Wizards of the accounts- moving 401k to IRA- which one?

[dullard]

I would personally just roll it over into a Vanguard IRA account. Vanguard is simple and low fee. That is about all you need.

Then consider switching some of it to a Roth if you are ever in the situation to do so (you'll pay taxes at that point, but gain many benefits). So do so if you have some spare cash or are in a low tax bracket for a given year (such as if you lost a job).

Putting it all in one location (rather than scattered over multiple brokers or multiple former employers) gets you many benefits. For example you might get around fund minimums, get around fees for balances that are too low, get free services (such as free guidance at Vanguard), etc. Plus, with just one company, you get just one set of tax forms to worry about.

Don't let s0me0nesmind1 worry you. The IRA benefits generally far outweigh 401k benefits. Generally you get far lower fees and much greater investment choices in the IRA. The only benefit that s0me0nesmind1 has mentioned is a possible lawsuit protection if your state gives you none. An umbrella insurance policy is the solution for lawsuits, the solution is NOT potentially destroying your retirement by keeping funds in a potentially bad 401k.

 

[s0me0nesmind1]

I would personally just roll it over into a Vanguard IRA account. Vanguard is simple and low fee. That is about all you need.

Then consider switching some of it to a Roth if you are ever in the situation to do so (you'll pay taxes at that point, but gain many benefits). So do so if you have some spare cash or are in a low tax bracket for a given year (such as if you lost a job).

Putting it all in one location (rather than scattered over multiple brokers or multiple former employers) gets you many benefits. For example you might get around fund minimums, get around fees for balances that are too low, get free services (such as free guidance at Vanguard), etc. Plus, with just one company, you get just one set of tax forms to worry about.

Don't let s0me0nesmind1 worry you. The IRA benefits generally far outweigh 401k benefits. Generally you get far lower fees and much greater investment choices in the IRA. The only benefit that s0me0nesmind1 has mentioned is a possible lawsuit protection if your state gives you none. An umbrella insurance policy is the solution for lawsuits, the solution is NOT potentially destroying your retirement by keeping funds in a potentially bad 401k.

Fees for balances that are too low? Fund minimums? High Fees? You dolt, these are all things you might face regardless of it being a 401k or an IRA. WHY are you acting as if this isn't possible in an IRA? Idiot.

Also, there is absolutely ZERO benefit to combining your accounts other than you liking to see all your accounts wrapped up into 1. There is ZERO benefit. Non. Zilch. Quit with the lies, generalities, and other bullshit that you have no idea what you are talking about.

 

[stlc8tr]

Don't let s0me0nesmind1 worry you. The IRA benefits generally far outweigh 401k benefits. Generally you get far lower fees and much greater investment choices in the IRA. The only benefit that s0me0nesmind1 has mentioned is a possible lawsuit protection if your state gives you none. An umbrella insurance policy is the solution for lawsuits, the solution is NOT potentially destroying your retirement by keeping funds in a potentially bad 401k.

Yeah, unless you are using an ultra low cost plan like TSP or have access to institutional funds like VIIIX, there's very little reason to keep it in a 401K.

Using a IRA provides so many more benefits that I've always asked HR if I can quit my job for a month to move my 401K balance.

 

[DaveSimmons]

Also, there is absolutely ZERO benefit to combining your accounts other than you liking to see all your accounts wrapped up into 1. There is ZERO benefit. Non. Zilch.

Moving to a better share class with a lower expense ratio has a non-zero benefit. Combining several 401k rollovers into one IRA over the years could let you do that.

Unless a 401k offers Vanguard funds itself, then in general the 401k's expense ratios will be higher, often ten times as high.

My employer pays an extra fee to Paychex to be able to offer Vanguard in the 401k instead of their default garbage funds, but not many employers do.

But you are correct that you need to pay attention to fees in an IRA too, especially if you have less than $5K to roll over. Even then if you try to buy 3 funds instead of just 1 Target fund you could be hit with fees.

 

[s0me0nesmind1]

Moving to a better share class with a lower expense ratio has a non-zero benefit. Combining several 401k rollovers into one IRA over the years could let you do that.

