ks have advantages, like loans and legal protections, that IRAs do not, that’s why.
I still think I'd rather control it outside the 401K if given a chance. The fund costs won't make a difference but the plan costs via ML may.
Oh I agree, but I’m just pointing out a material way that a 401k might be advantageous over an IRA for some people, depending on their financial/legal situation.
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Re: Any reasons not to rollover my 401k?

Post by placeholder »

retired@50 wrote: Sun Feb 11, 2024 10:28 am An IRA could create a small obstacle (pro-rata rule) for people who use the backdoor Roth strategy.
With 500k I'd say more than a small obstacle :wink:
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Re: Any reasons not to rollover my 401k?

Post by placeholder »

If you do roll out to an ira I'd consider robinhood with their 3% match which would add 15k to that rollover.

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Re: Any reasons not to rollover my 401k?

Post by ruralavalon »

berg wrote: Sun Feb 11, 2024 8:10 am I just started a new job and am considering rolling over two old 401ks. When I started my last job I did not rollover from two jobs ago because the investment options were limited. So I now have two old Fidleity 401ks (one with $300k, one with $200k) with more limited options than my current employer.

My new employer is with Merrill Lynch and has the following options which looks great:

FXAIX - Fidelity 500
FSMAX- Fidelity Extended Market
FTIHX - Fidelity Total International
FXNAX - Fidelity US Bond

Seems like I can make a simple three fund low cost index portfolio all in here. Any reason not to? This is my first experience with Merrill Lynch. Any questions I should be asking to be sure with the new plan.
I suggest a rollover ongoing the old 401k accounts into the new employer's plan, if the new plan charges plan participants no additional fees or only small additional fees.

Rollover into the new 401k is preferable to rollover into an IRA in my opinion, because (a) rollover into an IRA will interfere with a backdoor Roth IRA and (b) rollover into the new 401k means fewer accounts to keep track of and manage.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
FulanoG
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Re: Any reasons not to rollover my 401k?

Post by FulanoG »

Not considering that it is easier to have your accounts at fewer companies, nor what potential impact on backdoor Roth options may be, my view is the following:

Generally speaking, employer 401K plans charge Plan Administration and other fees. These are on top of the expense ratios of the underlying investments.

The last two 401K plans I have been apart of have charged 0.75-1.0% admin and service fees. If you have left your employer but kept your 401K with their plan you are paying some level of fees and getting zero value.

If you roll your old 401Ks over to your new company, you will be paying these fees on your old account values plus new contributions.

If I were in your shoes, I would NOT roll the two old Fidelity 401Ks to your new employer ML plan, but I would roll them elsewhere and save paying the 401K admin fees.

However I believe that to roll the 401Ks over to say Schwab, they might require you to sell holdings, mail you a check, deposit and reinvest. But you could ask if you could roll your 401K to Fidelity rollover IRAs and see if they can transfer the holdings in kind. I believe this may be possible. Then you don't have to sell anything and you save the fees.
I'm 50, married with two kids (8 & 10). Been saving 20-30% of salary my whole life. $2M in the market for retirement, $200K total in 529s. Hoping to retire by ~2030.
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Re: Any reasons not to rollover my 401k?

Post by Raspberry-503 »

Another possible reason to roll over the old 401(k) to the new one is the rule of 55: If your employment terminates after age 55, you can withdraw from your current (as in last employer) 401(k) plan without penalties as long as you were 55 when your employment ended.
So if you think you might retire early (voluntarily or not), having 4 1/2 years (age 55 to 59 1/2) in your 401(k) could end up being useful.

tIRAs or prior 401(k) doesn't help in that situation.

Obvioulsy it all depends on administration fees charged in addition to the funds ER. My 401(k) charges 0.04% and I decided it was worth it for the flexibility to retire before 59 1/2, but only because it offered low-cost index funds
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Re: Any reasons not to rollover my 401k?

Post by WhiteMaxima »

You can rollover your previous 401k into tIRA which will have more investment options. Typically 401k option is conservative like SPY500 Russel2000 and Int'l Index. In tIRA, you can invest more agressive in such as Nvedia, Tesla etc.
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berg
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Re: Any reasons not to rollover my 401k?

Post by berg »

Thanks for all the great responses!

We do the backdoor roth annually, so have avoided rolling over to an IRA to avoid any issues there.

Sounds like the most important next step is to determine the admin fees on my plan. I checked the SPD and didn't see anything jump out. What is the easiest way to determine? Thanks!!
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Re: Any reasons not to rollover my 401k?

