Normally a rollover to an IRA / Roth IRA is the best choice. However, two advantages of a 401k are: 1. A 401k is protected from any law suits by law. 2. If you terminate voluntary or not, at age 55 you can begin to take distributions from a 401k without incurring the 10% penalty you would be subject to with an IRA. So, you could leave all or a portion in the 401k until 59.5 in case you need to withdraw some or all before reaching 59.5 yrs of age.
Be careful! All States do not protect you against attachment for non-ERISA funds. When moving from a 401k to an IRA the rules for your State may not fully protect you. Virginia protects attachments from the 1st 100k, funds after are attachable in an IRA.
Thanks -- I was looking to see if anyone made this point before I did so myself. I don't plan on being sued and losing but then, nobody does. With medical expenses bankrupting so many people in this day and age, I have decided to leave my 401(k) money in my safe and relatively cheap account.
I'm 62 and retiring in 6 weeks. I have 2 options with my 401k, traditional and Roth. Most of my money is in the traditional side. I wanted to keep my money in the 401k but they do not allow Roth conversions. Therefore, I will be moving all my money to Vanguard which will allow me to do the conversions before the RMDs hit. I have all my investments in stock because I don't need it for retirement. I will leave it to my children to help them with their retirement.
I live in a state (GA) that does not protect IRA’s from lawsuits. 401k’s are Federally protected ERISA plans. I retired with a 17 year old driver. I’m keeping my retirement savings protected in my former employer’s 401k for now.
Federal ERISA protection is the main reason I left my 401K in place. 401ks fall under federal ERISA protection, IRAs fall under state law. My state only protects 500k of an IRA from lawsuits. I felt the need to protect from the black swan law suit which can take everything, with federal ERISA protection at least my 401K is protected. Luckily my Fidelity 401k offers enough low cost investment options. This should probably be a big consideration for most, check your state law on how much of your IRA will be protected from law suits should roll over to an IRA.
I’ve kept mine in my ex-companies Vanguard 401k plan for about 5 years after retirement, was in 100% Large caps for a many years which was good but recently switched to a money market fund, unfortunately they only let me invest in Vanguards sh1tty low yield money market funds, they block us from Vanguards highest paying money markets like VFMXX that pays a very safe 5%
I took advantage of the 55 rule for 401ks when my company offered a buyout the year I turned 55 and I retired (I consider myself extremely lucky). And you’re right, almost no one I talked to knew about the 55 rule. So if you want to retire between 55 and 59.5 and you need income, it’s best to leave it in the 401k and draw monthly income from the 401k.
Good advice. Being that I want to retire at 55 and desire to access some money as well as make some Roth conversions I am beholden to my 401K until at least I turn 59.5.I can't use the rule of 55 if I roll it over right at retirement.
“Most” employers have a clause that if you separate from employer at 55 or over regardless of type of separation you have access to your 401K with no early penalty.Hopefully yours is the same. My employers 401k had that clause in it but I didn’t find out until I separated two years ago 6/2021. I exercised a NUA in-kind transfer to my brokerage account. New game now. Good luck!
Thank you for this. Very informative. Can you do a video on how to convert traditional IRAs to Roth IRA? What the pros and cons, how much tax you will pay? is it better to roll it over? how much you can rollover, what is the penalty? Should I do it? Is it worth it?
I could have left my 401k with my employer but I decided to change for two reasons. First, there was not enough diversity with the employer run investment program so there was long term risk. Second. The fees to manage my investment were slightly higher with the employer compared to what I could get at other investment firms, after shopping around.
So far, I am very happy with leaving my 401K after retirement. I have paid no excessive fees and when I take my RMD it has been covered by my growth. I watch my 401K everyday just to keep in touch and make sure that a move to personal IRA might be better.
When I retired at 60 years old, all my hr dept could do for me is hound me for my work phone and computer before I left. Oh and they made sure someone followed me out of the refinery I worked at and took my badge. The retirement people that they had to guide me wasn’t much help either. A money manager was already in use before I retired and only way I could have made some of the decisions I made
I recently retired at age 55, and I’m Ieaving my 457 plan alone because the fees are low, the investment options are reasonable, and it’s easy to exchange funds, set up distributions, etc. However I have a few older poorly performing 403b’s that I’m trying to roll into that 457 account, and that is proving to be a pain in the butt. I just want things in only 2 or 3 easy-to-use places overall, and if those 403b’s drag their feet too much, I’ll just withdraw the money and put it in an IRA within 60 days. It really shouldn’t be that tough!
You don’t know how hard it has been for me to get answers to this question. When I have searched 401k to IRA all I was finding was based on me getting another job and what to do with the amount in the previous jobs 401k. Almost all the investment advice out here is geared towards people in their 30’s and 40’s. Yes that is so important. I wish I had this advice when I was younger. I am now retired and I don’t have a million dollars in my account. I have left my money in the companies 401k just from fear of making a mistake choosing an IRA. I do not know what I am losing in fees or where to look to compare these fees.
Prior to my retirement, I started rolling over my 401k to my TDA account. After retirement, I rolled my pension over also. To me, having my own direct access and investment choices works best for my strategy .
I retired in early 2019. I wanted more control over my 401K money, so I rolled that 92K of the 401K into my traditional IRA where I had about 30K in individual stocks, like Roku, Shopify, Nividia and Tesla. I decided out of the bunch I saw Tesla as the best chance for continued, and future growth, so I put the 90K in Tesla shares. I was in early enough to get all the stock splits in Tesla, and the big run up in 2020. Im still long in Tesla stock. Waiting for the next split in a couple of years. Than I’ll take some profits in 5 years and buy some investment properties. In my opinion it’s better to do the roll over from the 401K at retirement, into a traditional IRA or Roth IRA.
