Consolidating 401ks

[Anonymous]

Anonymous wrote:

Anonymous wrote:Do Not move it into a "current 401k". 401K have limited choices. Move all your old 401K (from companies you no longer work for) into an IRA at Vanguard/TRowe/any low cost mutual fund company. Then you can manage it in one place, with many many more choices for investments.

For ex: my current 401K is with betterment. There are quarterly fees (sure it's only $200-300/ but that is money I wouldn't be paying at vanguard/TRowe) and the investment options are basically "select your percentage for stocks vs Bonds". Betterment is great that it attempts to simplify the process and not scare uneducated people about investing. But Both Vanguard and TRowePrice have way better options for a similar or lower cost.

Basically, you never want to leave your 401K with a company---you will have better choices on your own and easier to manage.

It is true you should consider fees and investment options when deciding what to do with old 401k money but you should also realize that rolling the money into an IRA will make a backdoor Roth essentially not worthwhile/available to you so I’d carefully weigh the pros and cons before doing it.

Some questions about the posts above:

1) if current 401k is with T Rowe vs. a less desirable provider, I assume it would be best to move the $ to the current 401k?

2) Am I correct that the back door strategy would come into play after my spouse and I have each maxed out our 401k at $30,500 (both 50)? We cannot afford to invest $61k annually at this time as we are saving for college for kid 2 and beginning to cash flow part of kid 1 college next year. Not even sure we would get to back door status in 4 years as our house has a lot of deferred maintenance that we plan to do once both kids are out.

[Anonymous]

Anonymous wrote:If you leave a company (voluntary or not) in January of the year you turn 55 or later (before 59.5) you can take from the 401k for the company you separate from without penalty. For this reason, I keep my 401k rolled into my current place of employments plans. (Not 55 yet, but to keep it ready in case.) This is a widespread option, but specific to the plan, so check.
It's called "the rule of 55"

Good to know!

[Anonymous]

Anonymous wrote:I consolidated every this year except TIAA which has been a kafkaesque nightmare to get my money out (they are truly the worst). It’s nice to see it all together and balance portfolios etc and less for spouse to keep track off, beneficiaries, putting into trust etc should I kick the bucket .

This is fascinating - I moved mine to TIAA and they were the best to deal with (maybe because they were taking the money?)

[Anonymous]

I consolidated my old 401(k)s by “direct rollover” into a Vanguard IRA. I put them into a low-cost S&P 500 index fund and just leave them alone. Vanguard helped me do this as a direct rollover, which avoids any potential tax issues.

Now I only have current/active 401(k) at the employer and that one Vanguard IRA.

Bogleheads.org has great financial advice on average.

[Anonymous]

Move it all into an IRA at a brokerage like Charles Schwab, Fidelity, Vanguard (there are many more brokerages) so that you have control over your funds.

One for you, one for husband.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Do Not move it into a "current 401k". 401K have limited choices. Move all your old 401K (from companies you no longer work for) into an IRA at Vanguard/TRowe/any low cost mutual fund company. Then you can manage it in one place, with many many more choices for investments.

For ex: my current 401K is with betterment. There are quarterly fees (sure it's only $200-300/ but that is money I wouldn't be paying at vanguard/TRowe) and the investment options are basically "select your percentage for stocks vs Bonds". Betterment is great that it attempts to simplify the process and not scare uneducated people about investing. But Both Vanguard and TRowePrice have way better options for a similar or lower cost.

Basically, you never want to leave your 401K with a company---you will have better choices on your own and easier to manage.

It is true you should consider fees and investment options when deciding what to do with old 401k money but you should also realize that rolling the money into an IRA will make a backdoor Roth essentially not worthwhile/available to you so I’d carefully weigh the pros and cons before doing it.

Some questions about the posts above:

1) if current 401k is with T Rowe vs. a less desirable provider, I assume it would be best to move the $ to the current 401k?

2) Am I correct that the back door strategy would come into play after my spouse and I have each maxed out our 401k at $30,500 (both 50)? We cannot afford to invest $61k annually at this time as we are saving for college for kid 2 and beginning to cash flow part of kid 1 college next year. Not even sure we would get to back door status in 4 years as our house has a lot of deferred maintenance that we plan to do once both kids are out.

1- yes
2- up to you, personally I would just max out both your 401k's as its easier, and if you don't have enough cash left over to do the Roth contributions, just don't do that. Otherwise you could lower your 401k contributions and do $7k/year towards the Roth through the backdoor method. You would have to lower the contributions by probably around $10-11k to account for the taxes that will come out first now that that amount will come to you post-tax.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Do Not move it into a "current 401k". 401K have limited choices. Move all your old 401K (from companies you no longer work for) into an IRA at Vanguard/TRowe/any low cost mutual fund company. Then you can manage it in one place, with many many more choices for investments.

For ex: my current 401K is with betterment. There are quarterly fees (sure it's only $200-300/ but that is money I wouldn't be paying at vanguard/TRowe) and the investment options are basically "select your percentage for stocks vs Bonds". Betterment is great that it attempts to simplify the process and not scare uneducated people about investing. But Both Vanguard and TRowePrice have way better options for a similar or lower cost.

Basically, you never want to leave your 401K with a company---you will have better choices on your own and easier to manage.

It is true you should consider fees and investment options when deciding what to do with old 401k money but you should also realize that rolling the money into an IRA will make a backdoor Roth essentially not worthwhile/available to you so I’d carefully weigh the pros and cons before doing it.

