Preparing to quit - 401k help

[riverwed070707]

We're prepping for a relocation. Wondering what, if anything, I need to do about my 401k and when. I'm not likely going to have a new employer right away. Can I just leave it as is until I get sorted out at a new job? And if so, once I get sorted at the new job, then what do I need to do? Can I combine them or will the accounts always be separate? I've had the job I'm in now since college and it was my first retirement account so I'm completely clueless. My account has been doing really great and I want to make sure I don't screw it up. Thanks!!

[disneysteve]

Typically, you can leave it where it is unless it is below a certain balance (usually $5,000 or less but it varies). Otherwise, you can roll it into an IRA. You may also be able to roll it into a new 401k with a different employer but an IRA is usually the better option due to investment options and lower costs.

[scfr]

Agree with Disneysteve that rolling over in to an IRA can be a terrific choice. When I left my former employer I happily moved my funds to a Rollover IRA at Vanguard. When I leave or retire from my current employer I'll do the same.

Whether to leave your money where it is or roll it over really depends on the balance, fees, and how happy you are with the fund choices.

If you are wondering how a rollover is handled, it is pretty easy. Contact the institution where you would like your money to go and they will handle it or walk you through it. I let Vanguard handle my rollover and it was easy.

[Retired To Win]

Yes, roll it over to an IRA. But make sure you ask for a DIRECT transfer, where the money does "directly" (hah, hah) from your 401k to the IRA. Avoid having the 401k people send YOU a check because that can lead to an income tax complication.

Good luck.

[corn18]

I was reading up on backdoor Roths and if you are doing that (or plan to do it in the future), you might not want to roll your 401k over into an IRA just yet. That could screw up the taxes on the backdoor Roth. A lot. If you aren't doing a backdoor Roth (or don't plan to do one), then disregard.

Tom

[riverwed070707]

Thanks. Is there a strong argument for choosing one company over another? I have DHs roth with Fidelity and like the idea of being able to manage them both in one place but I've also heard good things about Vanguard and it seems like a lot of people here use them.

Backdoor ROTH is a non-issue. I can only hope to make that much some day...

[Like2Plan]

Backdoor ROTH is a non-issue. I can only hope to make that much some day...

If it does come to pass that you make that much some day, you may want to preserve that option. If so, make sure you don't comingle your 401K rollover funds with your regular IRA. If you set it up correctly, you have to option of combining the 401K funds that you put into an IRA back into your next 401k (assuming the new plan allows it).

But, taking a step back. If your 401K is currently with a large stable company that has institutional rate fees (that are lower than Fidelity or Vanguard) and a good selection of investments, you might want to keep your 401K where it is for a while. (Sadly, that is the exception--but you never know. )

Here is an interesting article that hits a lot of the high points as to whether it is a good idea or not:
8 Points To Consider Before Rolling Over A 401(k) To An IRA

[disneysteve]

Is there a strong argument for choosing one company over another? I have DHs roth with Fidelity and like the idea of being able to manage them both in one place but I've also heard good things about Vanguard and it seems like a lot of people here use them.

I do not think there is a strong argument to be made for Vanguard vs. Fidelity. I agree that there is a convenience factor and maybe even a financial advantage to having it all in one place. For example, certain fees might get waived once your overall investment with them tops a certain amount, or you might become eligible for a preferred share class or personalized investment advice.

I'm with Vanguard. Can't really tell you why as it has been so long since I made that decision but Fidelity is perfectly fine too, especially since you already have an account with them.

[autoxer]

I do not think there is a strong argument to be made for Vanguard vs. Fidelity.

I think there is a strong argument and that Vanguard is clearly the best choice. The fundamental difference is that Vanguard is actually owned by the shareholders of its mutual funds, which is the real reason that the fees are so low. Fidelity has to answer to trustees and shareholders who want to see profit, so their fees are set by what the market will bear. They certainly offer some funds with similar expense ratios, but their motivations are very different and that makes one much more preferred for me.