For what it is worth, you did not mention the principal reason I have left my money in my former employer's 401K and that reason is the ERISA protection of my 401k from credit claims. If I were to be in a car accident and be sued, ERISA protects my 401k from the creditor claim. However if I move it to an IRA, then it loses Federal protections and is subject to protections at the state level, which may be far less comprehensive. For example in California, a creditor can seize an IRA above whatever level the court decides is sufficient for your retirement, while the creditor could not seize assets in a 401k.
Thanks for your comment - that’s what I’m thinking too. But, I also wonder if I really need to be concerned about keeping my 401-k where it is and enjoying ERISA protection if I carry umbrella insurance. I’d be interested in your (or anyone’s) thoughts. Thanks.
IRA's and Company stock. Yes you are correct. If you have company stock, (an Employee stock ownership program or ESOP) a full In Kind distribution on your company stock to convert it out of an ESOP to ordinary shares of your companies stock, (they are different) you'll pay full tax on the cost base, (what your company paid to give you the stock), and the rest, (that it went up over your years spent working), will be capital gains taxed, (significantly lower tax). This also allows whoever inherits those stocks no taxes at the inset, but capital gains as it grows. Have it all in an IRA? they'll be paying full income tax on their inheritance. Disclosure I am not a financial advisor but have done some homework on this subject so please ask your advisor about this.
Another thing to consider: you may be fine with having money in various 401(k)s with various previous employers, but if something happened to you and your spouse suddenly has to manage all of it this may compound the problems they’re dealing with.
This why it’s usually a good idea to roll over your 401k from your past employers to your new one if all things are equal…..It solves the above problem while keeping your ERISA protection.
Update from below. It was rough getting the mutual fund out of 403b It took a while because of bad information. The third party company who approves distributions or transfers said that I was still working for the company and I had retired seven years ago! Three weeks later I fought to get the two to talk. I also was paying MORE for the money to be in the company sponsorship, even invested in the same fund! I rolled it all over and consolodated accounts to an IRA. Less hands in the pot!
I retired in 2019. I left my 401-K in investments and it has grown substantially since retiring. There is a mandatory 20% of withdrawals held back for federal income tax. The solution to that is to first rollover to an IRA then withdrawal from the IRA with
It would seem the best approach (especially for a young worker) is to max out the Roth 401k, max a Roth IRA, and then a brokerage. Without a pension, the Roth would provide $0 of taxable income which would create a 0% capital gains rate on the brokerage, and no taxes on Social Security. Am I wrong on my math? It would also be a great benefit to beneficiaries in estate planning.
It would seem another consideration would be account insurance limits. Do you want more money in an account then is insured? If not, then you might have to spread the money around into different accounts/brokers.
Another consideration is that Qualified Charitable Distributions (QCD) are not permitted with 401k/403b plans like they are with traditional IRAs. For those charitably inclined, a QCD is a great tax-efficient tool that counts towards fulfilling some or all of one's RMD. Also, RMDs must be taken separately from traditional IRAs and 401k/403b plans. However, if one is working past RMD age at the 401k/403b employer, no RMD is required on that account until the year one retires.
As a 54 year, a bigger factor is when do you need some of that $. If you are 55 and retire from the company and xfer it to IRA then you need to wait to get it until 59.5. Thanks
When I retired at 60 years old, I converted all of my 401K fund to roll over IRA. Invested in growth stocks like Apple, Microsoft, Amazon, Facebook etc. In 2014 I concentrated to one only stock. Right now my ROI is over 2000 % that is 22 times more than the amount of money I invested initially.
I struggled through 401k accounts that would lose 2% when the market lost 1% and in the reverse would gain only 1% and the market would gain 2%. Now in the last year with my IRA I have gained 300% and the market has gained 30%.
Most 401k providers that companies use, have high fees, and have crappy fund choices and are in clunky old style mutual funds....after I turn 59.5 I'm moving all of it to an IRA at Fidelity where they charge zero IRA account fees. I believe the 2 worst high fee 401k providers that many large employers are using these days are: Principal and Empowerment. They both have high fees, and offer very poor old school type Mutual fund choices.
Great video with a clear presentation of the options and their various pros and cons. One option you didn’t mention that my 401k offers is to convert my balance to a single or double life annuity. I only recently discovered this option and was wondering whether it was a good idea.
One gotcha that you didn't mention is that some 401k's don't allow partial withdrawals - just full distributions. This isn't an issue if you're 59.5 because you can roll it to an IRA and get that kind of control, but if you retire early and plan to use the rule of 55 you can't take distributions in a way that spreads it over the 4-5 years. Taking it all at once would blow up your tax bracket that year. I also asked if I could do a partial rollover to an IRA and then a full distribution of the remainder to keep taxes lower, and was told the plan doesn't support partial rollovers either. I finally decided to just withdraw Roth IRA contributions for cashflow instead to bridge the gap until I'm 59.5, but this was not what I originally planned to do.
My wife has a small 401k with a former employer. My thought was that we just zero that one out in the first year. This is easy enough to do, is it not?
You can't always leave monies in an employer's 401K plan when you retire. In some cases if the balance is small you're required to liquidate the balance.
Usually that is for a really small balance, such as under $5,000. However if you have a balance that small it would almost always be better to roll it into another 401k (if possible) or into an IRA.
Yep, I had a $2,500 401k that was shipped off to a trust. Rolled it into my new company's 401k. It still earned and lost interest like any regular 401k. It was in that trust for a few years.
I moved my retirement accounts from TIAA to Vanguard after retirement. Vanguard is a lot cheaper! The only hassle was that TIAA required my wife to notarize some paperwork.
Ty for a clear explanation. I did the in-service rollover when i hit 59.5. Do you have suggestion on where to invest pre-taxed ira? Are treasuries a good option?thank you.
Do not forget that the cost of your 401(k) while employed may change when you retire. Some companies subsidize for their employees but less or not at all for former employees. Also when you consider a rollover to an IRA, if you want to keep the same funds as your 401(k) you may discover that to be impossible or your desired funds cost more when purchased thru an IRA. I'm definitely doing a rollover. My 401(k) is okay but expensive and I prefer different investment options. Also, my 401(k) plan does not allow partial distributions (this may be changing) so the lack of withdrawal flexibility, the lack of investment flexibility, the lack of provider flexibility... An IRA is the more flexible choice (at least once you hit 59.5) and in my case will be cheaper as well.
So confusing…wished I’d looked into this sooner. As I’m 74.11 years old and have had to take out the mandatory amount. I have also have pension… I had turned the 401 k to a unity.
I rolled a portion of my 401k to a new employer which I worked till I was 55 and learned the new employer plan does not allow withdrawal after 55. Not interested using 72t, how else can I withdraw without penalty?
Before you do anything, you should talk to an accountant who knows the rules really well if you are in a position where you need to take money and are not 59 1/2 yet. I believe if you've had any Roth account open for at least 5 years, you can pull qualified money from it penalty free. You will need an accountant to help you determine what money is qualified to take based on proof of your past contributions or any IRA to Roth rollovers from 5 or more years ago. It's likely that you will have to roll that 401k into IRA and Roth compatible brokerage accounts so the employer doesn't block you.
Also a fourth option, at least with my 401k, is to have the 401k move to a lifetime annuity. Not saying I’m going to do that, but I assume many have that option.
@@mathew3267 Not correct. After retirement or otherwise leaving a job, one can roll their traditional 401(k) to traditional IRA and Roth 401(k) to Roth IRA.
James, I rolled a 403b balance from an exemployer this past December. I put the funds in a new Traditional IRA account with M1 Finance. I went from mutual fund fees to a "payment for order flow" structure as I invested in individual stocks. Not really sure what that means. Looking for input from you or anyone else on if that's a bad or good thing.
Be careful when moving 401k funds to IRAs. I wanted to move only the company stock out to a brokerage account but apparently , by selecting only the stock, the IRS requires that the entire 401k balance be transferred by year end to an IRA.
Do you still need to pay taxes on the money from a 401 when you take it out, FED and STATE? Correct? No matter your age? Or no matter your income level?
The best thing I did with my 401(k), was converting it into a self directed IRA. You can almost get the exact same investments in a brokerage company like Fidelity, Schwab or Vanguard but now you have full control over yourself and you don’t have to go to your program administrator or any hassles. And I did this with an older 401(k) years before I retired. It almost felt like they were happy that I took it out being I didn’t work there anymore just the feeling I got.
@@jpturner171 I’m 64 and I’ve been in Fidelity since 1986 or so and for many years they were a good company that offered a lot but ever since companies like robin hood, M1 finance Webull, etc etc Fidelity has become even better and it’s a well established company that many institutions use so yes you are about as safe as you can be as far as them as your brokerage house. They started offering free trades because of the pressure of they other companies so they had to be pushed into it but they dominate. One of the best things is you can speak to a rep anytime you need assistance in anything they offer and they offer a lot and walk you right through it and I’ve never spoken to a person with a poor attitude . Best of luck to you. God bless
@@jpturner171 a favor you can do for yourself is also have at least 2 different brokerage companies to use. I use vanguard and fidelity. Even though in these companies you will probably be diversified in your portfolio but this way just in case something totally unexpected happens to one of them for a time. Your accounts couldn’t somehow be frozen. This is a just in case scenario to make us even more financially comfortable.
my worst first attempt...annunities....bad bad bad idea....cost me two years and eight percent penalty to get some of my money back....got advice and bought good stocks....money back in about a year....wait on social security as long as you can...it pays for itself....
You could have given your money to an advisor sooner... and not only lost money in the market swing ... but also NOT THINK about the money your advisor charged you.... to tell you that THE MARKET lost your money, not him. These are usch great deals. How are people not figuring out.... to BECOME ADVISORS. LOL
How is retirement formally declared? For example, if you are happy with your savings can you just stop working and live off of savings until you are at a tax-advantaged age before doing anything with your 401k?
Yeah, forget HR except to figure out how to get your money out of there when you separate from the company. I've moved all my 401k's into IRA's and into low cost mutual funds and ETF's where I can control the mix and even some trading if I want to. Some of the company funds I've had were low cost, but just not as flexible or as much choice.
The purpose of 401K is.... To use it after you retire!!!! Not to invest, not for anyone’s inheritance, but for you, who wasted all your your younger years working like slaves, to use it when yo can no longer work! Don’t worry about your kids. You raised them, you took care of them, and now it’s time for them to take care of themselves, and for you to take care of yourself. Use it to buy your dream car, take a vacation, or to buy extra diaper once you’re in the nursing home. You were not born to work all your life, and to worry about the stocks and your investment or you grandchildren’s inheritance while lying on your death bed.
How come fixed indexed annuity insurance contracts is not being mentioned as an option? Not mentioning this as an option for a portion of people’s retirement funds appears to be a glaring hole in your presentations.
One very critical point wasn't mentioned ... "what happens if you die"? Some 401k accounts offer very limited options to the inheritor. Likely easier to do the rollover into an IRA while you're alive instead of having the beneficiaries suffer thru this.
For us, we needed to leave my husband's 401k at his employer. We used the Rule of 55. Once he turns 59.5 years old, we could roll it to our other IRA. We are undecided at this point. When I retired, I rolled my 401k to an IRA. We won't live on that money for many years. We may never touch it.
What company can you retire at? Especially in this day and age. I've work for a lot of company's so far, and every 6 to 7 years they rotate people out of the company. Which now people have to start over with their wage and 401k yet again, then to top it off you have the 401k company's that screw you over by either transferring you to different departments and your so confused who you have talking too, then get on the line with some indian guy from overseas thinking it's a scammer. It's such a freaking headache, sure you fill out the paperwork to get everything started then call them and they tell you you haven't filled the paperwork out right, then you start to tell them that you went over the paperwork with an employee before you sent it in to them, just to make sure you have all the basic BS taken care of, I think I just want to call a lawyer and have them handle the assholes at the company.
I retired last year & transferred all 300K in CD with 2-3 banks / financial institutions at 5%+/- ..used the interest received to cover RMD & my expenses & again repeated for this year. I think, by this way my (only money to survive) is safe & last longer than my life cycle….is my planning is good & safe enough?… I can’t just afford to gamble my life savings & don’t know the other way around!…. Can you suggest any other risk free substitute, which pays me more than 5%?…please advise
Question If I were to give 8% into an after tax, it would drop me into a lower tax bracket. I would then put 20% into a before. Is that better or should it all go into before? Thanks
Can I rollover a large chunk of money about 250K to a tradional IRA and still receiving my company 401K if I still working for the company at my 67 year old age?
Leave it in your 401k and when you need an assisted living facility, the home will drain it out so your children will lose all their inheritance😊 Or you could of taken it out years prior open a irrevocable trust and you would have qualified for Medicaid
You may retain a larger portion of the money you've worked so hard to accumulate since ROTH IRAs are tax-free.I spent six years in retirement. In addition to my depleted 401(k), I have a 130k annuity.What is the best way for me to invest $100k in a non-retirement account?
The Roth IRA conversion is a good idea for those in a traditional 401K in order to manage tax liability. He may be pushing it, but that doesn't make it a bad idea.
You are limited to the lineup in your plan which is very restrictive. You have unlimited choices if you roll to an IRA which include asset protection strategies. Can’t get those in your 401k
What Should You Do with Your 401k When You Retire? Convert it to SPY by transferring your 401K to your brokerage account and use the dividend payout (1.5% + SS) and live happily ever after while your capital appreciates. I am assuming you have $4M of S&P 500 ETF like SPY that will give you 60K + 20K from SS and that should be enough for day to day. For big spend sell some of your capital appreciation. Remember your capital is appreciation 10%. Got it? Thank me later.
Are there fees for transferring? I like the idea because I feel I have more control over my Vanguard brokerage account, which are all ETF’s like VOO and BND and VYM and VNQ.
I'm not liking the 401k or Roth casinos. Nice to have but we are one terrorist attack or "new banking failed product" away from them evaporating. I am socking cash into an annuity until it is full up to $250K point and retiring to South America where the money goes twice as far. Stll have the investment accounts, but never felt they were ever going to sustain my retirement at all no matter how much was in them.
If I don't retire until after 59.5 then I am absolutely rolling it into my IRA. There is ZERO reason to keep money in a 401k as opposed to an IRA unless you want to use Rule of 55.
Another benefit of keeping the money in your 401k is you can withdraw the money penalty free at 55.5 years old (instead of 60.5 years). Just keep the money in a low cost S&P 500 index fund because 99% of investors (including pros) can’t beat the S&P 500.
Normally a rollover to an IRA / Roth IRA is the best choice. However, two advantages of a 401k are:
1. A 401k is protected from any law suits by law.
2. If you terminate voluntary or not, at age 55 you can begin to take distributions from a 401k without incurring the 10% penalty you would be subject to with an IRA. So, you could leave all or a portion in the 401k until 59.5 in case you need to withdraw some or all before reaching 59.5 yrs of age.
I like this guy. Makes complex issue simple to understand. Thank!
Be careful! All States do not protect you against attachment for non-ERISA funds. When moving from a 401k to an IRA the rules for your State may not fully protect you. Virginia protects attachments from the 1st 100k, funds after are attachable in an IRA.
Thank you! I’m about to do this in Virginia and it is over 100k.
Didn’t know about this.
Yes, this was not mentioned in the video, but 401(k) has more protections.
Thanks -- I was looking to see if anyone made this point before I did so myself. I don't plan on being sued and losing but then, nobody does. With medical expenses bankrupting so many people in this day and age, I have decided to leave my 401(k) money in my safe and relatively cheap account.
I'm 62 and retiring in 6 weeks. I have 2 options with my 401k, traditional and Roth. Most of my money is in the traditional side. I wanted to keep my money in the 401k but they do not allow Roth conversions. Therefore, I will be moving all my money to Vanguard which will allow me to do the conversions before the RMDs hit. I have all my investments in stock because I don't need it for retirement. I will leave it to my children to help them with their retirement.
James, I work for a municipality and would love to see a video dedicated to how to deal with 453Bs with regards to retirement. Thanks!
I live in a state (GA) that does not protect IRA’s from lawsuits. 401k’s are Federally protected ERISA plans. I retired with a 17 year old driver. I’m keeping my retirement savings protected in my former employer’s 401k for now.
Thanks for the comment I had know idea about this. Not sure about my state but good to know. I also had children late in life.
Federal ERISA protection is the main reason I left my 401K in place. 401ks fall under federal ERISA protection, IRAs fall under state law. My state only protects 500k of an IRA from lawsuits. I felt the need to protect from the black swan law suit which can take everything, with federal ERISA protection at least my 401K is protected. Luckily my Fidelity 401k offers enough low cost investment options. This should probably be a big consideration for most, check your state law on how much of your IRA will be protected from law suits should roll over to an IRA.
Suggestion: when he/she turns 18 - Put the car in your child's name and pay for the insurance in his/ her name.
I’ve kept mine in my ex-companies Vanguard 401k plan for about 5 years after retirement, was in 100% Large caps for a many years which was good but recently switched to a money market fund, unfortunately they only let me invest in Vanguards sh1tty low yield money market funds, they block us from Vanguards highest paying money markets like VFMXX that pays a very safe 5%
@@davidbryan33473rd :
Glad you mentioned the year 55 rule. Many people don’t even know it. 👍🏻
I took advantage of the 55 rule for 401ks when my company offered a buyout the year I turned 55 and I retired (I consider myself extremely lucky). And you’re right, almost no one I talked to knew about the 55 rule. So if you want to retire between 55 and 59.5 and you need income, it’s best to leave it in the 401k and draw monthly income from the 401k.