Unless a 401k offers Vanguard funds itself, then in general its expense ratios will be higher, often ten times as high.

My employer pays extra to Paychex to be able to offer Vanguard in the 401k instead of their default garbage funds, but not many employers do.

Again, that is completely dependent upon multiple factors.

If someone is COMBINING they are likely combining with their current accounts (IE: Taking former 401k's to current 401k or former 401k's to current IRA).

The simple point being, until you have evaluated all possible measures, there is no guarantees that the IRA has lower fees. So don't spew bullshit assumptions like there is some guaranteed clause that all IRA's are cheaper. Because it's wrong. You should ALWAYS evaluate the fees on both sides before making such determinations.

In addition, as I said, you throw away other things... such as important things like... oh yeah, legal protection. Enjoy losing your IRA money should an emergency happen in life because you decided not to keep it in your 401k.

 

[maddogchen]

I'm most likely going to roll everything over to VG because it's just easier to have all my money in one place. I DEFINITELY have to do some reading as there are some terms/sentences here that may as well be written in hieroglyphics because they mean nothing to me - and are probably the most important. Since I'm far from retirement (<30) I'm probably going to put everything into a target fund (2050?) and let it sit while I educate myself a little bit more with this. On that note, where could one easily do this? Anyone recommend good (free) websites?

If you are going to move to Vanguard, you can read up on investing on bogleheads.org. They have a wiki and their forum is very helpful.

 

[stlc8tr]

As with all things in life, it's worth it to do your homework and then make the judgement whether or not the possible extra costs of the 401K fund is worth the legal protection. (And for most people, I think their 401K offerings will indeed cost them more than the IRA version.)

 

[dullard]

Fees for balances that are too low? Fund minimums? High Fees? You dolt, these are all things you might face regardless of it being a 401k or an IRA. WHY are you acting as if this isn't possible in an IRA? Idiot.

Also, there is absolutely ZERO benefit to combining your accounts other than you liking to see all your accounts wrapped up into 1. There is ZERO benefit. Non. Zilch. Quit with the lies, generalities, and other bullshit that you have no idea what you are talking about.

1) Please calm down, no one will take you seriously if you write like that.

2) Please notice that the paragraph discussing 401k vs IRA is a different paragraph than the one discussing things like a fund minimum. Since you don't appear to know what a paragraph is, try here: http://en.wikipedia.org/wiki/Paragraph

"A paragraph...is a group of sentences with one topic. it is also a self-contained unit of a discourse in writing dealing with a particular point or idea."

Thus, since I used different paragraphs, the topics in the various paragraphs are not related. For example, just because I said there are benefits of a IRA to a 401k in the last paragraph does not imply that IRAs do not have fund minimums (a different paragraph).

3) You have absolutely no clue of what you are talking about. Please stop posting gibberish and misinformation.

4) You want some reasons why having money in one account is better? Here are just a few:

a) Easier access to funds with high minimum balances (one randomly chosen example: VPGDX, https://personal.vanguard.com/us/funds/snapshot?FundId=1498&FundIntExt=INT). Investing in funds with high minimum balances is far easier to do if you have your money in one location unless you happen to be very wealthy. Not everyone has batches of $25k, $50k, or even $1000k to invest in a fund with a high minimum balance, especially if your money is scattered amongst different companies. Pooling money together really helps a lot on that regard.

b) Lower fees. Many places charge fees for low balances. Take Vanguard for example, they charge a $20 annual fee per account unless you have a $10,000 minimum balance with them or jump through various hoops (https://investor.vanguard.com/what-we-offer/account-types-and-services/costs-and-fees). Putting it in one location helps avoid fees for minimum account balances.

c) Lower fees (part 2). Many mutual funds get lower fees the more you put in them. For example, most people should strongly consider an S&P 500 tracking fund (or similar). At Vanguard, if you have $10,000+ in that fund you get a 0.05% fee (VFIAX, https://personal.vanguard.com/us/funds/snapshot?FundId=0540&FundIntExt=INT) but with only $3,000 in it you get a 0.17% fee (VFINX, https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT). Basically the same stocks, but you save 0.12% (compounded yearly). That sounds small, but it really does add up.

