New Company, Old 401k

I worked for a company with a really good 401k plan. Then, I left that company.

Now I am working for another company, but want to put money (before taxes) into the previous 401k. Talking to our wiz in accounting, he sez it isn't possible. But, I CAN move it into the new companies 401k plan (which isn't very good).

So here is my dilemma: do I open a SECOND 401k (where I may lose money in the long run) OR pay post-tax dollars to the previous 401K plan (which is currently running ahead of inflation)?

Or is this just a YMMV situation?

Reply to
Lloyd Sargent
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Roll the old 401K into a self managed rollover IRA. Practically all the brokerages and MF companies will set up a rollover IRA for you.

Reply to
PeterL

If the OP's old 401k plan really is "really good", why roll it over?

I still have a big chunk of money in a 401k plan from two jobs ago because it offers some funds I can't get access to in an IRA account: access to institutional-class shares with lower expenses but without the minimum investment requirements, some really good funds that are closed to new investors, and load funds with the load waived. Right now my money in that account is split between LSBDX (institutional shares) and LLPFX (closed fund), and I'm quite happy with those two choices. I have other investments in a Roth IRA and taxable account, plus my current employer's 401(k) plan.

-Sandra

Reply to
Sandra Loosemore

Maybe he should or maybe shouldn't. First we need to define "good". Is it becuase of the great profit sharing and employer match (that's gone now)? Or maybe its the fees (although the low expense ratios of ETFs and Index funds are almost impossible to beat)?

WHY he thinks its "good" will really be the determining factor.

Reply to
kastnna

Hmmm, what happened that you are less cynical than your prior posts? Or did you just rush the typing? :)

I caught this point as well. I've noted (ok, bragged) that my 401(k)'s S&P fund charges 5 basis pts. I'd be hard pressed to roll over and jump to 10.

(one friendly warning. Prior to rolling over a 401(k), one should see if they have any post tax IRA money. If they intend to convert to Roth, all IRAs are aggregated to determine what's taxable. If they have minimal pretax IRA money, they can convert in 2010 with little tax impact. Once that 401(k) is rolled over, it's part of the total IRA balance. This may not apply to all, but it should be considered for clients to whom it applies.)

Disclaimer - this is not a tax tail wagging anything. The above is independent of the asset allocation proper for the account owners.

JOE

Reply to
joetaxpayer

I wouldn't make it a high priority - if and only if the old company *itself* is also really good. Even if the 401k is awesome - low costs, great funds, etc - if the company which sponsors it goes under or has other issues, it can be a nightmare for the former employee to get at his money. That happened to me after leaving a very small company. The former employee needs to funnel requests for rollovers, etc through the former employer, *not* the 401k provider.

So unless the old 401k has just *fantastic* funds and the former employer is some large and solid company (ie. a fortune 500 co), I'd definitely move the 401k to a rollover IRA pretty quickly.

As far as the OP's situation, he asked if he could somehow put more money into the old employer's 401k since the new employer's stinks. No. He should max out the new

401k at least up to the point of an employer match, and then consider other options - Roth or regular IRAs, mainly.

Frankly, unless the new 401k absolutely stinks, I'd max it out regardless of the match - with the hopes that (a) it could be improved or (b) nowadays, folks stay at jobs only a few years in general - and then it could be rolled over to an excellent IRA. A couple of years of higher expenses than you'd like may be overcome by having a greater proportion of one's wealth in a tax-favored account later on, once it can be moved over to a better account.

Again, I'd only do that if that former employer is *very* solid and easy to deal with.

Great funds, certainly (and especially cool to be in the Longleaf fund), but do make sure to weigh that against having to deal with the former employer.

Since my unfortunate lesson (which did get resolved, though it took a little detective work to find someone who could deal with it), I've changed jobs again and this time, rolled the 401k over within a couple of months.

Reply to
BreadWithSpam

Thanks everyone! You've given me some food for thought. Indeed the old company is a multinational in the energy biz. I don't see it going away anytime soon.

Cheers!

Reply to
Lloyd Sargent

Asset allocation drives everything. With that in mind, you can figure out whether your old 401K's options mesh with future contributions going into your new 401K. For example, you say your new 401K is not as good. Are the options not as good all around or is there 1 or 2 good funds -- say a S&P500 index fund that has far lower expenses than the other otpions. If so, you would direct all new 401K money into that fund and then look at your old 401K to cover international, small cap, bonds, reits, etc -- whatever else your AA calls for. At that point, you would compare whether your old 401K's plan is better than a rollover IRA at Vanguard or ETFs at a discount brokerage for those categories missing or not acceptable in your new plan.

Reply to
wyu

Well, in my case, the former employer is Intel, and their 401(k) plan is managed by Fidelity, which also manages my current employer's plan, so everything is accessible from one web site. Not a big deal.

That said, I've been planning to do a rollover and Roth conversion on this money eventually. I just don't see any particular urgency about it.

BTW, I've lamented before that my current employer's plan isn't nearly as good as Intel's, in terms of the selection of funds. A big company has the leverage to negotiate a much better package on behalf of their employees, than a small company who's stuck with whatever standard basic plan Fidelity offers, filled with a couple dozen mediocre Fidelity funds. There's enough choice that you could put together a reasonable asset allocation, but none of the funds are ones I would pick for myself.

-Sandra the still-cynical ;-)

Reply to
Sandra Loosemore

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