Post by retired@50 »

berg wrote: Mon Feb 12, 2024 12:58 pm
Sounds like the most important next step is to determine the admin fees on my plan. I checked the SPD and didn't see anything jump out. What is the easiest way to determine? Thanks!!
Fees almost never "jump out".

Read the footnotes, and the last 5 pages of the SPD. Fees are generally buried in fine print toward the end of the document.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Raspberry-503
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Re: Any reasons not to rollover my 401k?

Post by Raspberry-503 »

Some fees are flat fees and some are commensurate to how much you have in the account, and some fees are paid by your employer, and others are not, which can be even more confusing.
Your HR department should be able to help you, although I would always check back with the plan document.

Also sometime when you leave the companies some fees that were paid by the employer may revert to you.

I'd say the default is to roll into an IRA with a Fidelity/Vanguard/Schwab as it's the most flexible (and you can roll future 401(k) into that same account), but still be aware of the few reasons why the default is not always best. I mentioned the rule of 55 above as an example.

I think it was mentioned already but another reason to hold onto a 401(k) is that it may be better protected from lawsuits than your IRA (and it's state-specific). I think the IRA protection from bankruptcy was improved in 2005 so it may no longer matter, I'm not well versed in bankruptcy matters...
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Re: Any reasons not to rollover my 401k?

Post by ruralavalon »

berg wrote: Mon Feb 12, 2024 12:58 pm Thanks for all the great responses!

We do the backdoor roth annually, so have avoided rolling over to an IRA to avoid any issues there.

Sounds like the most important next step is to determine the admin fees on my plan. I checked the SPD and didn't see anything jump out. What is the easiest way to determine? Thanks!!
You can ask HR at your employer or ask the plan administrator.
Finding 401(k) Fees wrote:Now, 401(k) fees must be disclosed in an easy-to-understand format. Participants will clearly see how much they pay, including:

Administrative expenses
Transaction charges
Asset based fees (deducted from investments)
Other services
Where can you find this information? If you participate in a 401(k) plan, you should receive this information before (or at the same time as) you enroll in the plan and choose your investments. After that, 401(k) fees should be disclosed annually. Ask your employer for this information if you don't receive it.
Finding 401(k) Fees

U.S. Department of Labor, pdf, A Look at 401(k) Plan Fees
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Topic Author
berg
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Re: Any reasons not to rollover my 401k?

Post by berg »

Thanks! I found a 10 page fee disclosure document.

As far as I can tell (and asked chathpt to give its a read as well) the only fee is a $49 annual participant admin fee covered by my employer (though they have the right to shift to me). Nothing is percent based. There are a few other fees for things like check writing. But I don’t see anything else. Do you think I’m missing something? This is a plan for a large public company so I would expect a decent plan but you all have me wondering! I thought it would be a simple yes to rollover given the decent investment options.
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Re: Any reasons not to rollover my 401k?

Post by learning30 »

berg wrote: Mon Feb 12, 2024 8:43 pm Thanks! I found a 10 page fee disclosure document.

As far as I can tell (and asked chathpt to give its a read as well) the only fee is a $49 annual participant admin fee covered by my employer (though they have the right to shift to me). Nothing is percent based. There are a few other fees for things like check writing. But I don’t see anything else. Do you think I’m missing something? This is a plan for a large public company so I would expect a decent plan but you all have me wondering! I thought it would be a simple yes to rollover given the decent investment options.
I would say it's a simple yes.
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Re: Any reasons not to rollover my 401k?

Post by Jeepergeo »

berg wrote: Sun Feb 11, 2024 8:10 am I just started a new job and am considering rolling over two old 401ks. When I started my last job I did not rollover from two jobs ago because the investment options were limited. So I now have two old Fidleity 401ks (one with $300k, one with $200k) with more limited options than my current employer.

My new employer is with Merrill Lynch and has the following options which looks great:

FXAIX - Fidelity 500
FSMAX- Fidelity Extended Market
FTIHX - Fidelity Total International
FXNAX - Fidelity US Bond

Seems like I can make a simple three fund low cost index portfolio all in here. Any reason not to? This is my first experience with Merrill Lynch. Any questions I should be asking to be sure with the new plan.
After checking the anti-alienation protections in your state, perhaps consider rolling your old 401ks into a rollover IRA at a brokerage.

Having your funds at a brokerage will save you the fees often associated with a 401k plan.