d) Free benefits. For example, at Vanguard, if you reach $1M you get free long-range financial planning and free guidance. https://investor.vanguard.com/what-we-offer/personal-services/flagship-and-flagship-select-services It is far easier to reach these types of milestones if you combine. Note the first milestone at Vanguard is just $50,000, so it does apply to many people, and not just the wealthy (https://investor.vanguard.com/what-we-offer/personal-services/voyager-and-voyager-select-services)

e) Access to closed funds. https://investor.vanguard.com/what-we-offer/personal-services/flagship-and-flagship-select-services

f) Simplicity in life of having your money in one place, with one password, one user name, one set of tax forms, etc.

g) Instant money transfers without wire fees. Moving money from one spot to another within the same company is ususally instantaneous and free. Moving between companies may give a 1+ week delay, may require medallian stamps (http://en.wikipedia.org/wiki/Medallion_signature_guarantee), or other hastles. Trust me, if you ever need a medallion stamp, you'll wish you had your money in one company.

Hmm, there are 7 distinct benefits just off the top of my head with links. Now it is your turn to prove this statement "there is absolutely ZERO benefit to combining your accounts".

 

[dullard]

The simple point being, until you have evaluated all possible measures, there is no guarantees that the IRA has lower fees.

This is the only truthful thing you have said in this thread. That said, most IRAs have lower fees and greater choices for most people than 401ks. True, it isn't guaranteed. But for most people, it is sound advice to move over to the IRA. Plus it gives the option to then convert to a Roth IRA with potential major tax advantages.

 

[cbrsurfr]

I'm kind of in the same boat as the OP. I've basically got money in an old Fidelity NetBenefits 401k that I haven't touched since I left my previous employer. My new 401k with new employer is through Vanguard. I've heard very good things about VG but haven't called to sort out any plans on what I should do with the stagnant money. Also like the op, I don't know a thing about any of this. Any help would certainly be appreciated... I've subscribed to this thread . WWATOTD? (What would ATOT do?)

Call VG. Tell them you want to do a roll over from Fidelity. They will initiate a 3 way call where both sides tell the other they are on a recorded line. They will verify identity, etc. and then initiate the transfer. Copies/confirmations of everything will be mailed to you. You may have the option of intercepting the check. I would recommend you have Fidelity mail it directly to VG. This way they handle everything. It may take 2-3 weeks for everything. They start everything right away but you are at the mercy of snail mail. You will also have a single point of contact on the VG side if you need to follow-up on anything.

It was all a very simple process for me when I did it.

 

[Hayabusa Rider]

I looked into legal protections in my state and it seems there are very broad and comprehensive protections for all kinds of retirement funds including IRAs.

So Vangard looks to be a favorite. So far that seems to be the one. Now all I have to do is figure out what Vanguard offers which suits me best. Oy!

Can't I just retire filthy rich now?

Yes that was a joke

 

[CraKaJaX]

Call VG. Tell them you want to do a roll over from Fidelity. They will initiate a 3 way call where both sides tell the other they are on a recorded line. They will verify identity, etc. and then initiate the transfer. Copies/confirmations of everything will be mailed to you. You may have the option of intercepting the check. I would recommend you have Fidelity mail it directly to VG. This way they handle everything. It may take 2-3 weeks for everything. They start everything right away but you are at the mercy of snail mail. You will also have a single point of contact on the VG side if you need to follow-up on anything.

It was all a very simple process for me when I did it.

Appreciate this.

Did you have to fill out VG's rollover form? I called VG last night and was told that I need to have Fidelity write VG a check made payable to "VFTC" but sent to me. Once received, I fill out the VG form for a rollover with basic information and send it, along with the check to VG where it then it gets deposited into my new VG account. How long ago did you do yours? It seems as I'm the middle man here and that VG can't directly deal with Fidelity as you said they did for you..

