Job change 401k questions

[ScottM]

In a few weeks I will be changing employers for the first time in a couple of decades. I know that my soon to be former employer, who manages my 401k, will allow me to transfer that money to an outside management company and I know how to do that to avoid the taxes on it. My question is for those of you who have done this.

1. Any pitfalls I should know about in accomplishing the transfer?

2. Did you consult a financial planner at all?

3. If you have transferred your 401k what company i.e. T.Rowe, Schwab, Fidelity, etc. did you go with?

4. Anything else I should know about?

 

[SCCutler]

Only immediate counsel is that you have a very limited timeframe within which to effect the transfer, or you will (1) have realized income on which you will be taxed, and (2) you will have the privilege of paying an early-termination penalty of 10%.

 

[jtheune]

The need to transfer a account quickly is very much based on what your former employer has set up. My wife has several 401K that are still with the former company's asset management group and there have been no tax issues with them.

As for pitfalls, make sure that you get the paperwork correct that it's a roll over and not a cashout as you will get hammered on a cashout. I work with Morgan Stanley on mine and have not had a issue with the 2 rollovers I've done over the years.

 

[TknoFlyer]

1. Any pitfalls I should know about in accomplishing the transfer?

I've switched jobs more than a few times over the last couple decades. I've had no issues transferring any of the old 401(k)s - even ones that had been dormant for many years. I'm not aware of any penalties for transferring years old accounts. There were fees for former employees keeping the old funds, but no IRS issues that I had to deal with.

2. Did you consult a financial planner at all?

Not for any specific transfer. We do periodically consult with a fee-based planner and he provides his opinion on the distribution of the rollover 401(k) accounts and I adjust as I see fit.

3. If you have transferred your 401k what company i.e. T.Rowe, Schwab, Fidelity, etc. did you go with?

Fidelity was the recommendation of my advisor due to the availability/selection of no- to very low cost funds. They (like all of them) have a range of qualifying funds to match your risk tolerance and other considerations.

Edit: BTW and FWIW, I don't have experience with the others, but Fidelity does allow Quicken to update account information via online updates.

4. Anything else I should know about?

Not in my experience. It sounds like you've already got a handle on the transfer process, so it should be a simple matter of filling out the current institution's paperwork telling them of the new account info. The rest should be automagic. I haven't had to handle any checks for this purpose in many, many years as these transfers are generally bank-to-bank these days.

 

[TMetzinger]

I had a very good experience rolling over my employer 401Ks to a Fidelity IRA. Took very little paperwork and there were no tax liabilities. Where people get in trouble is when they cash out their 401K and don't deposit the money into an IRA within the (60 day?) regulated timeframe. Rollovers completely bypass this concern.

 

[Matthew]

Like others have said: It's not a big deal. I've not run into a case where there were any time limits - if you don't move it right away, the 401(k) just stays with your former company. Rolling it into another IRA doesn't open you up to tax risks unless you withdraw it first and THEN deposit it. The IRS doesn't want you to get your hands on it at all, that's why you let the bank or whatever do it for you.

I don't know about the way it's 'normally' handled, but when I (and my wife) have done this in the past, we transferred from the 401(k) into an IRA and NOT into the new 401(k) with the new company. I don't know if a company 401(k) will let you do that anyway.

You end up with an IRA with your old 401(k) in it, and a new 401(k) with your new company. If you change companies again, you can keep rolling the 401(k)s into that IRA.

I'm no financial genius, by any means, so there may be better wayts to do this, but I think this is the route that is mostly used.

 

[Gary]

My question is for those of you who have done this.

1. Any pitfalls I should know about in accomplishing the transfer?

Other than making sure the paperwork is COMPLETELY correct, and you meet all the time deadlines, no big pitfalls. The assumption is that your new IRA will have more investment options availible than your new employer's 401k.

2. Did you consult a financial planner at all?

No.

3. If you have transferred your 401k what company i.e. T.Rowe, Schwab, Fidelity, etc. did you go with?

Went with Fidelity. The Fidelity "advisor" pretty much took care of all the paaperwork, knew what he was doing and helped set up the initial distribution of the funds into different investment options. I was quite pleased with the service.

