Rolling over old 401k

[glitzy07]

Hi!

I took a new job a few years back and at the time I left my 401k invested with the plan at my old company. I've checked on it a few times since then, but most often my investments there were performing at a better rate than the investments at my new job, so I continued to leave it there.

I checked it again today and the one-year returns are about the same between both companies, so I'm considering rolling it over for ease of management. When I began to look into doing so, Fidelity (where my current employer's program lives), gives me an option to roll into my current company plan or to roll into an IRA.

Can anyone tell me the benefits of one over the other? Are there any other things I should consider before initiating a rollover? I'm going to look into doing the same for my husband, as he just switched jobs and again, I think it will be easier to manage if it's all in once place.

TIA!

[ohgillian]

For me, the con of rolling into your new plan is that employer plans (this is only my experience) have fewer investment options and higher fees than my IRA does. Once it's in your new employer's plan, you basically have to leave it there til you leave employment. I like the investment options of my IRA more than I like those of my employer.

When we've left jobs, I've rolled into our Vanguard IRAs for, as you said, ease of having more in one place.

[Covergirl82]

DH changed employers in May 2019 and had a Fidelity 401k account with the previous employer. Apparently it was super easy to roll it into an IRA through Fidelity, and he had a lot more investment options. I'm changing employers next month and will be looking to move my retirement from my current employer to an IRA. I haven't decided if I'll move mine to a Fidelity IRA so that our IRAs are with the same company, or if I'll move it to another company.

[farmvillelover]

It would depend on how good your current 401k plan is, and whether contributing to a Roth IRA is important to you, and your current income level.

If you roll your old 401k into an IRA and your current income prevents you from contributing to a Roth IRA, you've made doing a backdoor Roth IRA a little hard bc now you'd have to pay some income taxes on existing IRA money before doing any backdoor Roths. This might be fine for you if your current 401k offerings aren't very good. If you roll your old 401k into your current 401k, then if you don't have other existing IRAs sitting there, you are open to doing the backdoor Roth IRA with no income tax consequences/gain on the conversion.

I wouldn't rush into rolling your 401k into an IRA rollover until you completely understand the pro rata rules of Roth conversions and backdoor Roths.

[Susie]

I had an old SIMPLE IRA from before my firm offered a 401k, but it was basically the same thing.  I could either leave it where it was, roll it over to the new 401k, or roll it over into an IRA.

I eventually did a rollover IRA at Vanguard, where I also have a Roth and a previous traditional IRA.  My hesitation was essentially what farmvillelover talked about, I am not eligible to contribute to my Roth anymore, and doing this makes it harder to cost effectively do backdoor contributions.  But ultimately I liked having more control and options that I would have within my 401k.

[glitzy07]

Jan 22, 2020 14:21:03 GMT -5 farmvillelover said:

It would depend on how good your current 401k plan is, and whether contributing to a Roth IRA is important to you, and your current income level.

If you roll your old 401k into an IRA and your current income prevents you from contributing to a Roth IRA, you've made doing a backdoor Roth IRA a little hard bc now you'd have to pay some income taxes on existing IRA money before doing any backdoor Roths. This might be fine for you if your current 401k offerings aren't very good. If you roll your old 401k into your current 401k, then if you don't have other existing IRAs sitting there, you are open to doing the backdoor Roth IRA with no income tax consequences/gain on the conversion.

I wouldn't rush into rolling your 401k into an IRA rollover until you completely understand the pro rata rules of Roth conversions and backdoor Roths.

As a follow up to this response, the 401k that I would be rolling over is a mix of a traditional 401k as well as a Roth 401k. If I were to roll it over, what would happen to that Roth portion? Would that roll into a Roth IRA?

My investment knowledge is very minimal, so I truly don't even know what you mean about backdoor Roth IRA contributions and would have to read more to understand that. At this point I'm just investing 12% of my income (half to pre-tax, half to post-tax), getting a 6% match, as well as a separate 6% match going to a pension. I do not make enough that I'm ineligible to contribute to a Roth, but I'm not currently doing anything separately aside from the post-tax portion of my 401k.

[farmvillelover]

Jan 22, 2020 16:02:35 GMT -5 glitzy07 said:

Jan 22, 2020 14:21:03 GMT -5 farmvillelover said:

It would depend on how good your current 401k plan is, and whether contributing to a Roth IRA is important to you, and your current income level.

If you roll your old 401k into an IRA and your current income prevents you from contributing to a Roth IRA, you've made doing a backdoor Roth IRA a little hard bc now you'd have to pay some income taxes on existing IRA money before doing any backdoor Roths. This might be fine for you if your current 401k offerings aren't very good. If you roll your old 401k into your current 401k, then if you don't have other existing IRAs sitting there, you are open to doing the backdoor Roth IRA with no income tax consequences/gain on the conversion.

I wouldn't rush into rolling your 401k into an IRA rollover until you completely understand the pro rata rules of Roth conversions and backdoor Roths.

As a follow up to this response, the 401k that I would be rolling over is a mix of a traditional 401k as well as a Roth 401k. If I were to roll it over, what would happen to that Roth portion? Would that roll into a Roth IRA?

My investment knowledge is very minimal, so I truly don't even know what you mean about backdoor Roth IRA contributions and would have to read more to understand that. At this point I'm just investing 12% of my income (half to pre-tax, half to post-tax), getting a 6% match, as well as a separate 6% match going to a pension. I do not make enough that I'm ineligible to contribute to a Roth, but I'm not currently doing anything separately aside from the post-tax portion of my 401k.

Here’s a good link on the backdoor
www.google.com/amp/s/blog.foxwealthmgmt.com/2017/07/13/the-pro-rata-rule-a-backdoor-roth-land-mine/amp/