Retirement and 401K to IRA

[Odduck]

I'm rapidly approaching retirement at 55 from generic mega-corp where I have over 1M pretax in a 401K. I have brokerage investments at Vanguard that should last more than 10 years, so I don't need to touch the 401K early. I also have a small Roth at Vanguard.

I have an old small account at Fidelity. I'm thinking I'd like to roll the 401K into an IRA perhaps at Fidelity, with the notion of doing Roth conversions for the next several years to ease taxes much later in life. I'm familiar with Fidelity and I'd like to have my assets spread around, which is part of why I'd like to get out of the 401K at mega-corp, besides more investment options.

Threads here generally seem to like Fidelity, Vanguard and Schwab. Does the plan seem reasonable to shift m-c 401K to a Fidelity IRA? Do the conversion tools at Fidelity work as well as anyone's?

I had planned to spend many evenings planning out the retirement and just getting comfortable with it all, but health issues with my parents have hit and I'm swamped and my nerves are shot. Trying to figure out what they can afford for their remaining years is one of my biggest worries besides the day-to-day stuff. So I'm trying to rush through my retirement now to free up time.

Sorry if these questions have been asked before - I did some searching first. Thanks in advance for any advice.

 

[bloom2708]

I would move your 401k (both) to Vanguard (Rollover Trad IRA) next to your Brokerage and Roth accounts. No reason to have multiple if you don't need to.

Vanguard or Fidelity will help pull your 401k dollars in. They will contact your current 401k provider and initiate the transfer/rollover. Everything will be sold as there are no tax consequences to liquidating as long as you roll it over to the Rollover Trad IRA.

Once transferred, then you can invest based on your current asset allocation goals

It is not a hard process. But, it may take 10 days to 2 weeks to complete the transfer. Some upfront work you can do is find the customer service number for your current 401k provider. The account number and balance, etc.

There is no rush as your 401k can stay where it is even after retirement for as long as you like. Reasons to switch are lower expense ratios. Lower fees. Once retired, they may charge a maintenance fee. Good reasons to consolidate.

We have everything at Vanguard. Taxable Brokerage, Roths for each and Rollover IRA for each. Overall expense ratio is .06%. I do everything myself, so no management fees.

Good luck and hopefully the holidays bring lower stress.

 

[scrinch]

Rolling over to an IRA at any of Fidelity, Vanguard, or Schwab should be quick, easy, and safe. I'd suggest creating a Roth IRA at the same place for ease of rollovers later on...also to get the drop on the 5-year rule just in case you need to use the money unexpectedly.

 

[Dtail]

Do you have a Stable Value Fund in your 401k account?
On a separate note, it is quite easy to convert TIRA to Roth accounts at Fidelity.

 

[Al18]

The conversion from 401K to a rollover IRA at Fidelity should be quick, especially if the 401K is already at Fidelity. I don’t think you can move the 401K until you are retired.

With Fidelity, you can make an appointment at one of their brick and mortar locations to talk to an advisor.

 

[Odduck]

Thanks for the thoughtful replies!

There is no rush as your 401k can stay where it is even after retirement for as long as you like.

I'm not sure the corporation's 401K allows for, as far as moving at any time after retirement, but in their employee website, the first step to initiating retirement is to input what you want done with the 401K. So if nothing else, this would be an easy point to initiate the move where most of the heard does. I believe it would be best to have the receiving account ready to go before informing my employer.

Do you have a Stable Value Fund in your 401k account?

I don't have any Stable Value type funds in my 401K.

With Fidelity, you can make an appointment at one of their brick and mortar locations to talk to an advisor.

There are no Fidelity branch locations in my midwest state. I think the closest is about 130 miles away, so it isn't likely that I'd drop in unless things really went wrong and 4 hours of driving seemed worth it.

 

[RE2Boys]

One note of warning. I don't believe you listed an existing Traditional IRA. If you do have an existing TIRA, and you have a basis (non-deductible contributions) in that TIRA, DON'T roll over the 401k until you fully understand the tax ramifications of any roll over. I have a basis on my TIRA, and the tax ramifications is why, even after 23 years of retirement, my 401k money has NOT been rolled over.

 

[Dtail]

Thanks for the thoughtful replies!




I'm not sure the corporation's 401K allows for, as far as moving at any time after retirement, but in their employee website, the first step to initiating retirement is to input what you want done with the 401K. So if nothing else, this would be an easy point to initiate the move where most of the heard does. I believe it would be best to have the receiving account ready to go before informing my employer.