4. Anything else I should know about?

Not really. May be worth the exercise to see if converting any of it to a Roth makes long term sense. Doing that conversion is VERY dependent on one's situation - one size DOESN'T fit all.

Congratulations and best of luck with the job switch!!

Gary

 

[CJones]

I've been playing in the 401k world for a whopping 9 months and Fidelity has offered everything I have needed. Site is very easy to navigate and research on individual funds is actually pretty easy to get to, with actual historical numbers available at a click.

I have no experience with any other companies, but Fidelity has made it easy enough for me to 'get in the game', that I haven't even looked around for other options.

 

[gprellwitz]

Scott, As others have said, it's pretty easy. Like most here, we went with Fidelity for a rollover IRA. Congrats on the new job!

 

[ScottM]

Not really. May be worth the exercise to see if converting any of it to a Roth makes long term sense. Doing that conversion is VERY dependent on one's situation - one size DOESN'T fit all.

Roth conversions are off the table for me and my situation. this will be a straight rollover

Congratulations and best of luck with the job switch!!

Gary

We'll see how it goes. I got my offer letter and accepted today. Still a lot of unknowns, the new company states they will honor our seniority for vacations calculations and such which will be nice. All the background check, pee testing, and benefit paperwork is a bit overwhelming.

 

[Ted]

My company's 401k is with Fidelity. I'm happy with it. I suppose the real question will be if I'm still happy with it in 40 years.

 

[ScottM]

My company's 401k is with Fidelity. I'm happy with it. I suppose the real question will be if I'm still happy with it in 40 years.

The new company uses Fidelity. That is good to hear that you are happy. My present employer uses northern Trust and I am not very happy with the investment choices and the website to monitor the account. But nothing I can do until I am not employed by them.

I also have a portfolio with T. Rowe Price and I like them. But I am not sure how their IRA are and will have to do some checking.

 

[Everskyward]

The new company uses Fidelity. That is good to hear that you are happy. My present employer uses northern Trust and I am not very happy with the investment choices and the website to monitor the account. But nothing I can do until I am not employed by them.

I also have a portfolio with T. Rowe Price and I like them. But I am not sure how their IRA are and will have to do some checking.

My employer also uses Fidelity for their 401(k). I have an old IRA with T. Rowe Price and and conventional account at Charles Schwab and I don't have complaints with any of them.

 

[Sam D]

The new company uses Fidelity. That is good to hear that you are happy. My present employer uses northern Trust and I am not very happy with the investment choices and the website to monitor the account. But nothing I can do until I am not employed by them.

I also have a portfolio with T. Rowe Price and I like them. But I am not sure how their IRA are and will have to do some checking.

You might want to pick Fidelity or T. Rowe simply for the convenience factor (i.e. fewer places to "look" to track your investments). I'd say whether you talk to an advisor or not really depends on you, your goals, and your proclivity for DIY. Finally, would suggest working with whomever you decide upon to arrange the roll-over. They'll give you chapter and verse in how to effect the rollover to make it as easy as possible (i.e. don't cash out from NT and then start looking for a place to put it).

 

[Ted]

The new company uses Fidelity. That is good to hear that you are happy. My present employer uses northern Trust and I am not very happy with the investment choices and the website to monitor the account. But nothing I can do until I am not employed by them.

I also have a portfolio with T. Rowe Price and I like them. But I am not sure how their IRA are and will have to do some checking.

To elaborate a bit more, Fidelity's options that I've used are mutual funds that are aimed at specific strategies depending on your goals. Their tracking tools aren't great for looking at individual investments, but give you a good broad picture. The details are harder to get. I like the options that they have for investing.

I suppose the big thing I'm happy with is that my investments are overall not doing poorly in the 4 years at this company, even when you factor in the big dip in the markets. Although that probably has more to do with a sound investment strategy than Fidelity themselves.

 

[Gary]

Their tracking tools aren't great for looking at individual investments, but give you a good broad picture. The details are harder to get. I like the options that they have for investing.

True, Fidelity's tracking tools are not the greatest, but still not bad. Morningstar, IMHO has the best (or maybe I understand their logic?). One nice thing about Fidelity is the ability to "consolodate" different accounts (410k, IRA, brokerage) into a single statement.

