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Switching jobs and 401k question
Posted on 4/17/15 at 8:21 am
Posted on 4/17/15 at 8:21 am
Hi, I'm switching jobs this week and I have about 6k in my 401k from my previous job. I read something about rolling over to a IRA or transferring the balance to my new company's 401k. Can somebody explain these options? I have no desire to withdraw any money from it. Which option is the best for me?
TIA!
TIA!
Posted on 4/17/15 at 8:47 am to 337tigergirl
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
and then start a new 401k with your new company
Posted on 4/17/15 at 9:05 am to Salmon
Roll it into an IRA - no taxes.
Roll it into a Roth IRA - pay taxes on it.
You can also roll it into your new company 401k, but it would probably just be easiest to roll it to a vanguard Ira.
Roll it into a Roth IRA - pay taxes on it.
You can also roll it into your new company 401k, but it would probably just be easiest to roll it to a vanguard Ira.
Posted on 4/17/15 at 9:29 am to 337tigergirl
Rollover IRA
Best option imo.
Best option imo.
Posted on 4/17/15 at 9:34 am to Croacka
I currently don't have a IRA.
I'm just worried about not being able to hit the limit (5500) per year. I have a lot of bills and student loans.
Would it be easy to just transfer to my new company's 401k?
I'm just worried about not being able to hit the limit (5500) per year. I have a lot of bills and student loans.
Would it be easy to just transfer to my new company's 401k?
Posted on 4/17/15 at 9:41 am to 337tigergirl
quote:
I'm just worried about not being able to hit the limit (5500) per year. I have a lot of bills and student loans.
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
This post was edited on 4/17/15 at 9:43 am
Posted on 4/17/15 at 9:43 am to 337tigergirl
quote:
Would it be easy to just transfer to my new company's 401k?
Find out what funds they are using and the management fees at your new company.
You can probably do better having it separate in a Vanguard.
Posted on 4/17/15 at 9:45 am to 337tigergirl
quote:
I'm just worried about not being able to hit the limit (5500) per year. I have a lot of bills and student loans.
you don't have to hit the max....
I've yet to hit the max on my roth IRA, not even close yet really
Posted on 4/17/15 at 10:01 am to yellowhammer2098
quote:
there is no benefit in rolling it over to your new company's 401k
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
Posted on 4/17/15 at 10:04 am to Croacka
quote:
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
For sure. I'd look at both based on costs/fees.
Posted on 4/17/15 at 10:12 am to Croacka
quote:
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
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.
Posted on 4/17/15 at 10:27 am to Oenophile Brah
Thanks for all the info!
If I roll it into a Roth or vanguard IRA, I have over 6k.. How will that work?
If I roll it into a Roth or vanguard IRA, I have over 6k.. How will that work?
Posted on 4/17/15 at 10:45 am to 337tigergirl
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.
The IRA will likely always be much cheaper, and give you significantly more investment options.
Posted on 4/17/15 at 11:42 am to eng08
quote:
Roll it into an Traditional IRA - no taxes.
Roll it into a Roth IRA - pay taxes on it.
Posted on 4/17/15 at 2:21 pm to 337tigergirl
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.
Posted on 4/17/15 at 6:16 pm to 337tigergirl
Rolling into an IRA is the best bet, I've done that with mine. As someone pointed out, your investment choices are much better (buy individual stocks, ETFs, after/pre market buying/selling). Some mutual fund costs may be a little more but I think the increase in choices out weight that.
This post was edited on 4/18/15 at 5:35 am
Posted on 4/18/15 at 1:31 pm to CajunTiger92
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).
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).
Posted on 5/19/15 at 4:06 pm to tigersnipen
quote:
Roll it into an Traditional IRA - no taxes. Roll it into a Roth IRA - pay taxes on it.
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?
Someone please enlighten me!
I was looking on vanguard to roll over my 401k, which funds do I choose? I honestly have no idea.
Posted on 5/19/15 at 4:19 pm to 337tigergirl
quote:
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?
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.
quote:
I was looking on vanguard to roll over my 401k, which funds do I choose? I honestly have no idea.
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
Posted on 5/19/15 at 4:45 pm to Croacka
quote:
Aren't costs/fees sometimes lower in some 401ks than in IRAs?
depends on what you select for investments. But if you go for schwab or vanguard ETFs in your IRA, they are going to beat most 401ks.
Do not rollover to your current company 401k. 401k usually has very high fees all things considered.
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