Rolling over retirement accounts??

[wanderingback]

Since people said they want more MM talk, I've been meaning to ask this....

I've had 2 jobs since med school, so 2 different 403b plans. I just started a 3rd job.
Not a TON of money in the 1st two plans, I think maybe a few thousand (definitely less than $10,000).
So should I put all the money in 1 account? I think it doesn't really matter as far as money goes from what I remember, but I guess I'm more worried about losing track of the money.

Since most people don't stay in the same job forever these days, what do you all do?
Right now the money is with Vanguard and Nationwide (I don't know what plan my new job will use, I have HR meeting in the next 2 weeks so I'll find out then.. 

[jinkies]

I don't know if this is the best answer, but created my own rollover account at Vanguard, and moved all my old employer accounts into it. I kept those funds separate from my current employer fund, but at least they were all in the same account.

My H actually just rolled all of his prior employer funds into his retirement account with his new employer. In his case, it had been a lot of years since he had worked at one of the places, and since he had accessed the account. This caused some issues. In retrospect, it would have probably been better if he had moved the money into an account that he controlled sooner. They had to contact his old employers for permission and to prove starting/ending dates of employment. I honestly don't know how that would have worked if the company had gone out of business in the intervening years.

[Pom]

Agree with jinkies, we moved all rollovers to Vanguard. We have never felt like we wanted money rolled to a current employer from a previous one, but rather always to independent brokerage like V or Fidelity.

[wanderingback]

Aug 11, 2020 13:04:52 GMT -5 Pom said:

Agree with jinkies , we moved all rollovers to Vanguard. We have never felt like we wanted money rolled to a current employer from a previous one, but rather always to independent brokerage like V or Fidelity.

Yes, thank you I think this is what I meant.

Should I pick 1 company like Vanguard (are there others I should consider?) and as I move jobs keep rolling the money in to the same Vanguard account? So it seems to be the answer is yes. I guess it would be easiest since I already have the money from my first job in Vanguard.

As far as shopping around for other options outside of Vanguard, does anyone know if there are specific things that are better at other places?

[Pom]

H swears by Vanguard. I prefer Fidelity. Fund choices are similar, cost similar, on-line Those are probably the top choices. I thinks it is a matter of which site's technology you prefer.

www.nerdwallet.com/blog/investing/vanguard-vs-fidelity/

Here's a more recent evaluation:

www.nerdwallet.com/blog/investing/choosing-the-best-online-broker/

[RockNVoll]

You have more control and more investment options by rolling into a rollover IRA compared to rolling into a new employer's 401(k)/403(b) plan. I think of Vanguard and Fidelity as the gold standards for most retirement savers. I've historically had a slight preference for Vanguard because I found their website to be better and easier to use, and their funds had some of the lowest expense ratios in the industry. However, Fidelity was one of the first to introduce a bunch of zero-fee funds in the last few years and I haven't kept up with whether Vanguard matched this offering.

[sadlebred]

wanderingback I think it depends. I have an old 401K with Fidelity. It's very low cost, so I plan to leave it there for the long haul. If I left this current job (which I have no plans to do for a long time), I'd leave it with the low cost provider my current company uses or possibly move it to Fidelity.

[awkwardpenguin]

Aug 11, 2020 13:52:55 GMT -5 RockNVoll said:

You have more control and more investment options by rolling into a rollover IRA compared to rolling into a new employer's 401(k)/403(b) plan. I think of Vanguard and Fidelity as the gold standards for most retirement savers. I've historically had a slight preference for Vanguard because I found their website to be better and easier to use, and their funds had some of the lowest expense ratios in the industry. However, Fidelity was one of the first to introduce a bunch of zero-fee funds in the last few years and I haven't kept up with whether Vanguard matched this offering.

This is generally true.  The exception is if you expect to do a backdoor Roth IRA - then you are better off rolling it into your new employer's 401(k)/403(b) because then the funds won't trigger the pro-rata rule on Roth conversions.  It makes the backdoor Roth much more straightforward.  This assumes you don't already have substantial pre-tax money in a Traditional IRA that would make Roth conversion tricky.