I don't have any Stable Value type funds in my 401K.




There are no Fidelity branch locations in my midwest state. I think the closest is about 130 miles away, so it isn't likely that I'd drop in unless things really went wrong and 4 hours of driving seemed worth it.

Having a Stable Value fund typically can be a reason to maintain a 401k, outside of bankruptcy protection concepts.

 

[Car-Guy]

Having a Stable Value fund typically can be a reason to maintain a 401k, outside of bankruptcy protection concepts.

I'd have endless more investment and withdrawal flexibility if I moved my 401k money to my tIRA, except, there's no way I'd be getting the 7 to 8% return I got this year in my 401k fixed/stable value. I don't expect that again in 2024 but I hope for 6+%.

 

[pb4uski]

... There are no Fidelity branch locations in my midwest state. I think the closest is about 130 miles away, so it isn't likely that I'd drop in unless things really went wrong and 4 hours of driving seemed worth it.

Are there any Schwab branch locations nearby?

I think you have a good plan.

I've consolidated everything at Schwab to make it easier for my DW and DD (CPA who I expect to help DW) if I get hit by a beer truck.

 

[Dtail]

I'd have endless more investment and withdrawal flexibility if I moved my 401k money to my tIRA, except, there's no way I'd be getting the 7 to 8% return I got this year in my 401k fixed/stable value. I don't expect that again in 2024 but I hope for 6+%.

Yeah I am at 4% net but have beaten the MM returns for many years now and expect to beat it again soon enough.

 

[Stwicky]

One note of warning. I don't believe you listed an existing Traditional IRA. If you do have an existing TIRA, and you have a basis (non-deductible contributions) in that TIRA, DON'T roll over the 401k until you fully understand the tax ramifications of any roll over. I have a basis on my TIRA, and the tax ramifications is why, even after 23 years of retirement, my 401k money has NOT been rolled over.

Can you explain this a little further? Are you performing Roth conversions from you TIRA and thinking about your pro-rata calculation? I don't think that is impacted by any 401k rollover. Are there other considerations? I've got a huge 401k that is still sitting in place (five years after retirement). But that's only because I've been sluggish in moving it. Are there other things I should think about when deciding to roll it over or leave it in place? Thanks.

 

[Ian S]

I don’t think you can move the 401K until you are retired.

I think you can move it if you leave the company for whatever reason.

 

[Ian S]

Everything will be sold as there are no tax consequences to liquidating as long as you roll it over to the Rollover Trad IRA.

In some cases, you may be able to transfer positions. I know that was the case with my 403b (similar to 401k but for an educational institution) that was with Fidelity: since the IRA was also Fidelity, I kept the existing mutual fund positions since they were all Fidelity anyway.

 

[G-Man]

One note of warning. I don't believe you listed an existing Traditional IRA. If you do have an existing TIRA, and you have a basis (non-deductible contributions) in that TIRA, DON'T roll over the 401k until you fully understand the tax ramifications of any roll over. I have a basis on my TIRA, and the tax ramifications is why, even after 23 years of retirement, my 401k money has NOT been rolled over.

Please explain more. Currently I'm using my existing TIRA for the sole purpose to perform backdoor Roth contributions/conversions to my Roth IRA. The TIRA has a 0 balance once the Roth conversions are executed. In my situation, I don't think I would want to rollover my 401k to a TIRA until I'm no longer able to perform backdoor Roth contributions/conversions which is year 2026.

Is that the scenario you are referencing with the comments? Please advise.

 

[monte1022]

Please explain more. Currently I'm using my existing TIRA for the sole purpose to perform backdoor Roth contributions/conversions to my Roth IRA. The TIRA has a 0 balance once the Roth conversions are executed. In my situation, I don't think I would want to rollover my 401k to a TIRA until I'm no longer able to perform backdoor Roth contributions/conversions which is year 2026.

Is that the scenario you are referencing with the comments? Please advise.

Perhaps the concern is if you have non-deductible contributions in your tIRA ie. net dollars that you put in even though you made too much money to deduct those dollars, and if you commingle those dollars with pre-tax dollars from a 401k, then you may have a mess unless you have kept really good records. Remember, if your income to too high for a tax deduction on tIRA dollars, you can still contribute and those specific dollars will escape taxation in the future (just those specific dollars ie. your basis, and not the gain on those dollars). No such rule relating to an income that is "too high" exists for traditional 401k contributions, therefore all dollars are pre-tax unless you chose to do extra "after-tax" contributions to a 401k then you would also want to know that number to avoid double taxation on those extra contributions.

