401k rollover

[cycloner29]

1) I’ll go one step further: some 401k are darn near impossible to get money out of. The rule of 55 should never affect you if you have some non-qualified savings (which you should).

2) Never come to CF for financial advice. The amount of misinformation in this thread is astounding.

3) Seriously, though, roll it to an IRA. That puts it in your control, not your former employer.

This should get nominated for post of the year! "Never come on here for advice....seriously though roll it into an IRA."

 

[RonBurgundy]

Roll it over into a self-directed IRA and if you can afford it and are relatively young, convert it to a Roth IRA. Tax rates when you retire are almost going to be certainly higher than today, and your IRA earnings will be tax free.

 

[Rabbuk]

Does your new employer for sure take rollovers?

 

[capitalcityguy]

This depends on the provisions that the employer offers in their plan.

It is usually 59.5 at a minimum to withdraw and avoid the penalty if you are taking it as cash.

Not correct. The 55 vs 59 1/2 rule is in the IRS Code.

 

[brianhos]

Does your new employer for sure take rollovers?

I think so, but I was really considering just moving it to a Vanguard IRA, which seems like the consensus choice.

 

[capitalcityguy]

Don't move it to the new employer's plan. Move it to an IRA(s). Yes, you will have another account to manage but you will suffer no tax consequences (unless you convert part/all of it) and you will have complete control over the money forever, whereas if you move it to your new employer's 401(k) it's locked in there until you change employers again.

Most employer plans have hidden administrative fees. I doubt any can match the low costs of Vanguard index funds or ETFs, and most reputable firms have similarly-priced offerings.

A few comments:

The hidden fees comment was valid a decade ago. Not any longer. All fees must be disclosed and are provided via the participant fee disclosure (AKA 404(a)5 fee disclosure). Nothing can be hidden and you are required to be provided this information upon request.

If a person’s 401k account is with a large enough employer (i.e….thousands of employees) , it is likely they are receiving institutionally priced shares that are not available to the public. It is can very valuable to stay put. In fact, FINRA has been cracking down on Mutual Fund companies and salespeople that blindly encouraged people to move out of low prices 401k plans into retail priced IRAs without fully disclosing (or considering) what they gave up .

 

[capitalcityguy]

Switching jobs after a rather long time at one place, and I need to move my 401k. For those of you that have done this, what did you do? Move it into the new employers account or move it to something like etrade, ameritrade, vanguard?

Just to throw it out there, by law, you can't be forced out of your plan if you have a balance of at least $5,000. So I assume by "need", you really mean "want".

 

[brianhos]

Just to throw it out there, by law, you can't be forced out of your plan if you have a balance of at least $5,000. So I assume by "need", you really mean "want".

Did not know that, our HR dept made it seem like you had 60 days to do something.

 

[BLHawk]

Not correct. The 55 vs 59 1/2 rule is in the IRS Code.

What 55 rule?

65 is NRA but the sponsor of the plan can choose an ERA if they would like. It is far more common for 59.5 to be the magic age in a plan to withdraw money without penalty than something younger than that.

 

[capitalcityguy]

Did not know that, our HR dept made it seem like you had 60 days to do something.

Hummm…well… my assumption would be this.

Your former employer wants to keep their plan expenses down so they use careful verbiage to encourage former employees to make a decision to move their money ASAP. This suggests to me that your former employer is probably generous and picks up a lot of the expenses vs others that pass those expenses onto the employees/plan participants(and thus don’t really care of you stay or not) .

That said, they can’t force you out of the plan if you’ve ever had an account balance of $5k or greater (unless they are terminating the entire plan).

https://www.investopedia.com/retirement/401k-know-your-rights/

 

[capitalcityguy]

What 55 rule?

65 is NRA but the sponsor of the plan can choose an ERA if they would like. It is far more common for 59.5 to be the magic age in a plan to withdraw money without penalty than something younger than that.