If you don't know what I'm taking about just ignore this advice, but I'm guessing as a physician you'll be phased out of the Roth pretty soon if you aren't already.

[RockNVoll]

Great point re: backdoor Roths, awkwardpenguin. I tend to forget about them since they don't make sense for us personally.

[wanderingback]

Aug 11, 2020 14:21:46 GMT -5 awkwardpenguin said:

Aug 11, 2020 13:52:55 GMT -5 RockNVoll said:

You have more control and more investment options by rolling into a rollover IRA compared to rolling into a new employer's 401(k)/403(b) plan. I think of Vanguard and Fidelity as the gold standards for most retirement savers. I've historically had a slight preference for Vanguard because I found their website to be better and easier to use, and their funds had some of the lowest expense ratios in the industry. However, Fidelity was one of the first to introduce a bunch of zero-fee funds in the last few years and I haven't kept up with whether Vanguard matched this offering.

This is generally true.  The exception is if you expect to do a backdoor Roth IRA - then you are better off rolling it into your new employer's 401(k)/403(b) because then the funds won't trigger the pro-rata rule on Roth conversions.  It makes the backdoor Roth much more straightforward.  This assumes you don't already have substantial pre-tax money in a Traditional IRA that would make Roth conversion tricky.

If you don't know what I'm taking about just ignore this advice, but I'm guessing as a physician you'll be phased out of the Roth pretty soon if you aren't already.

Even though I've been on MM for over 14 years what you said above is foreign to me lol.
I'm too brain dead to do the math right now, so not sure if I'll make 6 figures this year since I just started my new job. But next year I'll be well in to 6 figures. So I guess that makes a difference? Ugh.

This next year I also want to pay off some debt, so am just going to do the standard 3% so I get my organizations match. Then, after the 1 year of debt pay off I'll significantly increase my retirement contributions.
The past 2 jobs I've had have been a 403b and I'm sure that'll continue to be the case for awhile.

So once I get in to "full" retirement pay mode, should I do a ira and put the money from my old 403bs in there? And it needs to be a traditional ira account and I won't qualify for a roth due my income? Is that what you're saying? 

Tagging RockNVoll  

[sandandsea]

I like having it all in one place so it’s easier to manage and keep track of. I try to keep things simple and consolidated so it’s faster to check for fraud/ID theft/passwords/etc. If you don’t have great options in one place then there is support for keeping them separate for more diversity.

[farmvillelover]

wanderingback Since you're saying the amount is pretty small, and if you expect your income to go up in upcoming years, I'd roll it over into an IRA and then do Roth conversions. I could be totally off but I thought you mentioned that you were going to be getting a raise soon? I feel like I read that from you somewhere. But you'd ideally do a Roth conversion in years where your income isn't that high and/or you expect your income to go up substantially in the future. If you do this with the entire IRA and leave nothing in a traditional/rollover IRA, you'll be clear to do backdoor Roths in the future.

FWIW, I prefer Fidelity because of the ease of use on their website. I use Vanguard for my parents SO IME between the two I'd choose Fidelity. You can't go wrong either way though.

[RockNVoll]

Aug 11, 2020 16:41:37 GMT -5 wanderingback said:

This next year I also want to pay off some debt, so am just going to do the standard 3% so I get my organizations match. Then, after the 1 year of debt pay off I'll significantly increase my retirement contributions.
The past 2 jobs I've had have been a 403b and I'm sure that'll continue to be the case for awhile.

So once I get in to "full" retirement pay mode, should I do a ira and put the money from my old 403bs in there? And it needs to be a traditional ira account and I won't qualify for a roth due my income? Is that what you're saying? 

Tagging RockNVoll  

Bunch of questions before I attempt to provide non-professional advice

1. Do you have any IRA accounts at the moment?  If so, are they traditional or Roth?

2. What's the interest rate on the debt?  If it's low (say 5% or less), I'd be tempted to continue paying it off slowly in favor of putting more into retirement.  Long-term investment gains average 6-8% and time is the single biggest determinant of success in a long-term investment plan.

3. Have you checked to see if there's a Roth 403(b) option in your employer's plan?

And congrats on the new job, by the way!  New hospital, or new role, or maybe both?

