retirement savings rollover?

[dutchgirl678]

PDQ will delete later.

Does anybody know anything about retirement savings? I have money in a 401A account from my previous employer through Fidelity. I left that job in 2014 so I don't contribute to it anymore but it is still growing. I was thinking about rolling it over to a Vanguard account (I have to set up a new one) because I heard that Vanguard is easier to use and may have lower fees than Fidelity.

Right now I have picked the Vanguard target 2050 fund (mixed funds 90% stock 10% bonds) even though my retirement is probably closer to 2040. I like to be a bit more aggressive now, does that make sense? Can I still do that when I roll it over?

Through my current employer I am contributing to a different retirement account (7% my pre-tax contribution, 3% employer). If I wanted to put more money away, should I increase my pre-tax contribution? Or should I contribute to the new Vanguard account?

[RockNVoll]

Yes, I would roll it into a rollover (r/o) IRA account. Both Fidelity and Vanguard are good choices, and Fidelity has been giving Vanguard a run for the lowest-fees title over the last few years. You really can't go wrong with either though.

I've done exactly what you describe in terms of going with a later target date fund in order to get a more aggressive portfolio. When you open the rollover IRA, you can essentially purchase any fund or security you like within the account. So, yes, you can purchase the Vanguard Target 2050 fund in the r/o account.

You can't contribute directly to the r/o account--it's strictly for funds being rolled over from other places. You could open an additional traditional or Roth IRA account (assuming you qualify for a Roth) at Vanguard or Fidelity and contribute directly to that and have all the same purchase options as in the r/o account.  The difference is that IRAs have a much lower contribution limit than 401 plans.  The benefit is that you can pick from far more investment options than the limited menu provided by typical employer plans.  Conventional wisdom says that if you don't have the funds to max both your employer plan and an IRA, contribute to your employer plan up to their match (don't lose out on free money!), then contribute to the IRA, then go back to the employer plan if you still have more to contribute.

[dragon's breath]

Do you think you could be at risk of earning too much to directly contribute to a Roth IRA?
Do you already have money in a traditional IRA?

If the answers are yes and no, then I would not roll it into an IRA, but leave it where it is or, if possible, roll it into your current work retirement account (if allowed and fees are lower).

I have to do backdoor Roth IRA contributions, and fortunately do not have any money in traditional IRA accounts. If I did, it would be much more complicated, and may not even be worth it due to pro-rata rules.

Personally, if the old retirement account has low fees, I'd just leave it where it is to grow and not worry about it. You can't contribute to it anymore, but that doesn't stop it from compounding.

As far as where to contribute, it really depends on your income and tax situation. I'm in a situation where my tax bracket is not likely to go down in retirement, so I do a mix of Roth and Traditional to reduce taxes now, but also have access to some Roth money in retirement since it will be tax-free at that point.

ETA: You aren't going to go wrong with Fidelity or Vanguard.  I have Vanguard for my IRA myself, but it was almost a coin toss between that and Fidelity when I opened.  Vanguard won because it is investor-owned, and I like that.

[dutchgirl678]

Thanks dragon's breath, RockNVoll.

I guess I should keep it where it is. I just wasn't sure if they wanted me to move the account since I haven't worked at that company for several years now. Good to hear Fidelity is as good or maybe even better than Vanguard.

My current job's retirement is through American Funds by Capitol Group. I was abroad for a few years so there is a gap of 3.5 years where I didn't contribute. As soon as allowed I am planning to increase my pretax withholdings by 5% so that I have a total of 15% instead of the current 10%. I have another small account with E*Trade, I think it is an IRA but I am not sure. It has money invested in the Fidelity Freedom 2040 fund but it is less than $10k. I haven't contributed any extra for a while, we are still under the income limit but barely. I don't like the E*Trade interface so I might roll this IRA over to Fidelity.

[RockNVoll]

I respectfully disagree with dragon's breath on the advice to leave your funds with your old employer. I prefer the greater control and efficiency of having my retirement accounts consolidated somewhere like Vanguard. When you're no longer employed by a company (or, in your case, perhaps it's the government or a non-profit), it can be tricky to stay informed of any changes to the plan, make sure your contact info is always up-to-date with them, etc. I'd also double check as to whether you're paying the 401(a) administrator extra fees now that you're no longer employed there. The only scenario I can think of where I'd keep the money with the old employer is if their plan somehow gives you access to great investment options you can't get elsewhere (unlikely).

Does your job offer a Roth 401(k)? That's the other option to get money into a Roth account if that's of interest to you and not worry about having to do backdoor conversions. Really depends on your best guess as to your current vs. future tax liability, as already mentioned above.

[sakoro]

Jun 14, 2021 21:10:39 GMT -5 dragon's breath said:

Personally, if the old retirement account has low fees, I'd just leave it where it is to grow and not worry about it. You can't contribute to it anymore, but that doesn't stop it from compounding.

I have an old 403b account from a former employer and was advised to leave it there. We had access to specific custom very low fee funds (some sort of deal between the very large employer and Vanguard). I haven’t contributed since 2015 but it’s growing nicely and I can shift the funds around within the account if I choose.

[ohgillian]

I personally prefer, like RockNVoll, having things consolidated in one place. I have moved mine to Vanguard when I have left prior employers. I think it's easier for me to manage, and also easier for my H in case I get hit by a bus. But simplicity in my finances is important to me.

[Poppy]

For convenience, I like the fact that my old 401k has been rolled over to Vanguard as an IRA, buuut, it does prevent me from doing a backdoor Roth so I now wish that I hadn't.

My second company's 401k (at Fidelity, actually) would have let me roll it in but I didn't figure out to ask until after I left and they only allow it for current employees. My current 401k has very high fees so I do not want to roll it in here.

[mich1]

Jun 15, 2021 7:57:59 GMT -5 sakoro said:

Jun 14, 2021 21:10:39 GMT -5 dragon's breath said:

Personally, if the old retirement account has low fees, I'd just leave it where it is to grow and not worry about it. You can't contribute to it anymore, but that doesn't stop it from compounding.

I have an old 403b account from a former employer and was advised to leave it there. We had access to specific custom very low fee funds (some sort of deal between the very large employer and Vanguard). I haven’t contributed since 2015 but it’s growing nicely and I can shift the funds around within the account if I choose.

I did this too.  The fees that my old employer negotiated are much better than those I would receive if I shifted the funds.  I also have incredible fund options, and they are at Fidelity.  I haven't contributed since 2012, and they are doing very well.  My employer and Fidelity have done an excellent job of appraising me of any changes. 

It does help that all of my retirement funds are only in 2 different companies.   

[ellipses84]

I have a rollover IRA with Fidelity and a 401k with Vanguard (current employer). They both have significant balances and I’ve debated moving them to the same place for simplicity but the fidelity account has always done well and I track in mint so I can see how they are doing without logging into each one.