Switching jobs and 401k question

do you have a roth IRA? if not, I'd roll that into a new roth IRA

and then start a new 401k with your new company

Rollover IRA

Best option imo.

quote:

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I'm just worried about not being able to hit the limit (5500) per year. I have a lot of bills and student loans.

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Even if you can't hit the limit you'll still benefit from whatever money you are able to put in.

I'd assumed you'd want to roll it over to a regular IRA so you don't have to pay taxes on the money right now.

Don't roll it over to your new company's 401k.. 401k's are extremely restrictive relative to IRAs and there is no benefit in rolling it over to your new company's 401k

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I'm just worried about not being able to hit the limit (5500) per year. I have a lot of bills and student loans.

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you don't have to hit the max....

I've yet to hit the max on my roth IRA, not even close yet really

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Aren't costs/fees sometimes lower in some 401ks than in IRAs?

I may have misunderstood that somewhere but if it's true, that would be a benefit

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For sure. I'd look at both based on costs/fees.

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Aren't costs/fees sometimes lower in some 401ks than in IRAs?

I may have misunderstood that somewhere but if it's true, that would be a benefit

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I'm sure that may be the case once, but that would be the exception. Most IRAs have much greater options at lower fund fees.

OP should look at the 401k options then compare to a Vanguard IRA. I would bet the IRA would be cheaper than the 401k.

Rolling over the 6k wouldn't count as a contribution, so you're fine there.

The IRA will likely always be much cheaper, and give you significantly more investment options.

Because it's a relatively small amount, I would roll it over to the 401k. I wouldn't want to bother with another account, unless you were planning on making contributions to the new IRA. Those contributions might not be deductible depending on your income anyway.

One other note -

If you roll it into your new copany's 401k, they may not allow you to withdraw it in the event you ever need it.

Plans are not required to allow in-service distributions of rollover accounts.

Your IRA, you can always take it (and pay the taxes and early withdrawal penalty).

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why traditional? It seems that rolling into a roth has more benefits, such as tax free distributions.

I've also read that if I expect to be in a higher bracket when I retire, then I should rollover to a roth. I would think that I would be making more money at that age?

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That is all correct. But the benefit of rolling it into a traditional IRA is that you don't get the tax burden right now. If you roll it into a Roth IRA, you will get hit with the tax burden this year.

Simply put:
Traditional = no tax now, taxed distributions (ie in 30 years)
Roth = taxed now, no tax on distributions

Generally speaking, if you have a long time until retirement and aren't making a ton of money now, I would roll to a Roth, pay the taxes now and get the tax-free income upon retirement.

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I was looking on vanguard to roll over my 401k, which funds do I choose? I honestly have no idea.

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If you truly have no idea and just want to "set it and forget it," just go with a Target Date Fund for now. For example, if you're 30 right now and want to retire when you're 65, go with the 2050 target fund VFIFX

If you want more risk for now and plan to adjust it as you get older, you're probably alright sinking it into a total stock market index fund VTSMX