[wanderingback]

Aug 11, 2020 23:29:43 GMT -5 RockNVoll said:

Aug 11, 2020 16:41:37 GMT -5 wanderingback said:

This next year I also want to pay off some debt, so am just going to do the standard 3% so I get my organizations match. Then, after the 1 year of debt pay off I'll significantly increase my retirement contributions.
The past 2 jobs I've had have been a 403b and I'm sure that'll continue to be the case for awhile.

So once I get in to "full" retirement pay mode, should I do a ira and put the money from my old 403bs in there? And it needs to be a traditional ira account and I won't qualify for a roth due my income? Is that what you're saying? 

Tagging RockNVoll  

Bunch of questions before I attempt to provide non-professional advice

1. Do you have any IRA accounts at the moment?  If so, are they traditional or Roth?

2. What's the interest rate on the debt?  If it's low (say 5% or less), I'd be tempted to continue paying it off slowly in favor of putting more into retirement.  Long-term investment gains average 6-8% and time is the single biggest determinant of success in a long-term investment plan.

3. Have you checked to see if there's a Roth 403(b) option in your employer's plan?

And congrats on the new job, by the way!  New hospital, or new role, or maybe both?

1. No no IRA
2. Nope, no debt below 5%. I think my 2 credit cards are at 8 and 11%. SLs are at 6.5% and they're not going to be gone anytime soon.
3. Hmm is there a difference between a 403b and a Roth 403b? Or those are the same? (ugh clueless here). I know there's a 403b and you everyone is automatically enrolled in 3% and that's what gets you the matching, so that's what I plan to start with. My HR meeting isn't until next week.

And thanks for the congrats! It's a completely new position/role and includes leadership so I'm excited  

[ohgillian]

Aug 12, 2020 7:45:23 GMT -5 wanderingback said:

1. No no IRA
2. Nope, no debt below 5%. I think my 2 credit cards are at 8 and 11%. SLs are at 6.5% and they're not going to be gone anytime soon.
3. Hmm is there a difference between a 403b and a Roth 403b? Or those are the same? (ugh clueless here). I know there's a 403b and you everyone is automatically enrolled in 3% and that's what gets you the matching, so that's what I plan to start with. My HR meeting isn't until next week.

And thanks for the congrats! It's a completely new position/role and includes leadership so I'm excited  

- A 403b is a pre-tax contribution; you'll pay tax when you make withdrawals in retirement.
- A Roth 403b (if this exists?) would be a post-tax contribution; you'd pay income taxes now on the money you put in and then when you withdraw in retirement, you wouldn't owe income taxes then.

[wildrice]

This is a dumb, obvious question, but are the 403b's both with different companies, and does your current company have yet a different provider?

I only ask because I'm on my 4th employer with TIAA. I think I had a choice between that and Fidelity at my current employer, but it was easy to just pick TIAA since everything else is there. They break each employer into its own section in my account, but it's just 1 login and it shows my overall combined balance. I also have a Roth IRA through them so everything is together. From last I spoke with an adviser there (probably 3 years ago), there was no reason to do anything further with combining them. I think TIAA is mostly education but perhaps other 403bs work similarly?

IIRC rolling over a 403b is different than rolling over a 401k. I am not totally sure how though, but some of the above advice about rolling over 401ks may not apply.

[RockNVoll]

Aug 12, 2020 7:45:23 GMT -5 wanderingback said:

Aug 11, 2020 23:29:43 GMT -5 RockNVoll said:

Bunch of questions before I attempt to provide non-professional advice

1. Do you have any IRA accounts at the moment?  If so, are they traditional or Roth?

2. What's the interest rate on the debt?  If it's low (say 5% or less), I'd be tempted to continue paying it off slowly in favor of putting more into retirement.  Long-term investment gains average 6-8% and time is the single biggest determinant of success in a long-term investment plan.

3. Have you checked to see if there's a Roth 403(b) option in your employer's plan?

And congrats on the new job, by the way!  New hospital, or new role, or maybe both?

