Move 401K Funds out of Employer Account to IRA Managed by Advisor?

[Anonymous]

Anonymous wrote:

Anonymous wrote:You may not be able to. Check for tax consequences. I was not able to move mine without tax consequences until I retired. I’m not a financial person so I can’t explain why and I don’t recall what I was told.

That being said, we make a much tougher percent on our money with our money manager. And they provide a lot of advice about the market and retirement spending, required distribution and investing. We aren’t there yet - both still working and not 70. But we know what to expect.

So I guess for me, I really like having an advisor which didn’t come through my employer managed money.

One other thing. With $3m your fees may go up. But if your returns are better and the services you get are better it may be worth it.

You can always move a 401K to an IRA without tax consequences when you leave a job (and retirement is just that). You just must make sure it's a direct transfer to the IRA (and not to you yourself)


It almost always makes sense to NOT leave it at the former employer. Even if you transfer it to Vanguard/TRowePrice/some low fee company, you will have many more choices for investments.

OP here, yes this was my thinking initially, but then I saw a previous poster mention some tax advantage in Maryland if you keep it in the 401K vs. moving to an IRA. We are in MD.

[Anonymous]

Anonymous wrote:DH has about $3M in his 401K and is retiring soon. We have other investments managed by an advisor to whom we are paying .05% of assets under management, including my own IRA. Should we move the $3M out of the employer managed account into a new IRA managed by the advisor, i.e., would it be worth the .05% in expense to manage it? Or just leave it there? We are not familiar enough with the market to manage it ourselves.

Has your advisor beat the S&P market average by more than .05% every year. Also what other fees do they charge including management fees in fund recommended by them?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I’ll be in similar situation but I don’t have CFP. Some things to think about:

An AUM of .5% is on the low end. For you, that means each year your CFP gets $15K. There are other ways they may make money off your accounts. You should also look at the GE fee of each fund they put you in. With typical low fee funds, this might be .03. Funds with fees that are .4 or higher aren’t ideal.

Your DH should contact his HR and find out if he can keep his 401k with his employer and exactly what his fees would be. For me, my fees would be around $700/year for 1M. Thats nothing IMO.

You should also check his 401k to see what funds he is currently in and if they are low fee.

With that much in 401k, you will be “tax bombed”. You will need to read up on conversions.

There is a ton of information to be learned at this point of life. Bogleheads is a great resource.

This is very informative, thanks.

I did look up the GE (didn't even know what that was before now), and it ranged from .03 to .38 with most being around .1. This is for my portfolio being managed by my CFP of which there are many different funds (38 to be exact). I wasn't able to check the 401K (site is under maintenance now) but I suspect those funds are higher in expenses because they are mainly mutual funds and the choices of investment options are very limited.

You mentioned other ways for CFP to make money off my accounts. Do you have examples of this? I am sorry if this sounds dumb, but I thought the only source of income he has from management was the percentage of the funds being managed. One thing I do notice they do is buy and sell a lot of funds during the quarter in what he calls "loss harvesting." I just trust what he is doing, but should I ask more questions? Is he making money on those trades?

I don’t find your questions dumb at all. So much to learn here! For CFP making money, I was referring to the GE fees. Some CFP can put you in funds with high fees. Sounds like yours didn’t, although there are a lot of funds. If you are having questions about your CFP, o would first find out if they are a fiduciary. Then I’d ask them how they make money. If you want a second set of eyes on your portfolio, checkout Bogleheads. Very informative.

As for the 401k, do see what funds your DH is in. Some plans have limited amount of funds, others don’t. My 401k has low fee index funds so that’s not incentive for me to move to IRA.

[Anonymous]

Your advisor may be getting commissions on trades. Do you know?
If your "employer" 401k is in well managed funds like Vanguard, TIAA then it may be ok to leave them there, at least the employer contribution part if there is one.
I do not know why a direct rollover from one retirement fund to another where the check or transfer goes to the accepting fund would have any tax hot. If it goes to your "advisor" it might unless they have an IRA set up, deposit it in there promptly and prove it to IRS and state tax.
If one of you is able to earn a 3M 401k they can surely read this https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions