I have two 401k plans at Fidelity; one for my current employer and one for a former employer. The website says I can roll the former one into a ira, but I want to roll it into my current plan. is that possible?
If not, is there any advantage to rolling it into an ira. Well yeah, if my current becomes a former also I can consolidate them into one ira, but until that happens, is there any advantage to a ira over a 401k?
Ask your current plan administrator whether your the plan allows rolling an IRA into it. If so, you can roll into a Conduit IRA, then roll that into your current 401k.
IRAs are usually advantgeous. You can invest in almost anything, while a
401k limits you to a selected set of funds. Although if it's at Fidelity, and they allow investing in most of their funds, that's not much of a limit (my company's 401k is at Vanguard, so our choices are mostly their index funds -- we also have a TD Ameritrade brokerage option, but they charge pretty hefty loads).The main advantage of 401k's versus IRAs is that they may allow you to take out loans.
401(k) advantage - If you are above the limit to contribute to a Roth, you can deposit to an IRA and convert to Roth. But if you already have IRA funds, any pre-tax dollars are pro-rated and you might have a tax bill as those dollars get converted. 401(k) advantage - If you separate from the company at 55 or older, withdrawals are not subject to a 10% penalty. Note - if you have an IRA, you can take Sec 72(t) withdrawals for 5 years or 59-1/2 and no penalty, but this is tricky, the 401(k) leaves huge flexibility.
IRA advantage - If the 401(k) has no Roth side, the IRA can let you manage your tax bracket via controlled Roth conversions. This may be simple, a $10K/yr conversion, or convoluted, multiple Roth accounts created so only the one that go up in value stay converted, the rest get recharacterized.
My 401(k) has few choices, but its S&P fund has a .02% expense. Staying with that for the long term.
On Tuesday, February 4, 2014 6:45:10 AM UTC-8, snipped-for-privacy@gmail.com wrote: | If not, is there any advantage to rolling it into an ira. | Well yeah, if my current becomes a former also I can consolidate them into | one ira, but until that happens, is there any advantage to a ira over a 401k?
There are arguments in both directions. One potentially major difference is in protection against bankruptcy claims and lawsuits. 401(k) plans are often better in that regard, although the details vary by state.
See, for example:
You also need to watch out for NUA (net unrealized appreciation) if you have highly appreciated company stock in the portfolio. In kind distributions from the 401(k) are not taxed at ordinary rates. The appreciation in price above cost basis is taxed at capital gain rates. Roll over that stock into an IRA and all distributions are taxed at ordinary rates.
If want to see the impact on taxes of an-kind distribution vs rollover, there is a calculator at:
That advantage is to *contributing* to a 401k. His question was about the pros and cons of leaving them in the 401k versus rolling them into an IRA. The above benefit actually requires you to roll them over first.
I read the question as keeping money in 401(k)s (the current one accepting all the money or staying with the two as they are) VS moving to IRAs.
At some point in his life, if he'd benefit from the back-door Roth, the advantage of having all other money in 401(k)s and not IRAs is the tax free yearly BDRoth deposit. Something to consider before rolling old
401(k)s to IRAs.
Many 401(k) also let you pick your own stocks, although you have to fill out a special form. But as you said there may be hefty fees.
A big disadvantagae of an IRA is that if you make a non-deductible contribution to the IRA and try to convert it to a Roth, you still pay tax because the IRA the converted amount is considered to have both a deductible and non-deductible portion. Say you have 95k in deductible IRA and you make a 5k non-deductible contribution to it, and convert that 5k to a Roth. Ideally that 5k conversion should be tax free, but because of the rules 95% of that 5k conversion is taxable.
Are there other non-tax issues, like IRA are more protected in case of lawsuits (just making that up), or something like that?
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