Dumb question re: old 401ks

[gretchenindisguise]

I'm trying to learn more about finances and what to do with various accounts - this is an area where we have kind of just hobbled along out of ignorance.

We have old 401ks for employers we are no longer with. It seems we can keep the accounts there untouched, or we can open a Rollover IRA. 

Which is better and why? Does it really not matter as long as we can keep track of things? Or is there something else available?

[RockNVoll]

Roll them all into a rollover IRA.

1. You have more investment options in a rollover IRA account (essentially all possible publicly-traded vehicles)
2. Keeps the accounts squarely in your control. You never know what might happen with those former companies. Do they even know how to get hold of you to inform you of plan changes, expenses, etc.?

3. Tidies things up so everything is in one account rather than spread over multiple former employer plans.

The Vanguards and Fidelitys of the world will gladly hold your hand to help you set up the rollover IRA.  Just make sure of two things:

1. Open the r/o IRA account first, then have the 401(k) distributions sent directly to the account.  DO NOT have a distribution made to you personally or you will pay hefty penalties on it.

2. Don't forget to actually pick what investments you want the money to go into, whether target retirement funds, index funds, stocks, bonds, etc.

[flygirl]

I chose to roll my 401k from my former employer into my current employer 401k because it’s with Vanguard and the fees are decent. I rolled previous employers not my IRA because as the other posted stated, I have way more options than I did with the next employer plan.

[sadlebred]

Definitely roll it over into an IRA with Fidelity or Vanguard. They are the two lowest cost providers. Alternatively if the old 401K is with one of them and offers low cost choices within the plan you could leave it where it is.

[puppylove64]

Rockvroll advice was on point, the only except is….. if you plan to do any back door Roth’s roll the old 401ks into your current 401k because you don’t want pretax money in your IRA for back door Roth calculations. If you have no idea what I am talking about, then don’t worry, it probably doesn’t apply to you

[gretchenindisguise]

Jan 13, 2024 20:02:30 GMT -5 puppylove64 said:

Rockvroll advice was on point, the only except is….. if you plan to do any back door Roth’s roll the old 401ks into your current 401k because you don’t want pretax money in your IRA for back door Roth calculations. If you have no idea what I am talking about, then don’t worry, it probably doesn’t apply to you

I tried to roll the old 401k into the new 401k and Fidelity wouldn’t let me. It seemed like opening a rollover ira was the only option. Do you know why you can do it sometimes and not others?

[puppylove64]

Jan 14, 2024 10:28:29 GMT -5 gretchenindisguise said:

Jan 13, 2024 20:02:30 GMT -5 puppylove64 said:

Rockvroll advice was on point, the only except is….. if you plan to do any back door Roth’s roll the old 401ks into your current 401k because you don’t want pretax money in your IRA for back door Roth calculations. If you have no idea what I am talking about, then don’t worry, it probably doesn’t apply to you

I tried to roll the old 401k into the new 401k and Fidelity wouldn’t let me. It seemed like opening a rollover ira was the only option. Do you know why you can do it sometimes and not others?

Some employer plans do not allow roll ins. It might be set up in their rules that way.

[bee20]

Rolling into an IRA is the conventional wisdom. As someone mentioned above, it's not great if you plan to do backdoor roths. Another consideration if you are thinking you'll retire earlish is if you retire from a company in the year you turn 55 or later, you can withdraw penalty free from that company's 401k. Other money you still have to wait until you're 59.5.

Finally, I'm just sort of paranoid, and my old employer has a particularly good 401k, so I left the money there. In case my account ever gets hacked, or my brokerage goes under, or something....I still have a nest egg I can eek out a living on.

[imojoebunny]

My bigger 401Ks were with Fidelity and Vanguard, so I left them. The fees are very low and I am happy with the level of service I receive, and I like having multiple accounts with different firms. If you have 401K's from previous employers with more expensive brokerages, by all means call Vanguard, and ask them to help you roll it. It is easy and I have done it with some previous employers. Just do not have them close the account and send it to you, and then move it. That is a taxable thing. The new brokerage will take care of moving it correctly. We retired at 48 and 55. I have not heard about what Bee20 speaks of, but that might be a reason not to roll, if you are on the early retirement track.

[midwestmama]

It's easier to keep track of for everyone (you, former employer, plan administrator) to roll it into an IRA, and as others have said, you have more options.. It's possible there might be a different fee structure for former employees, but that is probably employer-dependent. (I believe my first employer implemented higher fees for former employees, but not sure what my last employer or current employer do.)

[mich1]

401ks are judgement proof, IRAs are not. This extra layer of protection might be important to you.

[RockNVoll]

Jan 16, 2024 15:02:08 GMT -5 mich1 said:

401ks are judgement proof, IRAs are not. This extra layer of protection might be important to you.

What does "judgement proof" mean?

[mlkgls]

Jan 16, 2024 16:17:31 GMT -5 RockNVoll said:

Jan 16, 2024 15:02:08 GMT -5 mich1 said:

401ks are judgement proof, IRAs are not. This extra layer of protection might be important to you.

What does "judgement proof" mean?

I had to google the ERISA acronym (Employee Retirement Income Security Act) because I couldn’t remember the exact wording, but the assets are protected from creditors or judgements. I think most employer 401ks are covered by ERISA, but that’s about the extent of my knowledge.