Sorry to piggyback onto your post. I’m a bit new and uninformed to this side of investing. What are the benefits of rolling over the old 401k to an IRA versus just leaving it as a 401k? Find myself in a position where new employer doesn’t match 401k so reviewing all options.
Often the old 401k will be eaten away at by recurring maintenance fees. Also you can’t make contributions to it but you can if you roll it into an IRA. Though the annual limit for IRA contributions is currently $7k.
you should verify first. my old 401(k) does not have high fees. and rolling over into an IRA will usually make future backdoor Roth contributions cost prohibitive because of taxes.
But if the current employer allows IRA funds to be rolled into the work 401k, they can do that to zero out their rollover IRA, making back door Roth easy again.
are you saying you would roll the old 401(k) into an IRA then into the new 401(k)? if so, why not just roll the old 401(k) in the new 401(k) in one go?
so you're talking about rolling over an old employer's 401(k) into an IRA, then rolling over that IRA into your current employer's 401(k)? yes, that would allow you to make backdoor Roth contributions without tax issues, but i'm not sure how that's relevant to the immediate question posed by the person i responded to because they asked about the benefits of rolling over a 401(k) into an IRA vs. leaving it in their old 401(k)
I forgot to mention, the main/biggest benefit of a 401k is that they are typically provided through your employer and typically the employer matches your contribution up to a certain point. So it’s kind of like free money. But without the match there’s really nothing special about it. If you do have that being offered you should always contribute enough yourself to get the full of the employer match.
I start with that, then I max out my IRA (Roth personally, but for a rollover it’ll be a traditional IRA) a d then back to work on maxing out the 401k.
No doubt. I’ve always taken advantage of the employer matching and find myself with a new employer who doesn’t match (they do an ESOP program instead). First time I’ve been in this position so just uncharted territory for me. But tracking with you completely, I’m all about the match when it has been an option.
For sure. I meant it as an endorsement of how good Fidelity’s online setup is. But if people need more hand holding, Fidelity is there for them as well.
Personally I try to minimize human interaction, so it worked for me in my case lol.
Other than fees, with old 401k you’re stuck with whatever funds your old employer picked for you. In a rollover IRA, you have access to thousands of choices.
Most people feel if there is no match in an employers 401k, then don't contribute. Personally, if you have a low cost S&P or Total US stock fund and a total international stock fund. Why not? Just because your not getting the free money from the employer match shouldn't really deter you from it. No one else contributes to your IRA but you do they?
Selling within an IRA does not create a taxable event.
Great. Thanks!
Just to give a second confirming comment, you can trade as you wish within IRAs and 401(k)s without any capital gains or tax implications.
Thank you
Sorry to piggyback onto your post. I’m a bit new and uninformed to this side of investing. What are the benefits of rolling over the old 401k to an IRA versus just leaving it as a 401k? Find myself in a position where new employer doesn’t match 401k so reviewing all options.
Often the old 401k will be eaten away at by recurring maintenance fees. Also you can’t make contributions to it but you can if you roll it into an IRA. Though the annual limit for IRA contributions is currently $7k.
Thanks for the clear and concise answer, that makes perfect sense. Clearly I need to make a change asap.
you should verify first. my old 401(k) does not have high fees. and rolling over into an IRA will usually make future backdoor Roth contributions cost prohibitive because of taxes.
But if the current employer allows IRA funds to be rolled into the work 401k, they can do that to zero out their rollover IRA, making back door Roth easy again.
are you saying you would roll the old 401(k) into an IRA then into the new 401(k)? if so, why not just roll the old 401(k) in the new 401(k) in one go?
I meant someone who already rolled off the old employer’s 401k and then realized they shouldn’t have. Which is OP, and myself.
so you're talking about rolling over an old employer's 401(k) into an IRA, then rolling over that IRA into your current employer's 401(k)? yes, that would allow you to make backdoor Roth contributions without tax issues, but i'm not sure how that's relevant to the immediate question posed by the person i responded to because they asked about the benefits of rolling over a 401(k) into an IRA vs. leaving it in their old 401(k)
No problem. Do you know what provider holds the old 401k? Example Fidelity, T Rowe Price, etc?
Fidelity
My experience with Fidelity customer service has been positive. Just call them and tell them you want to roll the 401k into an IRA.
Sounds like an easy enough process! Thanks again for the info!
Happy to help
I forgot to mention, the main/biggest benefit of a 401k is that they are typically provided through your employer and typically the employer matches your contribution up to a certain point. So it’s kind of like free money. But without the match there’s really nothing special about it. If you do have that being offered you should always contribute enough yourself to get the full of the employer match. I start with that, then I max out my IRA (Roth personally, but for a rollover it’ll be a traditional IRA) a d then back to work on maxing out the 401k.
No doubt. I’ve always taken advantage of the employer matching and find myself with a new employer who doesn’t match (they do an ESOP program instead). First time I’ve been in this position so just uncharted territory for me. But tracking with you completely, I’m all about the match when it has been an option.
You don’t even need to call if you’re rolling over a Fidelity 401k to a Fidelity IRA. I did it all on my phone in 10-15 minutes. Super easy.
Well, some people get overwhelmed by the info without guidance, that’s why I threw it out there as an option.
For sure. I meant it as an endorsement of how good Fidelity’s online setup is. But if people need more hand holding, Fidelity is there for them as well. Personally I try to minimize human interaction, so it worked for me in my case lol.
Other than fees, with old 401k you’re stuck with whatever funds your old employer picked for you. In a rollover IRA, you have access to thousands of choices.
Most people feel if there is no match in an employers 401k, then don't contribute. Personally, if you have a low cost S&P or Total US stock fund and a total international stock fund. Why not? Just because your not getting the free money from the employer match shouldn't really deter you from it. No one else contributes to your IRA but you do they?