The company where I work ultiizes ML to administer the 401k plan. While the plan has a few fairly low cost mutual funds, ML's administrative and advisory fees are ridiculous, and quite frankly, most staff at my firm would never take any advice from the ML advisor because he is a dishonest flake, we still must pay the fees. THE Admin+Advisory+Fund Fees add up making it an expensive place to keep money. Further, the ML rep goes to extreme levels to not discuss total fees.

I have about 3.5X my 401k balance in ETrade yet my total costs in ETrade are substantially less than the costs associated with the ML 401k where the balance is much less.

Going with a brokerage will also give you broader access to funds and ETFs than you'll likely find in the 401k.
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Re: Any reasons not to rollover my 401k?

Post by Rd123123 »

I work at a megacorp, and have been pleasantly surprised to find our plan administrator aggressively negotiates for lower mutual fund expense ratios in our 401K plan every year. The index mutual funds available to me inside my 401k plan have lower fees than their retail equivalents.

Hence, I rolled an old IRA into my 401K.

The possibility of withdrawal for no penalty at 55 is also intriguing to me.
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Re: Any reasons not to rollover my 401k?

Post by TheHiker »

Sounds like "yes to rollover" to me.
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Re: Any reasons not to rollover my 401k?

Post by Birdman67 »

I've found many 401K plans riddled with quarterly 'Record keeping fees' along with limited/fairly expensive options. Some people benefit from the relative safe harbor of limited investment options within a 401K and/or maybe will need a future loan or withdrawal (rule of 55, etc) from the current 401K plan. If you're a young gambler by nature then keep yourself within the confines of a 401K plan until your love of speculation diminishes or you know you can keep it in check. IRA's can be the wild west for some, especially if merging in a bunch of old 401K's into a large lump sum with endless investment options compounded with a potential lack of experience in managing as to what may be viewed as a large sum of money.

Just my .2cents.
Last edited by Birdman67 on Tue Feb 13, 2024 6:33 am, edited 2 times in total.
Topic Author
berg
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Re: Any reasons not to rollover my 401k?

Post by berg »

Birdman67 wrote: Tue Feb 13, 2024 6:25 am I've found many 401K plans riddled with quarterly 'Record keeping fees' along with limited/fairly expensive options. Some people benefit from the relative safe harbor of limited investment options within a 401K and/or maybe will need a future loan or withdrawal (rule of 55, etc) from the current 401K plan. If you're a young gambler by nature then keep yourself within the confines of a 401K plan until your love of speculation diminishes or you know you can keep it in check. IRA's can be the wild west for some, especially if merging in a bunch of old 401K's into a large lump sum with endless investment options compounded with a potential lack of experience in managing as to what may be viewed as a large sum of money.

Just my .2cents.
I’m comfortable managing myself. We have about $600k in taxable.

I’m 40 and hope for early retirement, so the age 55 aspect sounds nice, but not crucial.

Mostly I just do the low cost index funds which frankly is the best offering I’ve had in any 401k and thought good opportunity to rollover into one account and have less to manage.

Also as a bonus, I think I’d be eligible for the Bank of America rewards card.
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Re: Any reasons not to rollover my 401k?

Post by ruralavalon »

berg wrote: Mon Feb 12, 2024 8:43 pm Thanks! I found a 10 page fee disclosure document.

As far as I can tell (and asked chathpt to give its a read as well) the only fee is a $49 annual participant admin fee covered by my employer (though they have the right to shift to me). Nothing is percent based. There are a few other fees for things like check writing. But I don’t see anything else. Do you think I’m missing something? This is a plan for a large public company so I would expect a decent plan but you all have me wondering! I thought it would be a simple yes to rollover given the decent investment options.
Yes, rollover into the new employer's 401k plan.
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Re: Any reasons not to rollover my 401k?

Post by Dottie57 »

yules wrote: Sun Feb 11, 2024 10:53 am
260chrisb wrote: Sun Feb 11, 2024 10:25 am
berg wrote: Sun Feb 11, 2024 8:10 am I just started a new job and am considering rolling over two old 401ks. When I started my last job I did not rollover from two jobs ago because the investment options were limited. So I now have two old Fidleity 401ks (one with $300k, one with $200k) with more limited options than my current employer.

My new employer is with Merrill Lynch and has the following options which looks great:

FXAIX - Fidelity 500
FSMAX- Fidelity Extended Market
FTIHX - Fidelity Total International
FXNAX - Fidelity US Bond

Seems like I can make a simple three fund low cost index portfolio all in here. Any reason not to? This is my first experience with Merrill Lynch. Any questions I should be asking to be sure with the new plan.
Why would you not roll them into a self directed IRA and not into the new plan?
Because 401ks have advantages, like loans and legal protections, that IRAs do not, that’s why.
I haven’t rolled my all of my 401k into IRAs because of ERISA protections.
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Re: Any reasons not to rollover my 401k?