Good advice. Being that I want to retire at 55 and desire to access some money as well as make some Roth conversions I am beholden to my 401K until at least I turn 59.5.I can't use the rule of 55 if I roll it over right at retirement.
“Most” employers have a clause that if you separate from employer at 55 or over regardless of type of separation you have access to your 401K with no early penalty.Hopefully yours is the same. My employers 401k had that clause in it but I didn’t find out until I separated two years ago 6/2021. I exercised a NUA in-kind transfer to my brokerage account. New game now. Good luck!
Review your plan.
I'm good. My plan allows access.
Thank you for this. Very informative. Can you do a video on how to convert traditional IRAs to Roth IRA? What the pros and cons, how much tax you will pay? is it better to roll it over? how much you can rollover, what is the penalty? Should I do it? Is it worth it?
I could have left my 401k with my employer but I decided to change for two reasons. First, there was not enough diversity with the employer run investment program so there was long term risk. Second. The fees to manage my investment were slightly higher with the employer compared to what I could get at other investment firms, after shopping around.
The 401(k) withdrawal that requires paperwork is called a "Hardship withdrawal" and is only allowed for six reasons that are defined by the IRS.
So far, I am very happy with leaving my 401K after retirement. I have paid no excessive fees and when I take my RMD it has been covered by my growth. I watch my 401K everyday just to keep in touch and make sure that a move to personal IRA might be better.
How will your monthly income be provided after retirement? What is generating your monthly income?
Thanks James! 10 months to go so this is VALUABLE INFORMATION for us!
Unfortunately, our HR department offers little guidance .
Semper Fi!🇺🇸
Glad it was helpful!
HR folks are not able to provide financial investment advice. Not ethical. Conflict of interest, that’s were a financial service comes in to play.
@@gravies60 I work in HR. I have told employees to seek financial advisors, but never guided them.
@@gravies60exactly
When I retired at 60 years old, all my hr dept could do for me is hound me for my work phone and computer before I left. Oh and they made sure someone followed me out of the refinery I worked at and took my badge. The retirement people that they had to guide me wasn’t much help either. A money manager was already in use before I retired and only way I could have made some of the decisions I made
I recently retired at age 55, and I’m Ieaving my 457 plan alone because the fees are low, the investment options are reasonable, and it’s easy to exchange funds, set up distributions, etc. However I have a few older poorly performing 403b’s that I’m trying to roll into that 457 account, and that is proving to be a pain in the butt. I just want things in only 2 or 3 easy-to-use places overall, and if those 403b’s drag their feet too much, I’ll just withdraw the money and put it in an IRA within 60 days. It really shouldn’t be that tough!
You don’t know how hard it has been for me to get answers to this question. When I have searched 401k to IRA all I was finding was based on me getting another job and what to do with the amount in the previous jobs 401k. Almost all the investment advice out here is geared towards people in their 30’s and 40’s. Yes that is so important. I wish I had this advice when I was younger. I am now retired and I don’t have a million dollars in my account. I have left my money in the companies 401k just from fear of making a mistake choosing an IRA. I do not know what I am losing in fees or where to look to compare these fees.
Prior to my retirement, I started rolling over my 401k to my TDA account. After retirement, I rolled my pension over also. To me, having my own direct access and investment choices works best for my strategy .
I retired in early 2019. I wanted more control over my 401K money, so I rolled that 92K of the 401K into my traditional IRA where I had about 30K in individual stocks, like Roku, Shopify, Nividia and Tesla. I decided out of the bunch I saw Tesla as the best chance for continued, and future growth, so I put the 90K in Tesla shares. I was in early enough to get all the stock splits in Tesla, and the big run up in 2020. Im still long in Tesla stock. Waiting for the next split in a couple of years. Than I’ll take some profits in 5 years and buy some investment properties.
In my opinion it’s better to do the roll over from the 401K at retirement, into a traditional IRA or Roth IRA.
For what it is worth, you did not mention the principal reason I have left my money in my former employer's 401K and that reason is the ERISA protection of my 401k from credit claims. If I were to be in a car accident and be sued, ERISA protects my 401k from the creditor claim. However if I move it to an IRA, then it loses Federal protections and is subject to protections at the state level, which may be far less comprehensive. For example in California, a creditor can seize an IRA above whatever level the court decides is sufficient for your retirement, while the creditor could not seize assets in a 401k.
Thanks for your comment - that’s what I’m thinking too. But, I also wonder if I really need to be concerned about keeping my 401-k where it is and enjoying ERISA protection if I carry umbrella insurance. I’d be interested in your (or anyone’s) thoughts. Thanks.
Leave it in the 401k. Don't buy umbrella insurance. It's just an incentive for lawyers to get paid.
I only regret not opting for a government job in my field, for a little less pay and a LOT more retirement benefit!
IRA's and Company stock. Yes you are correct. If you have company stock, (an Employee stock ownership program or ESOP) a full In Kind distribution on your company stock to convert it out of an ESOP to ordinary shares of your companies stock, (they are different) you'll pay full tax on the cost base, (what your company paid to give you the stock), and the rest, (that it went up over your years spent working), will be capital gains taxed, (significantly lower tax). This also allows whoever inherits those stocks no taxes at the inset, but capital gains as it grows. Have it all in an IRA? they'll be paying full income tax on their inheritance. Disclosure I am not a financial advisor but have done some homework on this subject so please ask your advisor about this.
Just found you. Your videos are clean, crisp, and informative. And easy to understand !!! Keep up the good work!
I feel like this is a finance and fitness motivational channel lol THANKS for the info James Conole!
Great options of course, what about a in kind transfer to exercise a NUA??
