401k rollover questions

[Sunny]

When you rollover your 401k to an IRA, is everything inkind?

My 401k has some separately managed account (SMA) choices that don't have a ticker. What would happen to those?

My 401k also has some really low fee index funds. They are institutional class so they are lower than what I could get with my account balance. Would I now pay higher fees?

I'm actually leaning towards not rolling over my 401k since I have access to trading equities if I desire. Are there any reasons to roll it over to an IRA if I am happy with my 401k?

 

[BenT]

No, everything is liquidated and the cash is transferred to your IRA. So you loose access to some 'propriety' funds (typically those that hold your company's stock).

You probably won't have access to those low cost institutional funds anymore. Sorry!

As for your last question, the usual advantage is getting access to buying a broader range of investments. Are you looking to roll into a Roth or regular IRA? There are req'd min. distributions (RMDs) for 401ks and regular IRAs, but not for Roths. Also, Roths pass on to heirs should you pass without tax implications as opposed to 401k's & regular IRAs. I'm sure there are other points, but I hope this is a good start for you.

 

[Matt]

When you rollover your 401k to an IRA, is everything inkind?

My 401k has some separately managed account (SMA) choices that don't have a ticker. What would happen to those?

My 401k also has some really low fee index funds. They are institutional class so they are lower than what I could get with my account balance. Would I now pay higher fees?

I'm actually leaning towards not rolling over my 401k since I have access to trading equities if I desire. Are there any reasons to roll it over to an IRA if I am happy with my 401k?

As Ben mentioned, it is more likely that you will liquidate, an ACAT transfer could move you in securities like for like, but that would then be dependent on the firm you move to.

You need to look at all fees - some 401(k) will offer low cost funds, but bolt on a 401(k) admin fee, which changes the price point completely. If your plan has any sort of overall admin fee then I would say 99% of the time you would be better off rolling over to Index funds externally.

There are a lot of considerations RE Roth Vs Traditional, one that is noteable is that you would incur a taxable event on both contributions and earnings if you convert from a 401(k) to a Roth (there is no such event if you transfer from a 401(k) to a Traditional IRA).

You can trade equities pretty much anywhere, even in the most boring of Vanguard accounts.

 

[Sunny]

Thanks for the info. My 401k is at Fidelity and I would likely keep it there. I've had Fidelity salespeople call me (and snail mail me) about rolling it over, which is why I've been looking into it.

I meant that my 401k account has the ability to trade equities (BrokerageLink). If I'm not mistaken, this is actually a pretty unique feature, as my current employer's 401k (also with Fidelity) does not provide this feature.

There are no admin fees on the account and the fund fees are really low. (For instance, I have access to VIIIX which has a fee of 0.02%. I wouldn't be able to invest in this myself outside the account).

I'm thinking it makes sense to keep this account as-is, though I need to think about whether or not I care about MRDs.

 

[Matt]

Thanks for the info. My 401k is at Fidelity and I would likely keep it there. I've had Fidelity salespeople call me (and snail mail me) about rolling it over, which is why I've been looking into it.

I meant that my 401k account has the ability to trade equities (BrokerageLink). If I'm not mistaken, this is actually a pretty unique feature, as my current employer's 401k (also with Fidelity) does not provide this feature.

There are no admin fees on the account and the fund fees are really low. (For instance, I have access to VIIIX which has a fee of 0.02%. I wouldn't be able to invest in this myself outside the account).

I'm thinking it makes sense to keep this account as-is, though I need to think about whether or not I care about MRDs.

Sounds like a good plan, I'd be in no rush to roll it out if you are certain that there are no other administrative costs. The brokerage link option is indeed somewhat harder to find in 401(k) but it is wide open in IRAs.

 

[Sunny]

Thanks!

 

[BenT]

Thanks for the info. My 401k is at Fidelity and I would likely keep it there. I've had Fidelity salespeople call me (and snail mail me) about rolling it over, which is why I've been looking into it.

I meant that my 401k account has the ability to trade equities (BrokerageLink). If I'm not mistaken, this is actually a pretty unique feature, as my current employer's 401k (also with Fidelity) does not provide this feature.

There are no admin fees on the account and the fund fees are really low. (For instance, I have access to VIIIX which has a fee of 0.02%. I wouldn't be able to invest in this myself outside the account).

I'm thinking it makes sense to keep this account as-is, though I need to think about whether or not I care about MRDs.

I have fidelity too for my 401k and this is my second employer with it. My first employer did not have the brokeragelink feature, but my current one does now. I don't know if this limitation exists for you, but only 15% of my portfolio (I think) can be invested through it.

Your old employer's 401k may even offer a pre 401k to roth 401k conversion ption if you're interested in having money invested post tax, but you would have to call to find out. Best of luck