Post by FulanoG »

Sounds as if many people out there have 401K plans with low fees.....

I currently work at a small business (~40 employees) where we had been using "Company A" for our 401K plan. They charged 0.1131% PER QUARTER Admin Fee + $18 / Qtr fixed fee. On a $500K portfolio this equates to $2,334 per year!

I personally thought that this was very high.

We hired a new CFO, who, unbeknownst to me, began searching for alternatives for 401K plan providers. He made a unanimous decision to switch to "Company B".

By the time I found out, it was too late. When I asked him what the admin fees were versus the prior provider, he said he "didn't even know" but he advocated for the move because the provide better service and overall holistic financial planning and advice. I have since found out that Company B is charging us 0.16% PER QUARTER which is much higher and equates to ~$3,200 per year per $500K portfolio.

Both plans had about the same amount of fund options including low cost target date funds

This is where my opinion comes from to roll over your old 401Ks as soon as you have the chance, but I guess it depends a lot on your fee situation
Last edited by FulanoG on Tue Feb 13, 2024 2:32 pm, edited 3 times in total.
I'm 50, married with two kids (8 & 10). Been saving 20-30% of salary my whole life. $2M in the market for retirement, $200K total in 529s. Hoping to retire by ~2030.
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Re: Any reasons not to rollover my 401k?

Post by vgc303 »

I'm in a similar situation. I have two previous 401k accounts with former companies. The one at Vanguard with $70k balance has a relatively low, 0.07% per year administrative fee that gets charged to it. My account at Fidelity with an $80k balance get's charged a 0.21% annual fee.

My new employer's (small company, less than 40 people) 401k provider charges a whopping 0.75% on an annual basis for "investment advisor, custodial, and recordkeeping services".

The no brainer move for me would be to roll my accounts in to a tIRA and not my new company 401k right?
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Re: Any reasons not to rollover my 401k?

Post by backpacker61 »

I have 37 years worth of retirement plan contributions, plus a small pension lump sum, in my current employer's 401(K) plan, which allows me to make "Backdoor Roth" IRA contributions each year (unencumbered from the "pro rata" rules, since I have no other assets in pre-tax IRA's). I rolled assets from my earlier employer-sponsored plans into my current employer's plan.

My employer covers the plan record-keeping costs of the employer-sponsored plan, and the plan contains a few very low cost Blackrock Collective Trust Funds, which are lower in cost than comparable securities that would be available to me as solo retail investor.

The asset protection benefits of the 401(K) plan under ERISA are also important to me.
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Dovahkiin
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Re: Any reasons not to rollover my 401k?

Post by Dovahkiin »

What about rolling over to a solo 401k plan? It's pretty easy to get $100 in bonafide self employment income and open a pre-tax plan with Fidelity. Still can do loans (to the extent you can repay with said SE income.) Still accepted in employer plans. Can keep ERISA protections if you never deposit with SE income, and if you do deposit with SE income you can still roll over to an employer plan.

The only downsides I see with it is keeping up with 401k adoption agreements every 6-7 years and 5500ez filings if assets ever end over 250k in any one year.
yules
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Re: Any reasons not to rollover my 401k?

Post by yules »

Dottie57 wrote: Tue Feb 13, 2024 9:57 am
yules wrote: Sun Feb 11, 2024 10:53 am
260chrisb wrote: Sun Feb 11, 2024 10:25 am
berg wrote: Sun Feb 11, 2024 8:10 am I just started a new job and am considering rolling over two old 401ks. When I started my last job I did not rollover from two jobs ago because the investment options were limited. So I now have two old Fidleity 401ks (one with $300k, one with $200k) with more limited options than my current employer.

My new employer is with Merrill Lynch and has the following options which looks great:

FXAIX - Fidelity 500
FSMAX- Fidelity Extended Market
FTIHX - Fidelity Total International
FXNAX - Fidelity US Bond

Seems like I can make a simple three fund low cost index portfolio all in here. Any reason not to? This is my first experience with Merrill Lynch. Any questions I should be asking to be sure with the new plan.
Why would you not roll them into a self directed IRA and not into the new plan?
Because 401ks have advantages, like loans and legal protections, that IRAs do not, that’s why.
I haven’t rolled my all of my 401k into IRAs because of ERISA protections.
Yep, exactly my point. This works for some people, whereas rolling over might make sense for others. But people just need to be aware of the risks/rewards of such a move!
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