Rollover/Transfer 401k without quitting

mastermind85

Level 2 Member
So I messed up terribly last year and when I switched jobs I rolled over my 401k from my relatively low fee merryl lynch fund to my new company's 401k John Hancock fund which the fees are astronomical (I mean lowest is index 500 and is 1.3% astronomical). Is there anything I can do in this situation without having to change jobs again (other than requesting they offer lower plans, which I have)? I am desperate for a solution to stop the bleeding of fees. Thanks!
 

GettingReady

Level 2 Member
So I messed up terribly last year and when I switched jobs I rolled over my 401k from my relatively low fee merryl lynch fund to my new company's 401k John Hancock fund which the fees are astronomical (I mean lowest is index 500 and is 1.3% astronomical). Is there anything I can do in this situation without having to change jobs again (other than requesting they offer lower plans, which I have)? I am desperate for a solution to stop the bleeding of fees. Thanks!
Some companies allow in service rollovers. We were able to do that with my husbands 401K account and move money to Vanguard. There were limits on how much and how often we could do a rollover. The plan administrator should be able to give you some information.
 

mastermind85

Level 2 Member
Some companies allow in service rollovers. We were able to do that with my husbands 401K account and move money to Vanguard. There were limits on how much and how often we could do a rollover. The plan administrator should be able to give you some information.
I already called John Hancock today and they said the only way to rollover was to not be employed anymore by my company :(. Anything else I can possibly do?
 

GettingReady

Level 2 Member
I already called John Hancock today and they said the only way to rollover was to not be employed anymore by my company :(. Anything else I can possibly do?
There may be different rules for money you roll into the plan versus money put in via employment. You can always withdraw the money but that results in a penalty, (unless you're 59 1/2 or its for education/hardship reasons), and you'll have to pay taxes.

Here's a calculator: https://www (dot) .wellsfargo.com/investing/retirement/tools/401k-early-withdrawal-calculator/
 

ibleed0range

Level 2 Member
If you withdrawal the same amount on an annual basis from your 401K you will not get hit with a penalty. The catch is you have to take that same withdrawal every year until 59 1/2. Its called the 72t and I am looking into it to retire early. I realize this info doesn't help the OP but it could be huge for some.
 

Matt

Administrator
Staff member
I already called John Hancock today and they said the only way to rollover was to not be employed anymore by my company :(. Anything else I can possibly do?
You can check again. It is possible that there is a distinct exclusion for transferred in money that your agent isn't aware of. It is also possible that they are correct. Ask for the plan document, I'll look at it for you.
 

Matt

Administrator
Staff member
If you withdrawal the same amount on an annual basis from your 401K you will not get hit with a penalty. The catch is you have to take that same withdrawal every year until 59 1/2. Its called the 72t and I am looking into it to retire early. I realize this info doesn't help the OP but it could be huge for some.
Can't apply this to an in service 401k, only old ones and IRAs.

As an aside, highly risky. You lose a lot of options by forcing yourself to take the periodic payments. Early retirement with the ability to rollover over pre RMD years is huge from a tax bracket arbitrage perspective and generally I would say a smarter option, unless you have an abnormally large 401(k) and very little in taxable to tide you over.
 

Cytraveler

Level 2 Member
How large is your company? If it's large, they should be able to negotiate to get better funds/fees (i.e., low-fee index funds); begin to advocate nicely but persistently. If it's small to medium-size, say less than 500 people, try to sit down with an owner, or manager who runs the 401k (not just an admin, though that might be the same person). I'm an owner of a 70-person firm, and I run the 401k among lots of other things. I can tell you we care very much about what our employees think, as well as our own investment opportunities. We were looking at changing our plan from Fidelity to Paychex because it would have made my life easier, but we didn't because the Fidelity plan had a much better selection of low fees for us. Recently, I made a change to add Roth options to our plan because I personally was interested in it.

So put some numbers together about the impact of fees on long-term outcomes, especially in a dubious investing environment that we have now. I know nothing about possible options with John Hancock, but try to do a little research there as well. If you are nice, and persistent, and do a little leg-work to help your company out, you might be able to improve your options even if you can't roll money out.
 

mastermind85

Level 2 Member
Thanks, can I ask for your smaller firm (similar to mine) how much the lowest fee plan is? The 401k guy at my company gave me BS saying that a index 500 fund at 1.13% is the norm for everywhere. I just can't see that happening though. I plan to go to the owner of the company soon to talk about it.

How large is your company? If it's large, they should be able to negotiate to get better funds/fees (i.e., low-fee index funds); begin to advocate nicely but persistently. If it's small to medium-size, say less than 500 people, try to sit down with an owner, or manager who runs the 401k (not just an admin, though that might be the same person). I'm an owner of a 70-person firm, and I run the 401k among lots of other things. I can tell you we care very much about what our employees think, as well as our own investment opportunities. We were looking at changing our plan from Fidelity to Paychex because it would have made my life easier, but we didn't because the Fidelity plan had a much better selection of low fees for us. Recently, I made a change to add Roth options to our plan because I personally was interested in it.

So put some numbers together about the impact of fees on long-term outcomes, especially in a dubious investing environment that we have now. I know nothing about possible options with John Hancock, but try to do a little research there as well. If you are nice, and persistent, and do a little leg-work to help your company out, you might be able to improve your options even if you can't roll money out.
 

Matt

Administrator
Staff member
You can get it for a lot lower, but there will be some third party administrator fees (which you probably also have) that will increase things.
 

Cytraveler

Level 2 Member
Thanks, can I ask for your smaller firm (similar to mine) how much the lowest fee plan is? The 401k guy at my company gave me BS saying that a index 500 fund at 1.13% is the norm for everywhere. I just can't see that happening though. I plan to go to the owner of the company soon to talk about it.
We have index funds with fees as low as .07% for our Spartan Total Market Index Fund and Spartan Extended Market Index Fund. We have 40 funds to choose from, of those only 3 have expense ratios higher than 1%, the highest being 1.13%. These

This article confirms to a degree what your 401k admin is saying:
http://blogs.wsj.com/totalreturn/2015/02/20/401k-fees-what-is-reasonable/
For smaller firms the expense ratios tend to be higher, but the 1.27% in the article is total expense - in some cases that would include fees for administrating the plan that the company passes on to employees (our company pays those fees directly and doesn't pass them on). And that average also includes funds that are managed and therefore have higher fees. I think some of it might be that smaller firms don't always push to get some lower fee funds, so if an owner pushes, they should be able to at least get an index fund with a better fee.

This article highlights the problem and possible approach:
http://www.wsj.com/articles/why-you-should-check-your-401-k-plans-fees-1447038127
Our company has a plan with Fidelity, which I think just simply has lower fees than John Hancock, so you're unlikely to get a fee like .07%. But anything is better than what you have now, and you should be able to get better fees. Unfortunately, Fidelity will currently only take companies with at least $10M to invest (we were grandfathered in, and still only have $4M). A lot of it will depend on how much the owner of your company wants to work on it. Good luck!
 
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