I suppose the big thing I'm happy with is that my investments are overall not doing poorly in the 4 years at this company, even when you factor in the big dip in the markets. Although that probably has more to do with a sound investment strategy than Fidelity themselves.

Good for you!!! It has been a tough couple of years. Sometimes not losing is winning!

Gary

 

[CJones]

I suppose the big thing I'm happy with is that my investments are overall not doing poorly in the 4 years at this company, even when you factor in the big dip in the markets. Although that probably has more to do with a sound investment strategy than Fidelity themselves.

This is the first job where I've had company-matching 401k. I was really excited when I crossed the 90-day employment threshold to be able to enroll. After a couple of paychecks I thought 'I should go look at ALLL that free money I have now'. Boy was I surprised when it said "YTD change: -3.5%". WTH!? I've only been in a month and I'm already in the hole!? ha.

Last I looked a couple of weeks ago, it had turned around to the slight positive, so all is well. Of course, +2% of $3 is a lot different than +2% of $500, so it's all relative.

 

[Ted]

True, Fidelity's tracking tools are not the greatest, but still not bad. Morningstar, IMHO has the best (or maybe I understand their logic?). One nice thing about Fidelity is the ability to "consolodate" different accounts (410k, IRA, brokerage) into a single statement.

Exactly. I like that about Fidelity very much, since the total number is really the one that matters most. What I'd like to know how to do is move my investments around, or maybe I'm just not able to do that.

Good for you!!! It has been a tough couple of years. Sometimes not losing is winning!

Ain't that the truth! But in a time when many people just stared panicing and pulled all their money out, I kept on investing.

This is the first job where I've had company-matching 401k. I was really excited when I crossed the 90-day employment threshold to be able to enroll. After a couple of paychecks I thought 'I should go look at ALLL that free money I have now'. Boy was I surprised when it said "YTD change: -3.5%". WTH!? I've only been in a month and I'm already in the hole!? ha.

Last I looked a couple of weeks ago, it had turned around to the slight positive, so all is well. Of course, +2% of $3 is a lot different than +2% of $500, so it's all relative.

I remember looking at my Fidelity statement online at some point when things were as bad as they got and seeing something like -53% rate of return for the year. But I kept on dumping money in and now not only am I showing a good rate of return for the year this year, but looking at my overall money from when I started the job I'm actually still ahead. If nothing else, getting the employee matching is like getting another however much added on to your salary (in my case 5%), but even not counting that as an instant gain, I've still made money in the past 4 years.

 

[ScottM]

This is the first job where I've had company-matching 401k. I was really excited when I crossed the 90-day employment threshold to be able to enroll. After a couple of paychecks I thought 'I should go look at ALLL that free money I have now'. Boy was I surprised when it said "YTD change: -3.5%". WTH!? I've only been in a month and I'm already in the hole!? ha.

Last I looked a couple of weeks ago, it had turned around to the slight positive, so all is well. Of course, +2% of $3 is a lot different than +2% of $500, so it's all relative.

For 401k you have to think long term. Avoid watching the returns monthly or weekly. I look twice a year and at one of those reviews I also recheck my strategy and goals.

 

[JeffDG]

I think the important part is to look at a host of IRA options and find one with the options you want. Look at the funds available to the IRA.

Now the one thing that mitigates against moving from the old 401(k) to the IRA is creditor protection. Other than that, good luck in the new job!

 

[ScottM]

Other than that, good luck in the new job!

Thanks. Just an FYI it is not a new job, it is a new employer. I don't even change desks.

 

[JeffDG]

Thanks. Just an FYI it is not a new job, it is a new employer. I don't even change desks.

Your job got outsourced to a contractor, eh?

 

[Gary]

Exactly. I like that about Fidelity very much, since the total number is really the one that matters most. What I'd like to know how to do is move my investments around, or maybe I'm just not able to do that.

Are you trying to move money from say... a 401k account to an IRA account? I can check, but don't think you can do that without doing a bunch of gyrations and probably triggering some tax implications. If you are trying to move investments within an account, like a 401k, there isn't any reason you can't do as you please using the "action" tool on the on-line account summary page.

If you are trying to make an IRA contribution from a personal, taxable brokerage account, that is easily done on-line.

