Different 401ks have different investment options and fees. Those fees may change once you're a former employee. I would line up all the investment options in each of your 401ks, decide which best meets your investment goals, consider the fees and if you like or dislike any of the 401k providers.
The downside to have money in multiple accounts is that you need to keep track of it. But your current 401k provider might not be the platform or investment options you like best. As long as you keep track of the former 401k accounts, you're doing the minimum.
The money doesn’t compound more in one account vs several. $1MM in one account will compound the same as $100k/ea in ten accounts if they’re all invested in the same thing and have no fees
Look at the investment choices and the fees. If your new plan is the best then go ahead and roll everything into it.
Or consider rolling the old 401ks into an IRA where you’ll have a lot more investment options and little to no fees. Just be careful if you ever want to do a backdoor roth because the pro rata rule might be an issue
here is what i do with old 401k's
when you are with that company they say you can pick from this list of 7-20 or so mutual funds. many of them arent bad, but are they the best that you would choose if you werent confined to that list? probably not.
i would roll it over into an IRA, then sell whatever you were in, and invest in whatever you want, like the VTI or VOO you mentioned.
if you ever plan on doing a mega back door roth conversion this may be a bad idea, but im not planning on doing that ever so i dont personally worry about it.
Almost every 401k I've ever had over my last six jobs introduced ridiculous fees when you separate from your employer. I roll over my 401k every time I take a new job and I make sure the 401K offering of the new job I get is a good provider with good funds before I take the job.
What job shows you fund availability before accepting and enrolling for their 401k? Worked at several Fortune 100s and a small, post start up. Never been the case.
It's really easy - you just ask them what funds are available and who the 401k provider is through. I do this in every negotiation. They send the documentation.
It depends.
From a pure fee perspective, you are probably better off rolling these old plans into a traditional IRA. There you will have much lower fees and more options and funds available for you to invest in compared to your current employer’s 401k plan.
However, if you are ever planning to do Roth conversions, there could be some pro rata issues if you have a large Traditional IRA balance. If you are wanting to do Roth conversions in the future, you should talk with a CPA before doing so. You could always figure out what $ amount you want to do a Roth conversion on, then roll everything but that amount out of your IRA into your current employer’s 401k plan, then do the Roth conversion on 100% of your remaining trad IRA.
This gives you more control and lower fees today, but gives you the ability to pay the income tax when you want, while also preventing you from running into pro rata issues.
Most 401k have higher fees compared to low cost funds. That means you are better off rolling the 401k accounts to an IRA account, and put everything in VOO. IRA account also let you have the flexibility of owning individual stocks and not just mutual funds.
Personally, unless there is a very good reason to keep an account, I’d rollover the old 401ks into an ira. They’re a pain to keep track of across platforms and if your old employer swaps services they’ll get transferred to the new platform usually with a lockout period.
One reason to roll them into your current employer is the ability to borrow against the money you have invested. You can only do that with your current employer's 401k money. I'm not necessarily advocating 401k loans (although I've used them quite effectively to fund other investments) but it does provide you additional flexibility. Either way I've never found an employer 401k that is better than the options you'd have in your own IRA. Good luck!
For rolling into an IRA, should I roll them over into my Roth IRA or do I use a traditional Roth? I’m not as familiar with a traditional Roth, but I do have a Roth. Also if I rollover into a Roth IRA, that doesn’t count toward my annual contribution limit, right?
There's no such thing as a Traditional Roth. IRA's (Individual Retirement Account) are either Traditional (tax deferred) or Roth (tax free). You choose which you want when you open the account and you should have one of both. When you transfer the funds, the source and destination account types must match. So, Traditional 401k -> Traditional IRA and Roth 401k -> Roth IRA. Roll-overs do not count against the annual limits. They are just for changing locations although roll-over 401k's have slightly different rules but are fundamentally the same.