1. No no IRA
2. Nope, no debt below 5%. I think my 2 credit cards are at 8 and 11%. SLs are at 6.5% and they're not going to be gone anytime soon.
3. Hmm is there a difference between a 403b and a Roth 403b? Or those are the same? (ugh clueless here). I know there's a 403b and you everyone is automatically enrolled in 3% and that's what gets you the matching, so that's what I plan to start with. My HR meeting isn't until next week.

And thanks for the congrats! It's a completely new position/role and includes leadership so I'm excited  

Sounds like a very exciting new opportunity, I'm thrilled for you!

So, Roth vs. traditional accounts--you can get much more complete explanations online about what they are and the plusses and minuses of each option but I'll throw out some main points.  Both IRAs and employer-sponsored retirement plans like 401(k)s and 403(b)s can come in Roth or traditional flavors.

• Roth contributions are made post-tax. So if you earn $100 that you want to put into a Roth account and let's say you're taxed 25%, you would end up investing $75.  But that Roth account is never taxed again--not the original $75 contribution nor any of the gains in the account.  Other benefits of the Roth are that you're not required to take minimum distributions (RMDs) once you hit retirement age (you might want to keep the money invested in the tax-advantaged account as long as you can), and you can take out contributions (not gains) at any time without penalty so those dollars could do double duty as an e-fund.  www.investopedia.com/articles/personal-finance/021015/how-much-are-taxes-ira-withdrawal.asp
  
  
• Traditional contributions go into the account tax-free up front, so you'd invest the full $100. Investments grow tax-free within the account, but at retirement when you take withdrawals you pay your then personal income tax rate on both the original contribution and the gains. It's interesting to me that you don't pay the lower capital gains tax rate on the investment growth, which makes the traditional account option less appealing than a regular old brokerage account in some ways.
  
  
• Picking between Roth and Traditional accounts often comes down to whether you want a tax break today or down the road, and whether you think you'll be in a lower tax bracket at retirement than you are today.  IMHO, Roths are great if you don't need the tax break today, aren't in a super high tax bracket, and/or think your current tax bracket is lower than what it will be in retirement.  The thing is, you have to be below certain income thresholds to qualify for a Roth IRA: www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020
  
  
• There are two ways around these Roth IRA income limits.  The first is the backdoor Roth referenced above.  Rather than try to explain it here, I'm going to suggest you Google for the details or this will be even more of a novel.  The short version is that more than a decade ago now they removed a previous restriction that barred people over a certain threshold from converting a traditional IRA to a Roth if they changed their minds about what type of IRA they wanted.  Without the restriction, people who don't qualify for a Roth IRA otherwise can now put money into a traditional IRA and immediately convert it to a Roth--big loophole, but the math gets complicated if you have money in an existing traditional IRA. 
  
  
• The second workaround is if your employer offers a Roth 401(k) or Roth 403(b). And the contribution limits are much higher on these employer-sponsored plans compared to an IRA.  Not all firms offer this but it's worth double checking if yours does.

Sorry this is so long, but I hope it helps.  Ask anymore questions you like; it's hard to cover everything (and it's late, LOL).  There are a lot of details worth knowing, but if your tax bracket is relatively low today compared to what it will likely be in the future, a Roth IRA and/or 403(b) probably makes a lot of sense.  Since the ~$10k sounds like it's currently in traditional 403(b)s, you'd have to roll those accounts to a traditional IRA and the convert that into a Roth IRA (and pay the income taxes).  I know it sounds complicated, but Vanguard and Fidelity can both hold your hand through the entire process I'm sure--they both have excellent customer service.  Apologies again if this is information overload!

[ellipses84]

I’ve rolled most of my former employer accounts to a Fidelity account not tied to an employer. I know for a couple that were under $10k, I either had to move them or pay extra fees to keep them where they were. There’s one I didn’t rollover that I need to track down because the former employer switched 401k companies.

[wanderingback]

Aug 12, 2020 9:09:11 GMT -5 wildrice said:

This is a dumb, obvious question, but are the 403b's both with different companies, and does your current company have yet a different provider?