Another thing to consider: you may be fine with having money in various 401(k)s with various previous employers, but if something happened to you and your spouse suddenly has to manage all of it this may compound the problems they’re dealing with.
Good point
This why it’s usually a good idea to roll over your 401k from your past employers to your new one if all things are equal…..It solves the above problem while keeping your ERISA protection.
@@July.4.1776 Or roll it into an IRA and really discover how muted your returns have been in a 401k.
Update from below. It was rough getting the mutual fund out of 403b It took a while because of bad information. The third party company who approves distributions or transfers said that I was still working for the company and I had retired seven years ago! Three weeks later I fought to get the two to talk. I also was paying MORE for the money to be in the company sponsorship, even invested in the same fund! I rolled it all over and consolodated accounts to an IRA. Less hands in the pot!
I retired in 2019. I left my 401-K in investments and it has grown substantially since retiring. There is a mandatory 20% of withdrawals held back for federal income tax. The solution to that is to first rollover to an IRA then withdrawal from the IRA with
It would seem the best approach (especially for a young worker) is to max out the Roth 401k, max a Roth IRA, and then a brokerage. Without a pension, the Roth would provide $0 of taxable income which would create a 0% capital gains rate on the brokerage, and no taxes on Social Security.
Am I wrong on my math?
It would also be a great benefit to beneficiaries in estate planning.
It would seem another consideration would be account insurance limits. Do you want more money in an account then is insured? If not, then you might have to spread the money around into different accounts/brokers.
Another consideration is that Qualified Charitable Distributions (QCD) are not permitted with 401k/403b plans like they are with traditional IRAs. For those charitably inclined, a QCD is a great tax-efficient tool that counts towards fulfilling some or all of one's RMD. Also, RMDs must be taken separately from traditional IRAs and 401k/403b plans. However, if one is working past RMD age at the 401k/403b employer, no RMD is required on that account until the year one retires.
That's great if you retire when you are 90yo.
As a 54 year, a bigger factor is when do you need some of that $. If you are 55 and retire from the company and xfer it to IRA then you need to wait to get it until 59.5. Thanks
True. Different rules for different account types.
Simply explained, clearly understood.
Well done. Subscribed.
When I retired at 60 years old, I converted all of my 401K fund to roll over IRA. Invested in growth stocks like Apple, Microsoft, Amazon, Facebook etc. In 2014 I concentrated to one only stock. Right now my ROI is over 2000 % that is 22 times more than the amount of money I invested initially.
bitcoin?
That's great about how much your money has grown but be careful when you put all your eggs in one basket.
Russell 1000 growth index fund.😊@@JD-tn5tb
PLEASE Do a video on a how nua works with company stock.
My companies 401k fees through Fidelity are so cheap(large company) that I don’t see the need to move to IRA.
I struggled through 401k accounts that would lose 2% when the market lost 1% and in the reverse would gain only 1% and the market would gain 2%. Now in the last year with my IRA I have gained 300% and the market has gained 30%.
@everettcalhoun8197 all about investment choices. Do your homework.
These are the right considerations. Cost matters a lot.
Most 401k providers that companies use, have high fees, and have crappy fund choices and are in clunky old style mutual funds....after I turn 59.5 I'm moving all of it to an IRA at Fidelity where they charge zero IRA account fees. I believe the 2 worst high fee 401k providers that many large employers are using these days are: Principal and Empowerment. They both have high fees, and offer very poor old school type Mutual fund choices.
Amazing, full of valuable information. Thanks James.
Great video with a clear presentation of the options and their various pros and cons. One option you didn’t mention that my 401k offers is to convert my balance to a single or double life annuity. I only recently discovered this option and was wondering whether it was a good idea.
Very informative info. Thank you for posting!
Glad it was helpful!
Awesome explanation!! Thank you!
One gotcha that you didn't mention is that some 401k's don't allow partial withdrawals - just full distributions. This isn't an issue if you're 59.5 because you can roll it to an IRA and get that kind of control, but if you retire early and plan to use the rule of 55 you can't take distributions in a way that spreads it over the 4-5 years. Taking it all at once would blow up your tax bracket that year. I also asked if I could do a partial rollover to an IRA and then a full distribution of the remainder to keep taxes lower, and was told the plan doesn't support partial rollovers either. I finally decided to just withdraw Roth IRA contributions for cashflow instead to bridge the gap until I'm 59.5, but this was not what I originally planned to do.
Can you do a 72T from the 401k?
You can withdraw from your 401k at 55 if you leave. You cannot access an IRA until 59 1/2 without a penalty.
True
Excellent point for those wishing to retire early.
You can do SEPP
can do a 72T
That’s my plan…retiring after 27 yrs with same company at 55 yrs old because of this beautiful rule!
My wife has a small 401k with a former employer. My thought was that we just zero that one out in the first year. This is easy enough to do, is it not?
Is there a way to find my old 401K's?
I am not sure where they are to convert them
Retiring I. 6 months. How do you find a bank or company to help you with the conversion. Just want to make sure I pick the right people to help me. TY
You can't always leave monies in an employer's 401K plan when you retire. In some cases if the balance is small you're required to liquidate the balance.
Usually that is for a really small balance, such as under $5,000. However if you have a balance that small it would almost always be better to roll it into another 401k (if possible) or into an IRA.
Yep, I had a $2,500 401k that was shipped off to a trust. Rolled it into my new company's 401k. It still earned and lost interest like any regular 401k. It was in that trust for a few years.
My 401K plan offers a self-directed option. What are the advantages and disadvantages of using that option?
Tiaa-cref?
I want to consolidate 2 of my 401K, Could I rollover both to an existing Roth IRA or do I have to open a new traditional IRA account?
I moved my retirement accounts from TIAA to Vanguard after retirement. Vanguard is a lot cheaper! The only hassle was that TIAA required my wife to notarize some paperwork.
Cant I just get a monthly payment of say 1500.00 or so from my 401k?