Some questions about the posts above:

1) if current 401k is with T Rowe vs. a less desirable provider, I assume it would be best to move the $ to the current 401k?

2) Am I correct that the back door strategy would come into play after my spouse and I have each maxed out our 401k at $30,500 (both 50)? We cannot afford to invest $61k annually at this time as we are saving for college for kid 2 and beginning to cash flow part of kid 1 college next year. Not even sure we would get to back door status in 4 years as our house has a lot of deferred maintenance that we plan to do once both kids are out.

1- yes
2- up to you, personally I would just max out both your 401k's as its easier, and if you don't have enough cash left over to do the Roth contributions, just don't do that. Otherwise you could lower your 401k contributions and do $7k/year towards the Roth through the backdoor method. You would have to lower the contributions by probably around $10-11k to account for the taxes that will come out first now that that amount will come to you post-tax.

What is the advantage of doing back door roth instead of 401k?

[Anonymous]

Anonymous wrote:I consolidated my old 401(k)s by “direct rollover” into a Vanguard IRA. I put them into a low-cost S&P 500 index fund and just leave them alone. Vanguard helped me do this as a direct rollover, which avoids any potential tax issues.

Now I only have current/active 401(k) at the employer and that one Vanguard IRA.

Bogleheads.org has great financial advice on average.

Thanks! Curious why this is this preferred over moving the funds to the current 401k?

[Anonymous]

I consolidated every this year except TIAA which has been a kafkaesque nightmare to get my money out (they are truly the worst). It’s nice to see it all together and balance portfolios etc and less for spouse to keep track off, beneficiaries, putting into trust etc should I kick the bucket .


This is fascinating - I moved mine to TIAA and they were the best to deal with (maybe because they were taking the money?)

I wont go into all the detail but I first had to have my spouse notarize something authorizing me to move the funds. then sent that in and filled out forms with my new brokerage. We sent those in, but they rejected them saying they needed a 'wet' signature. We did that. Then they said that they can't roll them over directly and I have to roll them into a different IRA first with TIAA and then roll them over. I did that. Then nothing happened. We checked in and they said that I needed to fill out another form, which seemed to be an electronic version of the same form I had done recently with the wet signature. but okay. So I did that. Nothing happened. I called recently and they said they had "no idea" why. I was assigned a case number and name and told I would hear within 48 hours. I have heard nothing and contacted the case manager 3 times. I have been trying to move this money out since July. So maybe easy to move money INTO but not out of. My brokerage says that they have always been difficult, but that my experience has been the worst so far that they have witnessed.

[Anonymous]

Anonymous wrote:

I consolidated every this year except TIAA which has been a kafkaesque nightmare to get my money out (they are truly the worst). It’s nice to see it all together and balance portfolios etc and less for spouse to keep track off, beneficiaries, putting into trust etc should I kick the bucket .


This is fascinating - I moved mine to TIAA and they were the best to deal with (maybe because they were taking the money?)

I wont go into all the detail but I first had to have my spouse notarize something authorizing me to move the funds. then sent that in and filled out forms with my new brokerage. We sent those in, but they rejected them saying they needed a 'wet' signature. We did that. Then they said that they can't roll them over directly and I have to roll them into a different IRA first with TIAA and then roll them over. I did that. Then nothing happened. We checked in and they said that I needed to fill out another form, which seemed to be an electronic version of the same form I had done recently with the wet signature. but okay. So I did that. Nothing happened. I called recently and they said they had "no idea" why. I was assigned a case number and name and told I would hear within 48 hours. I have heard nothing and contacted the case manager 3 times. I have been trying to move this money out since July. So maybe easy to move money INTO but not out of. My brokerage says that they have always been difficult, but that my experience has been the worst so far that they have witnessed.

We had a similar experience with them over 10 years ago. It is a small amount though and I wanted a rollover from their accounts (401K/403B) to an IRA. We couldn't get it done and our financial advisor offered to take over and sent us paperwork to sign, etc. They couldn't get it done either! Money is still there .

[Anonymous]

Most people suggested consolidating. Are you worried about insurance coverage up to 500K? Some companies claim to have additional coverages, but what happens when many companies are in trouble? I know the probability is low, but you never know. Thoughts?

[Anonymous]

Anonymous wrote:Most people suggested consolidating. Are you worried about insurance coverage up to 500K? Some companies claim to have additional coverages, but what happens when many companies are in trouble? I know the probability is low, but you never know. Thoughts?

All the major brokerages have excess SIPC coverage. If Fidelity, Vanguard, and Schwab all fail at the same time, money will not do you any good. Only water, food, and ammunition will be of any value.

[Anonymous]

Anonymous wrote:Most people suggested consolidating. Are you worried about insurance coverage up to 500K? Some companies claim to have additional coverages, but what happens when many companies are in trouble? I know the probability is low, but you never know. Thoughts?

Historically, the Trustee for the failed broker-dealer has made all customer whole, regardless of the account value. Securities holdings aren’t like bank deposits.

[Anonymous]

Anonymous wrote:Rollover your other accounts into your current 401k. If you open a rollover IRA it will create issues if you want to do a backdoor Roth.

Also, it is much easier to manage your assets allocation in fewer accounts.

What is a backdoor Roth?

[Anonymous]

Anonymous wrote:Most people suggested consolidating. Are you worried about insurance coverage up to 500K? Some companies claim to have additional coverages, but what happens when many companies are in trouble? I know the probability is low, but you never know. Thoughts?

Interesting.