Actually, when I mentioned the 55 rule, it refers to the 10% IRS tax penalty that you are normally assessed if you take out retirement funds prior to age 59 ½. There is an exception if you are terminated after age 55. You can take your money and not get hit sit the 10% excise tax(AKA early withdrawal penalty). I’m too lazy to look up ta the moment, but I think this only applies to ERISA qualified group plans (401k, 403b).

 

[BLHawk]

Actually, when I mentioned the 55 rule, it refers to the 10% IRS tax penalty that you are normally assessed if you take out retirement funds prior to age 59 ½. There is an exception if you are terminated after age 55. You can take your money and not get hit sit the 10% excise tax(AKA early withdrawal penalty). I’m too lazy to look up ta the moment, but I think this only applies to ERISA qualified group plans (401k, 403b).

I don't think that's correct.

 

[capitalcityguy]

I don't think that's correct.

google is your friend.

The IRS Rule of 55 allows an employee who is laid off, fired, or who quits a job between the ages of 55 and 59 1/2 to pull money out of his 401(k) or 403(b) plan without penalty. ... If you were to move assets into a rollover IRA upon leaving your job, you would not be eligible for early withdrawal under the Rule of 55.

https://www.thebalance.com/what-is-the-rule-of-55-2894280

 

[ricochet]

I don't think that's correct.

The following is from https://www.irs.gov/taxtopics/tc558 where it talks about the 10% penalty.

The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA:

1. Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions made from a qualified governmental benefit plan, as defined in section 414(d) if you were a qualified public safety employee (federal state or local government) who separated from service in or after the year you reached age 50.

This is what capitalcityguy and I are talking about. I think this means you don't get hit with the 10% penalty from a 401(k) but you do from an IRA, doesn't it?

 

[BLHawk]

google is your friend.

The IRS Rule of 55 allows an employee who is laid off, fired, or who quits a job between the ages of 55 and 59 1/2 to pull money out of his 401(k) or 403(b) plan without penalty. ... If you were to move assets into a rollover IRA upon leaving your job, you would not be eligible for early withdrawal under the Rule of 55.

https://www.thebalance.com/what-is-the-rule-of-55-2894280

Learn something new everyday, thanks!

 

[Cyforce]

In the process of moving 2 pensions, a 401K and a SEP into an annuity. If the market tanks I don't lose a dime then as it recovers I receive solid yields.

 

[Trice]

A few comments:

The hidden fees comment was valid a decade ago. Not any longer. All fees must be disclosed and are provided via the participant fee disclosure (AKA 404(a)5 fee disclosure). Nothing can be hidden and you are required to be provided this information upon request.

If a person’s 401k account is with a large enough employer (i.e….thousands of employees) , it is likely they are receiving institutionally priced shares that are not available to the public. It is can very valuable to stay put. In fact, FINRA has been cracking down on Mutual Fund companies and salespeople that blindly encouraged people to move out of low prices 401k plans into retail priced IRAs without fully disclosing (or considering) what they gave up .

Thanks for correcting me. I knew disclosure was better, I did not realize *everything* had to be disclosed now. But if you still have to ask for it (and most people still won't know to do so) that's not as upfront as an expense ratio. And while it's a good point about institutionally priced shares, when Vanguard is offering ETFs at 10 basis points or less it's hard to imagine getting a deal that good in any plan.

 

[twojman]

In the process of moving 2 pensions, a 401K and a SEP into an annuity. If the market tanks I don't lose a dime then as it recovers I receive solid yields.

Annuity...yikes! At least nobody in your family will have to fight over an inheritance.

BTW, you can build your own annuity (using different funds w/varying risk levels & equity/bond balances) without paying massive fees and be able to maintain your rights to your money.

 

[besserheimerphat]

This should get nominated for post of the year! "Never come on here for advice....seriously though roll it into an IRA."

I also like that he says the thread is full of bad advice, and then proceeds to tell the OP to do the same thing that 90% of the posters did.

 

[besserheimerphat]

Did not know that, our HR dept made it seem like you had 60 days to do something.

I'd bet that you need to declare a decision within 60 days, not that you have 60 days to leave the program.