My son has two 401k plans; one with a former employer and one with his current employer. They are both at Fidelity, and have the same investment.
Can he move the old one into the new one? Any good reasons to do that, or to not do that?
What are the expenses within the 401(k) accounts? If there's no .10% S&P choice, I'd move the funds to an IRA.
Does the new company offer a Roth 401(k)? If not, the option to convert the transferred IRA to a Roth IRA is appealing even if not imminent.
Does the new employer offer a 401(k) loan option? If so, having $100K in that account might be a good thing, although the loans are a length of rope that can easily hang the borrower.
There are probably a few other pro/con to go either way.
I will ask him about investment options. Right now both are invested in the same fund. It has a 0.78% expense and has underperformed the S&P500 rather badly; despite being 92% equity.
He only has $5000 in each account, so it is not a huge deal, but still...
The ETF VOO (Vanguard's S&P) sports a .05% fee. 1% is only $50, but decades of compounding the excess fee adds up fast. When one's 401(k) passes $1M, .78% is $7800, vs $500 for the VOO. $7300 is more than most of us save each year, why throw it away in excess expenses?
I can't think of a good reason not to consolidate (just make sure to do it trustee-to-trustee so that the former employer doesn't withhold 20%). Unless the fees charged to you at the new employer are higher (e.g. expense ratios [different share class of funds], any annual charges [rare], loan fees, etc.)
A reason to consolidate is that if the old account is very small (under $5K), the former employer has the right to close it out.
A transfer of a qualified plan to your current employer's qualified plan can only be accomplished if the current employer's plan document has a provision that allows it. Not all employer plans allow for transfers in.
Alan wrote: : On 9/26/2014 7:18 AM, Mark Freeland wrote: : > On 9/23/2014 7:22 PM, Troubled wrote: : >> My son has two 401k plans; one with a former employer and one with his : >> current employer. They are both at Fidelity, and have the same : >> investment. : >> : >> Can he move the old one into the new one? Any good reasons to do : >> that, or to not do that? : >> : > I can't think of a good reason not to consolidate (just make sure to do : > it trustee-to-trustee so that the former employer doesn't withhold 20%). : > Unless the fees charged to you at the new employer are higher (e.g. : > expense ratios [different share class of funds], any annual charges : > [rare], loan fees, etc.) : > : > A reason to consolidate is that if the old account is very small (under : > $5K), the former employer has the right to close it out. : > : A transfer of a qualified plan to your current employer's qualified plan : can only be accomplished if the current employer's plan document has a : provision that allows it. Not all employer plans allow for transfers in.
Even f the plans are small, as they oftne are for young people, wouldn't it be better to move a plan form an ex-employer to an IRA, independent of the new employer? Perhaps it could even be added to over time or, perhaps, if the person is not, currently a high earner, be changed to a Roth with its added flexibility and the abilit to supply tax free retirement income even on the gains made throug the years. As a retiree, I am now seeign that that is a good idea:-)
Wendy Baker
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