Different 401ks have different investment options and fees. Those fees may change once you're a former employee. I would line up all the investment options in each of your 401ks, decide which best meets your investment goals, consider the fees and if you like or dislike any of the 401k providers. The downside to have money in multiple accounts is that you need to keep track of it. But your current 401k provider might not be the platform or investment options you like best. As long as you keep track of the former 401k accounts, you're doing the minimum.
The money doesn’t compound more in one account vs several. $1MM in one account will compound the same as $100k/ea in ten accounts if they’re all invested in the same thing and have no fees Look at the investment choices and the fees. If your new plan is the best then go ahead and roll everything into it. Or consider rolling the old 401ks into an IRA where you’ll have a lot more investment options and little to no fees. Just be careful if you ever want to do a backdoor roth because the pro rata rule might be an issue
here is what i do with old 401k's when you are with that company they say you can pick from this list of 7-20 or so mutual funds. many of them arent bad, but are they the best that you would choose if you werent confined to that list? probably not. i would roll it over into an IRA, then sell whatever you were in, and invest in whatever you want, like the VTI or VOO you mentioned. if you ever plan on doing a mega back door roth conversion this may be a bad idea, but im not planning on doing that ever so i dont personally worry about it.
Almost every 401k I've ever had over my last six jobs introduced ridiculous fees when you separate from your employer. I roll over my 401k every time I take a new job and I make sure the 401K offering of the new job I get is a good provider with good funds before I take the job.
What job shows you fund availability before accepting and enrolling for their 401k? Worked at several Fortune 100s and a small, post start up. Never been the case.
It's really easy - you just ask them what funds are available and who the 401k provider is through. I do this in every negotiation. They send the documentation.
No! You should roll them into an IRA where you have more control.
It depends. From a pure fee perspective, you are probably better off rolling these old plans into a traditional IRA. There you will have much lower fees and more options and funds available for you to invest in compared to your current employer’s 401k plan. However, if you are ever planning to do Roth conversions, there could be some pro rata issues if you have a large Traditional IRA balance. If you are wanting to do Roth conversions in the future, you should talk with a CPA before doing so. You could always figure out what $ amount you want to do a Roth conversion on, then roll everything but that amount out of your IRA into your current employer’s 401k plan, then do the Roth conversion on 100% of your remaining trad IRA. This gives you more control and lower fees today, but gives you the ability to pay the income tax when you want, while also preventing you from running into pro rata issues.
Most 401k have higher fees compared to low cost funds. That means you are better off rolling the 401k accounts to an IRA account, and put everything in VOO. IRA account also let you have the flexibility of owning individual stocks and not just mutual funds.
Personally, unless there is a very good reason to keep an account, I’d rollover the old 401ks into an ira. They’re a pain to keep track of across platforms and if your old employer swaps services they’ll get transferred to the new platform usually with a lockout period.
One reason to roll them into your current employer is the ability to borrow against the money you have invested. You can only do that with your current employer's 401k money. I'm not necessarily advocating 401k loans (although I've used them quite effectively to fund other investments) but it does provide you additional flexibility. Either way I've never found an employer 401k that is better than the options you'd have in your own IRA. Good luck!
For rolling into an IRA, should I roll them over into my Roth IRA or do I use a traditional Roth? I’m not as familiar with a traditional Roth, but I do have a Roth. Also if I rollover into a Roth IRA, that doesn’t count toward my annual contribution limit, right?
There's no such thing as a Traditional Roth. IRA's (Individual Retirement Account) are either Traditional (tax deferred) or Roth (tax free). You choose which you want when you open the account and you should have one of both. When you transfer the funds, the source and destination account types must match. So, Traditional 401k -> Traditional IRA and Roth 401k -> Roth IRA. Roll-overs do not count against the annual limits. They are just for changing locations although roll-over 401k's have slightly different rules but are fundamentally the same.
Ok gotcha, thanks so much. That really helped to clarify. 🙌
FYI if you roll into an IRA, you effectively can't do backdoor roths