Ty for a clear explanation. I did the in-service rollover when i hit 59.5. Do you have suggestion on where to invest pre-taxed ira? Are treasuries a good option?thank you.
I gave it to the Investor to work. It out plus my pension. I still use it a lot traveling before I died
Very helpful information!
What about amortizing?
Do not forget that the cost of your 401(k) while employed may change when you retire. Some companies subsidize for their employees but less or not at all for former employees.
Also when you consider a rollover to an IRA, if you want to keep the same funds as your 401(k) you may discover that to be impossible or your desired funds cost more when purchased thru an IRA.
I'm definitely doing a rollover. My 401(k) is okay but expensive and I prefer different investment options. Also, my 401(k) plan does not allow partial distributions (this may be changing) so the lack of withdrawal flexibility, the lack of investment flexibility, the lack of provider flexibility... An IRA is the more flexible choice (at least once you hit 59.5) and in my case will be cheaper as well.
Who makes the Tshirt you are wearing in video?
So confusing…wished I’d looked into this sooner. As I’m 74.11 years old and have had to take out the mandatory amount. I have also have pension…
I had turned the 401 k to a unity.
How does the 401k work with social security
I am in one of the best 401k plans in the country with low costs and all kinds of choices. Plus my plan is Federally protected under ERISA.
I rolled a portion of my 401k to a new employer which I worked till I was 55 and learned the new employer plan does not allow withdrawal after 55. Not interested using 72t, how else can I withdraw without penalty?
Before you do anything, you should talk to an accountant who knows the rules really well if you are in a position where you need to take money and are not 59 1/2 yet. I believe if you've had any Roth account open for at least 5 years, you can pull qualified money from it penalty free. You will need an accountant to help you determine what money is qualified to take based on proof of your past contributions or any IRA to Roth rollovers from 5 or more years ago. It's likely that you will have to roll that 401k into IRA and Roth compatible brokerage accounts so the employer doesn't block you.
Also a fourth option, at least with my 401k, is to have the 401k move to a lifetime annuity. Not saying I’m going to do that, but I assume many have that option.
Best thing I learned today is I can roll my work 401k over to an IRA when I leave/retire. Never knew that!
Only if its Roth 401k
@@mathew3267 Not correct. After retirement or otherwise leaving a job, one can roll their traditional 401(k) to traditional IRA and Roth 401(k) to Roth IRA.
Good presentation !
James, I rolled a 403b balance from an exemployer this past December. I put the funds in a new Traditional IRA account with M1 Finance. I went from mutual fund fees to a "payment for order flow" structure as I invested in individual stocks. Not really sure what that means. Looking for input from you or anyone else on if that's a bad or good thing.
Be careful when moving 401k funds to IRAs. I wanted to move only the company stock out to a brokerage account but apparently , by selecting only the stock, the IRS requires that the entire 401k balance be transferred by year end to an IRA.
Do you still need to pay taxes on the money from a 401 when you take it out, FED and STATE? Correct? No matter your age? Or no matter your income level?
Traditional yes. Roth. No
😊great video😊
The best thing I did with my 401(k), was converting it into a self directed IRA. You can almost get the exact same investments in a brokerage company like Fidelity, Schwab or Vanguard but now you have full control over yourself and you don’t have to go to your program administrator or any hassles. And I did this with an older 401(k) years before I retired. It almost felt like they were happy that I took it out being I didn’t work there anymore just the feeling I got.
Thanks …ours is in Fidelity so this is great to hear.
@@jpturner171 I’m 64 and I’ve been in Fidelity since 1986 or so and for many years they were a good company that offered a lot but ever since companies like robin hood, M1 finance Webull, etc etc Fidelity has become even better and it’s a well established company that many institutions use so yes you are about as safe as you can be as far as them as your brokerage house. They started offering free trades because of the pressure of they other companies so they had to be pushed into it but they dominate. One of the best things is you can speak to a rep anytime you need assistance in anything they offer and they offer a lot and walk you right through it and I’ve never spoken to a person with a poor attitude . Best of luck to you. God bless
@@jpturner171 a favor you can do for yourself is also have at least 2 different brokerage companies to use. I use vanguard and fidelity. Even though in these companies you will probably be diversified in your portfolio but this way just in case something totally unexpected happens to one of them for a time. Your accounts couldn’t somehow be frozen. This is a just in case scenario to make us even more financially comfortable.
I kept mine due to the Stable Value Fund
my worst first attempt...annunities....bad bad bad idea....cost me two years and eight percent penalty to get some of my money back....got advice and bought good stocks....money back in about a year....wait on social security as long as you can...it pays for itself....
You could have given your money to an advisor sooner... and not only lost money in the market swing ... but also NOT THINK about the money your advisor charged you.... to tell you that THE MARKET lost your money, not him. These are usch great deals. How are people not figuring out.... to BECOME ADVISORS. LOL
How is retirement formally declared? For example, if you are happy with your savings can you just stop working and live off of savings until you are at a tax-advantaged age before doing anything with your 401k?
Yeah, forget HR except to figure out how to get your money out of there when you separate from the company.
I've moved all my 401k's into IRA's and into low cost mutual funds and ETF's where I can control the mix and even some trading if I want to. Some of the company funds I've had were low cost, but just not as flexible or as much choice.
I don't think my 401k has any fee. The fee is just buying and trading stocks and options on the brokerage link account.
All 401k have fees
The purpose of 401K is....
To use it after you retire!!!! Not to invest, not for anyone’s inheritance, but for you, who wasted all your your younger years working like slaves, to use it when yo can no longer work! Don’t worry about your kids. You raised them, you took care of them, and now it’s time for them to take care of themselves, and for you to take care of yourself. Use it to buy your dream car, take a vacation, or to buy extra diaper once you’re in the nursing home. You were not born to work all your life, and to worry about the stocks and your investment or you grandchildren’s inheritance while lying on your death bed.
Hear, hear!
