401k: Rollover, IRA or ?

[Billy_McSkintos]

I thought I'd ask this as I am not sure of the best option to take or why.

I have just started a new job which offers a 403b through Fidelity (cost: unknown)
I have a 401k with a  previous company managed by a local company but in Vanguard 2045 (cost: $45/y)
I just found ~ $1000 in a 401k from another previous company in Fidelity 2050 (cost: $30/y)

So, should I rollover my 401k's into the 403b an IRA, roll one 401k into the other or something else? Why? What should I be considering?

Thank you for any advice, opinions you can offer.

[Joel]

What are the management expense ratios? It looks like you converted to dollar fees, but it's not clear how you came up with those numbers.

There's nothing wrong with leaving 401ks where they are if the fees are low.

You want to be careful about rolling into an IRA if you ever want/need the ability to make back door Roth IRA contributions. If not, rolling the funds over to an IRA will likely have the lowest fees.

On a side note, once you are no longer an active employee most accounts do not let you roll another 401k balance into them.

[Billy_McSkintos]

Thank you Joel, very helpful.

I am not sure what the expense ratios are or where I can find them. Those fees are just the quarterly record keeping fees. Perhaps I foolishly assumed that was it?

[Joel]

Thank you Joel, very helpful.

I am not sure what the expense ratios are or where I can find them. Those fees are just the quarterly record keeping fees. Perhaps I foolishly assumed that was it?

The individual funds that you are invested in should also have management expense ratios. You should be able to find them by looking at the fund prospectus.

If you can roll these over into your 403b, you will want to look to see what fees that account has as well. (I'm not familiar with 403b accounts and do not know if you can rollover 401ks into them).

[Billy_McSkintos]

So the cost of my 401k would be:

Fund Management Expense Ratios
+
Record Keeping Fees
+
Any other BS Fees?

What is a good number e.g. <1%?

[Shark]

IRA Pro: You will have full access to the entire market of choices if you are an active investor.

IRA Con: You will have full access to the entire market of choices if you are an active investor.

Seriously, I used to always say roll it over to an IRA but I have the potential of needing backdoor Roth IRA contributions within the next few years. I'm going to have to convert (and pay income taxes at a higher bracket than I earned the dollars at) my rollover account if I want to be able to do Roth in the next few years. Something to be educated about for sure.

[Joel]

So the cost of my 401k would be:

Fund Management Expense Ratios
+
Record Keeping Fees
+
Any other BS Fees?

What is a good number e.g. <1%?

My IRA at Vanguard has no record keeping fees and expense ratios of 0.05% for admiral shares (>10k) of Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) and 0.12% for admiral shares (>10k) of Vanguard Total International Stock Index Fund Admiral Shares (VTIAX).

When comparing your old 401k to your new 401k, the money should likely stay at which one is better (and offers the right combination of funds that meets your asset allocation needs).

[Billy_McSkintos]

Thank you all!

The Vanguard 2045 ratio is pretty low (0.16%) and the additional fees that the management co. charge are not too bad, I think I'm going to leave the larger portion of my 401k there.

My new 403b will be a Fidelity Freedom 2045 Fund with a much higher expense ratio of 0.65% with a similar asset allocation so it doesn't seem worth it roll it in to that.

Since I neither fully understand how to use a Roth IRA nor the pros, cons and backdoors of one, I am just going to leave that alone until I do.

[RPNnerd]

IRA Pro: You will have full access to the entire market of choices if you are an active investor.

IRA Con: You will have full access to the entire market of choices if you are an active investor.

Seriously, I used to always say roll it over to an IRA but I have the potential of needing backdoor Roth IRA contributions within the next few years. I'm going to have to convert (and pay income taxes at a higher bracket than I earned the dollars at) my rollover account if I want to be able to do Roth in the next few years. Something to be educated about for sure.

When I inquired about IRA and backdoor Roth with Merrill Edge, I found out that I could just open a new IRA -- supply it with new money and transfer that money into a (newly made) Roth IRA.

They did not charge for creating the account and I left $5 in it so that I could use that same account again.  I have/had an IRA from a 401k rollover already.  And I sure didn't want to mix ungrown principal into that IRA for the backdoor Roth IRA.

There are ways and different investment places can help in different ways.

[Joel]

Thank you all!

The Vanguard 2045 ratio is pretty low (0.16%) and the additional fees that the management co. charge are not too bad, I think I'm going to leave the larger portion of my 401k there.

My new 403b will be a Fidelity Freedom 2045 Fund with a much higher expense ratio of 0.65% with a similar asset allocation so it doesn't seem worth it roll it in to that.

Since I neither fully understand how to use a Roth IRA nor the pros, cons and backdoors of one, I am just going to leave that alone until I do.

What about the 401k that has the Fidelity 2050? Would it make sense to roll that over to your 403b? Can you roll it over to your old 401k?

Depending on the fees, it may make sense to roll it into an IRA. Especially since you have no plans to make backdoor roth IRA contributions (when your taxable income levels are too high: https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2016)

[Billy_McSkintos]

I think its too late to roll it into my old 401k but will likely roll it into the new 403b once that is up and running.

[nolesrule]

IRA Pro: You will have full access to the entire market of choices if you are an active investor.

IRA Con: You will have full access to the entire market of choices if you are an active investor.

Seriously, I used to always say roll it over to an IRA but I have the potential of needing backdoor Roth IRA contributions within the next few years. I'm going to have to convert (and pay income taxes at a higher bracket than I earned the dollars at) my rollover account if I want to be able to do Roth in the next few years. Something to be educated about for sure.

When I inquired about IRA and backdoor Roth with Merrill Edge, I found out that I could just open a new IRA -- supply it with new money and transfer that money into a (newly made) Roth IRA.

They did not charge for creating the account and I left $5 in it so that I could use that same account again.  I have/had an IRA from a 401k rollover already.  And I sure didn't want to mix ungrown principal into that IRA for the backdoor Roth IRA.

There are ways and different investment places can help in different ways.

You need to be careful about the pro-rata rule if you have money in a traditional IRA in a year you make a Roth conversion involving non-deductible IRA contributions. You will end up leaving some of that basis in the traditional IRA and will have to pay taxes on part of the conversion.