 

[Sunset]

OP - If you are going to roll-over $1M or more to Fidelity, be sure to phone them and ask for a bonus, they will probably give you $1K for doing it.

But if you don't ask, you won't get anything.

 

[imbatman]

Glad to see the discussion about backdoor Roth and keeping clean TIRAs, I have also been doing the same and haven't taken the time to read all the rules to see if my trepidation is reality based or not. I have definitely enjoyed having my 0 basis TIRAs as makes the backdoor easy every year and should be easy to demonstrate in an audit. But I don't love my ex-employer 401K where I have let funds sit there, partially just for wanting to keep the TIRAs simple.

On to the OP note:
1) Does your current employer allow you to convert from 401k to Roth 401K? I have done that for my significant other as their 401k plan has some funds that I would not be able to access at all with my current brokers.
2) Def ask for a bonus as others suggest. Everytime I do my free annual touchbase with advisor, Fido offers to give me a small bonus to move my 401K over.

If you are going to be trading bonds, I think Fido is unbeatable for platform and depth of inventory......but otherwise, I think there have been lots of polls on preference here and EOD, there are probably not huge differences between the top 5 companies. Assume you are already aware of all your tax thresholds so you can time your incrimental conversions most advantageously.

 

[DrRoy]

I would go with Fidelity. Been there 40 years. I've heard some occasional problems with Vanguard.

 

[retire48in2018]

My advice

1 - Make it simple. Use primarily one brokerage company (yes, have a contingency of funds somewhere else - bank, or small amount at other brokerage - for just in case temporary issues at brokerage

2 - If you were doing back door Roths, have high pension income, expect inheritances — or special high income situations, there might be a unique answer. For example, continuing back door Roths would want you to maintain 401k. Having some non deductible IRAs open - make another reason to not comingle funds for purposes of cost basis, coverting to Roth, etc

3- Take your time and learn first. Time is your friend. As you learn you will make better and more informed decisions.

 

[Murph]

Hope this helps

My m-c 401k is at Fidelity and I have no problem with it. I recently moved $$$ from a stable-value fund in that 401k to an IRA rollover account also with Fidelity, so that I could by a CD (5% APR compared to <1% was a no-brainer). It was fairly easy, though you have to call them to move that money to the new account (as opposed to doing it yourself on-line).

 

[RetiredHappy]

We tried to set up our accounts with Vanguard and it was crap. A month later they still struggled and asked for more and more documentation. Not to mention wasting hours on hold with Vanguard. We went to Fidelity and everything got set up within an hour. Go with Fidelity and you won't regret it. Yes, ask for a bonus for transferring more than a $1M in.

 

[RetireBy90]

I had my 401k with Fido and megacorp wouldn’t allow partial conversions, either all or nothing. It seems to depend on your 401K rules. I rolled over entire to Fido IRA no problems, Fido-Fido was easy.

 

[jollystomper]

My m-c 401k is at Fidelity and I have no problem with it. I recently moved $$$ from a stable-value fund in that 401k to an IRA rollover account also with Fidelity, so that I could by a CD (5% APR compared to <1% was a no-brainer). It was fairly easy, though you have to call them to move that money to the new account (as opposed to doing it yourself on-line).

+1. Did the same thing to move some monies from 3% stable fund to IRA to buy CDs and Treasuries. You do have to call, but they are very efficient and it took maybe 5 minutes of my life .

I had my 401k with Fido and megacorp wouldn’t allow partial conversions, either all or nothing. It seems to depend on your 401K rules. I rolled over entire to Fido IRA no problems, Fido-Fido was easy.

Agree, you have to check your megacorp's 401K rules. Mine fortunately does allow partial rollovers from my 401K to my tIRA.

 

[2017ish]

Easy to do conversions at any of the three brokerages mentioned. We try to keep a good amount at two different places, just in case.

And if you intend to travel in retirement, having accounts at Fidelity or Schwab (Obviously including a CMA), is nice for no-expense international ATM withdrawals at a very competitive exchange rate. Granted, it's nickel and dime, but I HATE having to pay ATM and Foreign transaction fees.... FIDO's 2% cash back credit card it also an easy way to go--although we haven't done that, but it would be much easier....