To each their own
A reality knock to consider at decision time.
I had to read your comment twice.thanks for the reminder.
Blow it before you die, is also a good option
How come fixed indexed annuity insurance contracts is not being mentioned as an option? Not mentioning this as an option for a portion of people’s retirement funds appears to be a glaring hole in your presentations.
One very critical point wasn't mentioned ... "what happens if you die"? Some 401k accounts offer very limited options to the inheritor. Likely easier to do the rollover into an IRA while you're alive instead of having the beneficiaries suffer thru this.
For us, we needed to leave my husband's 401k at his employer. We used the Rule of 55.
Once he turns 59.5 years old, we could roll it to our other IRA. We are undecided at this point.
When I retired, I rolled my 401k to an IRA. We won't live on that money for many years. We may never touch it.
What’s the point of saving if you never touch it 😂
@@manuvns 🤷♀️
@@manuvns Emergency funds. You get cancer or something major, and you can owe a million bucks in an alarmingly short time.
@manuvns I'm saving for the grandkids to have a good life start, and for the animal shelter.
@@elaineburns4074leaving it to grandchildren for college or a house payment is great.😊
What company can you retire at? Especially in this day and age. I've work for a lot of company's so far, and every 6 to 7 years they rotate people out of the company. Which now people have to start over with their wage and 401k yet again, then to top it off you have the 401k company's that screw you over by either transferring you to different departments and your so confused who you have talking too, then get on the line with some indian guy from overseas thinking it's a scammer. It's such a freaking headache, sure you fill out the paperwork to get everything started then call them and they tell you you haven't filled the paperwork out right, then you start to tell them that you went over the paperwork with an employee before you sent it in to them, just to make sure you have all the basic BS taken care of, I think I just want to call a lawyer and have them handle the assholes at the company.
That’s why people try and get jobs with the government.
I work at UPS and will be retiring in 2 months after 41 years of service. Perhaps it has to do with the choices we make.
I retired last year & transferred all 300K in CD with 2-3 banks / financial institutions at 5%+/- ..used the interest received to cover RMD & my expenses & again repeated for this year.
I think, by this way my (only money to survive) is safe & last longer than my life cycle….is my planning is good & safe enough?… I can’t just afford to gamble my life savings & don’t know the other way around!…. Can you suggest any other risk free substitute, which pays me more than 5%?…please advise
Question
If I were to give 8% into an after tax, it would drop me into a lower tax bracket. I would then put 20% into a before. Is that better or should it all go into before?
Thanks
I’m going to put it in my money market account at local bank and start spending it to pay living expenses.
Can I rollover a large chunk of money about 250K to a tradional IRA and still receiving my company 401K if I still working for the company at my 67 year old age?
You will need to check with the plan administrator for the rules of your particular plan.
Yes you should still be able to contribute to the plan and receive a match (if offered) even if you roll out a portion of your balance
I have my pension , and I am not touching my Tax Sheltered Annuity until I hit 70. Make sure that your house and cars are paid off.
Leave it in your 401k and when you need an assisted living facility, the home will drain it out so your children will lose all their inheritance😊
Or you could of taken it out years prior open a irrevocable trust and you would have qualified for Medicaid
Are annuities a good option to roll into at retirement
You may retain a larger portion of the money you've worked so hard to accumulate since ROTH IRAs are tax-free.I spent six years in retirement. In addition to my depleted 401(k), I have a 130k annuity.What is the best way for me to invest $100k in a non-retirement account?
Really selling that IRA conversation aren’t you. Managing my 401K and withdrawing money from my 401K are easy.
The Roth IRA conversion is a good idea for those in a traditional 401K in order to manage tax liability. He may be pushing it, but that doesn't make it a bad idea.
You are limited to the lineup in your plan which is very restrictive. You have unlimited choices if you roll to an IRA which include asset protection strategies. Can’t get those in your 401k
Cash it out and buy a 100-thousand-dollar bass boat.
GIVE it to ME. I WILL keep working in it!!
Spend it.
I will take Cash out at age 60, then put it in CD some of the Money 😅
In service 401 k after tax distribution … aka back door roth
What Should You Do with Your 401k When You Retire? Convert it to SPY by transferring your 401K to your brokerage account and use the dividend payout (1.5% + SS) and live happily ever after while your capital appreciates. I am assuming you have $4M of S&P 500 ETF like SPY that will give you 60K + 20K from SS and that should be enough for day to day. For big spend sell some of your capital appreciation. Remember your capital is appreciation 10%. Got it? Thank me later.
Are there fees for transferring? I like the idea because I feel I have more control over my Vanguard brokerage account, which are all ETF’s like VOO and BND and VYM and VNQ.
To retire for good, I need to be at 62 with at least $4K a month in pension PLUS at least $1M extra savings to be living for good in America.
I'm not liking the 401k or Roth casinos. Nice to have but we are one terrorist attack or "new banking failed product" away from them evaporating. I am socking cash into an annuity until it is full up to $250K point and retiring to South America where the money goes twice as far. Stll have the investment accounts, but never felt they were ever going to sustain my retirement at all no matter how much was in them.
I have no 401K. I do live in my paid for home off the grid. Works for me.
If I don't retire until after 59.5 then I am absolutely rolling it into my IRA. There is ZERO reason to keep money in a 401k as opposed to an IRA unless you want to use Rule of 55.
ERSIA protection is one reason…. If you have a great plan or a self directed one would be another great reason to leave it. 🤔
Another benefit of keeping the money in your 401k is you can withdraw the money penalty free at 55.5 years old (instead of 60.5 years). Just keep the money in a low cost S&P 500 index fund because 99% of investors (including pros) can’t beat the S&P 500.
Stocks are going to crash with the upcoming issuance of the CBDC. The dollar/cash will be history. Transfer your $$ into silver and gold.
I’ll transfer mine to my checking account. I’m never paying federal taxes again.