Gary

 

[Sam D]

If you are trying to move investments within an account, like a 401k, there isn't any reason you can't do as you please using the "action" tool on the on-line account summary page.

This will depend upon your company's plan (e.g. how many transfers are allowed and when) and what investment options are part of that plan.

 

[ScottM]

Your job got outsourced to a contractor, eh?

Nope. My employer changed because the new company bought the division I was transferred to earlier this year.

My current company is splitting into two pieces. One of those pieces is exiting the cellular business and sold my division to a competitor.

 

[Gary]

This will depend upon your company's plan (e.g. how many transfers are allowed and when) and what investment options are part of that plan.

Guess we have a good 401k plan. Unlimited transfers. Agree that it is limited to the options provided.

Gary

 

[Ted]

Are you trying to move money from say... a 401k account to an IRA account? I can check, but don't think you can do that without doing a bunch of gyrations and probably triggering some tax implications. If you are trying to move investments within an account, like a 401k, there isn't any reason you can't do as you please using the "action" tool on the on-line account summary page.

Sure enough - I learned something!

That said, I'm pretty happy with things as they are. So it's working out nicely for me. I'll keep dumping money in and hopefully keep on not losing it by the time I retire.

 

[Cap'n Jack]

Fidelity, T. Rowe Price, Vanguard all have people you can call the make sure you have the correct forms and to help with the transfer of funds. You'll be paying these people (indirectly) so might as well use their services.

 

[wsuffa]

I've rolled from a 401K to a rollover IRA a couple of times. I have NOT rolled from one 401K into another, though that is an option.

The one time I rolled from a Fidelity plan to a self-managed (online broker) rollover IRA, Fidelity put a really, really hard sell on to keep my funds with them (open individual account) & made it more difficult than it needed to be.

Pitfall to watch for: if you roll from a 401K into a rollover IRA, keep the account separate from any other IRA you have. If you keep it separate, you may have the option to roll it back into a 401K if you choose later. If you co-mingle with other IRA funds that you might have you lose any chance at that option (talk to a good tax advisor).

I subsequently converted one of my 2 rollover IRAs to a Roth (during a year where I have very little income). It was smooth and painless.

Fidelity has the 401K plans of many big companies, and is good at managing 401K programs. They are not necessarily the low-cost provider, and if you have outside financial counselor or you are able to self-direct, you may find one of the brokerage companies (etrade, scotttrade, tdameritrade, etc) to be a more cost effective choice with as as many options as Fidelity. I would stay away from the high-cost brokerages like Merrill, Solomon, and the like.

 

[flyersfan31]

It is no big deal to transfer a 401k. Nor is it a big deal to transfer that to an IRA, should you choose.

Sticking with Fidelity would be the most painless way to go. Convert it to an IRA account if you wish.

I'm actually with Schwab for most of my stuff, but do have a Fidelity IRA converted from a Fidelity 401k. No big deal.

What's more important is: do you get to pretend that you were fired, and get a week or three of freetime??????

 

[ScottM]

What's more important is: do you get to pretend that you were fired, and get a week or three of freetime??????

Sadly no.

 

[JeffDG]

You know what's worse than going through a divestiture like that, where you get moved over without any input from you...

I once quit my job and moved to a competitor...on day 1, the President of the new company calls me in for a meeting..."So, we're buying your old company..." Grrrr...I just escaped them dammit!!!

 

[ScottM]

You know what's worse than going through a divestiture like that, where you get moved over without any input from you...

I once quit my job and moved to a competitor...on day 1, the President of the new company calls me in for a meeting..."So, we're buying your old company..." Grrrr...I just escaped them dammit!!!

That would truly suck.

Actually I did have a little input. I was formally with the corporate research labs until this past July. The split in my company was well known and it was going to occur in Q1-2011. The research labs were being shut down, I know something was going to be changing for me. In mid June I was offered a nice severance package or a transfer to the networks group. At that time the ink on the sale of networks was not yet put on paper but I was discreetly told that it was almost a sure thing. I knew if I accepted the transfer that I was going to be traded but no details of that trade were told to me. Several people who I trust, advised me to take the transfer. I was really ready to retire and do something different. It is not like I actually need the money from this job and there are other things I would prefer to do. I may still change my career focus next year.