I only ask because I'm on my 4th employer with TIAA. I think I had a choice between that and Fidelity at my current employer, but it was easy to just pick TIAA since everything else is there. They break each employer into its own section in my account, but it's just 1 login and it shows my overall combined balance. I also have a Roth IRA through them so everything is together. From last I spoke with an adviser there (probably 3 years ago), there was no reason to do anything further with combining them. I think TIAA is mostly education but perhaps other 403bs work similarly?

IIRC rolling over a 403b is different than rolling over a 401k. I am not totally sure how though, but some of the above advice about rolling over 401ks may not apply.

The first 2 organizations, yes different 403b companies. I haven't had my orientation yet for my new job to find out what this new org has theirs with. It certainly would be nice if they were all with the same company, hence me wondering how to get them all together so I don't lose track of things. 

[wanderingback]

RockNVoll, thank you so much! All of that is super helpful. I'll definitely be referencing all of this in the future.
I think maybe what I'll do is hold off on doing anything right now. Just do my 3% contribution with my new job so I can get the match, then in 1 year when I get more serious about retirement accounts can figure this out and hopefully get a financial advisor anyway.

[mich1]

You want to roll your accounts over into a company, and of the 2 you have listed I'd suggest Vanguard. It's pretty easy to roll it over into a traditional IRA. The only thing that you might want to consider is looking at converting it to a Roth. However, a lot of this depends upon what your current tax rate is and what you anticipate it being (yeah, crystal balls are a little cloudy these days).

Right now, tax rates are about as low as they are ever going to get. I do not anticipate them staying this rate for long (and neither does our accountant, which is why we are converting as much as we can up to a certain tax point) so you might want to convert as much as possible. Optimally, you want a mixture of taxed, untaxed and investment accounts.

[mich1]

Aug 12, 2020 9:09:11 GMT -5 wildrice said:

This is a dumb, obvious question, but are the 403b's both with different companies, and does your current company have yet a different provider?

I only ask because I'm on my 4th employer with TIAA. I think I had a choice between that and Fidelity at my current employer, but it was easy to just pick TIAA since everything else is there. They break each employer into its own section in my account, but it's just 1 login and it shows my overall combined balance. I also have a Roth IRA through them so everything is together. From last I spoke with an adviser there (probably 3 years ago), there was no reason to do anything further with combining them. I think TIAA is mostly education but perhaps other 403bs work similarly?

IIRC rolling over a 403b is different than rolling over a 401k. I am not totally sure how though, but some of the above advice about rolling over 401ks may not apply.

I have not rolled over 401ks, only 403bs, and it sounded like it's pretty much the same.  Maybe there is a difference on the investment company's end, but not really on the consumer.  The major difference is that 403bs do not have the same regulations on highly compensated employees.  

[Cappy]

One thing on the 403b rollovers is depending on your employer rules there might be a portion that's not allowed to move. I have this with both TIAA and with Fidelity because of the way it was set up with my employer. I have all of these accounts with tiny amounts "stuck". I couldn't tell you why bc I don't fully understand but I know they have to sit until I reach retirement age per the TIAA guy trying to get them to roll. I was able to consolidate most but still have 3 extra accounts sitting.

[fryjack2]

Thanks for asking this as I have been dragging my feet on doing the same with a Vanguard account with less than 10k in it.

And congrats on the new job wanderingback!

[wanderingback]

Just to update you all...

My new job also uses vanguard, so that makes things easy.
So I think I just need to figure out what to do with the small amount that's in the account with another company. I was only there for a year, so not much is in there.
I'm going to read through all the advice again when I'm ready to take next steps
Thanks!

[gt7301b]

I wanted to add that 403bs and 401ks aren't exactly the same thing. 403bs are typically administered by insurance companies and they may have surrender charges if you move the money ( I noticed . The Vanguard account probably doesn't have a surrender charge, but the other account may. I would look into your plan documents before you move the money.

investor.vanguard.com/403b-plans/low-cost
www.chicagotribune.com/business/success/tca-check-fees-on-your-403-b-retirement-plan-20161221-story.html
www.investor.gov/additional-resources/retirement-toolkit/employer-sponsored-plans/403b-and-457b-plans