What to do with 401K

[Fishindude77]

I retired at year end at age 58 and have about $1.2 mil sitting in the company 401K plan, fully vested, all mine. Since I'm no longer an employee I am not receiving any match, so wondering if I should just take this plan solo / personally and get it away from the company plan?

Wondering if anyone else has done this or has recommendations.

[disneysteve]

If you are happy with the investment choices, expenses, and performance, there is nothing wrong with leaving it where it is. Otherwise, roll it into an IRA where you'll have much more control over the funds.

[bjl584]

When my Mom retired, she did just that.
Got away from the company plan and rolled everything into an IRA.
It gave her much more flexibility and investment choices.

[Like2Plan]

I retired at year end at age 58 and have about $1.2 mil sitting in the company 401K plan, fully vested, all mine. Since I'm no longer an employee I am not receiving any match, so wondering if I should just take this plan solo / personally and get it away from the company plan?

Wondering if anyone else has done this or has recommendations.

I left my 401K alone as I don't plan to tap into it until RMD time and there are no fees and the ER is really low. Also, DH is still working so I do a spousal tIRA every year and then I do a Roth conversion. If I moved my 401k over to a rollover IRA it wouldn't be practical to do the Roth Conversions.

DH had a 401K from a previous employer that had low ERs, but then they recently added a fee each month based on the account value. So, DH did a rollover on that 401K.

Now, something else to consider is how you are planning to take distributions from your 401k? I noticed that DH's current 401k doesn't allow partial withdrawals after he retires. He either has to roll the whole thing over or set up an annuity (which I doubt we will want to do), so that is something to consider, too. (Your choice might already have been made for you depending on what the plan rules are.)

Edited to add: It is possible that the IRA doesn't have the same protections that your 401K has--so, it is a good idea to check your state specific rules before doing a rollover.

[LivingAlmostLarge]

Roll it if you are retired so you can start transferring money out every year and capturing the lower tax brackets before the RMDs hit.

Like2plan, when is your husband retiring? Would it make sense to fill the bracket your in assuming 25% now anyway? Or are you in a state with income taxes and will be moving to a state with no income taxes in retirement?

[Like2Plan]

Like2plan, when is your husband retiring? Would it make sense to fill the bracket your in assuming 25% now anyway? Or are you in a state with income taxes and will be moving to a state with no income taxes in retirement?

He is retiring “in a couple of years” (which he’s been saying for several years )
We pay state taxes and we expect to be in a lower bracket after DH retires (Although we’ll have to look at where we are with the tax reform this year). Our plan is to do some conversions on his rollover IRA before RMDs come into play.

As a general rule I believe taking distributions for retirement income are most likely easier from the IRA than the 401k (just from reading the 401k Plan documents from the plans we’ve been involved with). Conversions to ROTH are easily done from the tIRA as well. It’s almost as if the 401k Plan didn’t give much thought to taking the money out.

[Like2Plan]

Fishingdude,
Do you plan to do conversions to Roth prior to RMDs? I’m finding there are a lot of things to consider especially conversions after age 63.
You are in a sweet spot right now age wise.
And, speaking of age...there might be another complication if you do a roll over. You may be able to take penalty free distributions from your 401k (starting from age 55 at retirment), but if you roll over to the IRA you have to wait until 59.5.

So, a lot depends on what your plans are, how soon you need to take distributions and what your plan documents say you can do....

[corn18]

Fishingdude,
Do you plan to do conversions to Roth prior to RMDs? I’m finding there are a lot of things to consider especially conversions after age 63.
You are in a sweet spot right now age wise.
And, speaking of age...there might be another complication if you do a roll over. You may be able to take penalty free distributions from your 401k (starting from age 55 at retirment), but if you roll over to the IRA you have to wait until 59.5.

So, a lot depends on what your plans are, how soon you need to take distributions and what your plan documents say you can do....

Like2Plan,

You give ridiculously awesome advice when it comes to this kind of stuff. Lots of stuff you offer I haven't even thought of and I hope fishingdude can get the most out of his $1.2M with your help. Good stuff.

[Like2Plan]

Corn,
Thank you. Coming from you I consider that high praise, indeed. I appreciate your insights on your journey to financial independence--(as well as your experience with the mechanics of how the megabackdoor Roth works. )

[Fishindude77]

Thanks for the feedback. I really don't need any of this money for a while, probably won't get into it for at least 5+ years. It's with Vanguard and the fees are low and investment choices good, so I think we will just leave it alone for now.

From what I remember, they are pretty flexible on how you can take the distributions too, so I don't think that is an issue. Think I'll make an appointment with our agent to get a clearer picture of what my options are.

[Like2Plan]

Thanks for the feedback. I really don't need any of this money for a while, probably won't get into it for at least 5+ years. It's with Vanguard and the fees are low and investment choices good, so I think we will just leave it alone for now.

From what I remember, they are pretty flexible on how you can take the distributions too, so I don't think that is an issue. Think I'll make an appointment with our agent to get a clearer picture of what my options are.

You might ask about conversions to a Roth IRA, too. Here is a link to the IRS page on RMDs https://www.irs.gov/retirement-plans...ion-worksheets

This worksheet gives you a feeling for how much RMDs are in a 401K. You reach RMDs at age 70.5, so that is about 12 ish years from now for you, I believe.
Left alone, the balance of your 401K could more than double in that frame and you could have some eye popping RMD amounts--maybe it puts you into another tax bracket? Something to look at now.

Another sobering thought is if you are married--and one of you predeceases the other--The surviving spouse (not filing joint anymore) could be put in even a higher tax bracket with RMDs.

Conversion to Roths (BTW, you must have a Roth IRA account for at least 5 years--existing Roth would work) would eliminate RMDs at age 70.5 for the money you have converted--and the subsequent gains are all tax free.

But, of course it has to make sense to convert now tax-wise. (There are a lot of ins and outs to figuring this all out. ).

[~bs]

consult your tax advisor. it could be more advantageous to start drawing, putting a portion into a roth, other into taxable account. if you retired, then your income tax rates are really low, and it might make sense to "use up" those low brackets and newly raised standard deduction amount.

[tripods68]

I agree. Plan to do the conversion to ROTH to avoid RMDs.

[scfr]

If you are concerned about asset protection in the event of a lawsuit, you may want to investigate your state's laws and the implications of moving funds out of the 401(k). If you make a move that will cause you to lose protection, you may want to offset by increasing umbrella coverage.

[LivingAlmostLarge]

Do you have a pension or just 401k? I would definitely start taking contributions and rolling into Roth along with fill any bracket you are in to the maximum.