 

[WackyDan]

If you are going to have another 401k soon, you can roll into that new one. For example, I'm finally rolling my former 401k into my new 401k as I work for a 100 billion dollar company and the fees on my new 401k are actually very low and the selection of investments is fantastic. If you work for smaller companies, then yes, you might be better off calling Vanguard. I've got some money in their funds, both within my 401ks and my daughter's 529 and they have been a solid choice expense and return-wise. *Least for now.

 

[Uppsala9496]

Appreciate this.

Did you have to fill out VG's rollover form? I called VG last night and was told that I need to have Fidelity write VG a check made payable to "VFTC" but sent to me. Once received, I fill out the VG form for a rollover with basic information and send it, along with the check to VG where it then it gets deposited into my new VG account. How long ago did you do yours? It seems as I'm the middle man here and that VG can't directly deal with Fidelity as you said they did for you..

You should be able to complete the form online. At least that is what I did.
3 way call to Fidelity. Fidelity sent me the check which I then mailed to Vanguard. Took about a week after mailing for it to show up in my account (already had an existing Roth with Vanguard) and then I just made the fund selections I wanted.

From my conversation with both companies on the 3 way call (this was back in October I think), Fidelity said they are unable to mail directly to Vanguard since the money's are mine.

It really is an easy process.

 

[s0me0nesmind1]

I looked into legal protections in my state and it seems there are very broad and comprehensive protections for all kinds of retirement funds including IRAs.

So Vangard looks to be a favorite. So far that seems to be the one. Now all I have to do is figure out what Vanguard offers which suits me best. Oy!

Can't I just retire filthy rich now?

Yes that was a joke

Paging CPA & a lawyer before you go making bad decisions...

 

[Tequila]

Probably the most crucial reason is your money is no longer protected in an IRA account. They can come after you for collections, mortgage bankruptcy, etc... That is not the case with a 401k. It is a protected asset and can't be touched.

Stop with the misinformation;

If a 401k is ERISA qualified then the IRA you roll it into is also ERISA qualified, i.e your assets are protected. Just keep it separate from all other non ERISA qualified rollovers and don't roll it into an existing IRA that you already contributed to. I.e just keep a separate rollover IRA account for all your ERISA 401k rollovers and you can sleep easy.

I've yet to participate in a non-ERISA 401k so I've rolled them all into one. Easy to manage. No way I want to manage several separate 401ks from former employers.

 

[Gunslinger08]

I don't know much about the legal protection stuff and it varies by state. My state protects IRAs to the same extent as ERISA plans. Regardless, I think it's probably not the best idea to base your retirement savings strategy entirely on creditor/bankruptcy protection - you could seriously reduce your returns in a bad 401k in order to protect yourself from an edge case (default/bankruptcy).

Financially speaking, you will most likely have more/better/cheaper options in an IRA. The employer sponsored plans that I've seen have all had very limited options. Many of them didn't even include index funds, which are huge with the "set it and forget it" crowd.

Consolidating your assets at one broker can also open up some additional benefits, like lower expense shares (Admiral Shares at Vanguard), reduced/free trade commissions, free advice from a financial planner, etc. It's also easier to keep your investments diversified/balanced, as the single broker knows the full extent of your holdings and can easily auto-balance them. Reducing paperwork and statements you need to keep are also minor benefits.

 

[Jeff7]

...
b) Lower fees. Many places charge fees for low balances. Take Vanguard for example, they charge a $20 annual fee per account unless you have a $10,000 minimum balance with them or jump through various hoops (https://investor.vanguard.com/what-we-offer/account-types-and-services/costs-and-fees). Putting it in one location helps avoid fees for minimum account balances.
...

The only "hoop" I encountered was that I have to take statements electronically, rather than having them mailed. That suits me just fine, I don't need more mail that needs to be shredded.
Some of the funds have $1k minimums in the lower classes, and most of the rest are $3k.
I haven't encountered a single fee yet in my IRA, beyond the low expense ratios inherent to the funds themselves.


I haven't done anything outside of the IRA with them though - no taxable accounts or anything like that.

 

[Jumpem]

I need to do this as well. My wife has a 401k to roll over, and I would like to start a pair of Roth IRAs as well.