IRA vs Leaving it in a 401k (or similar plan)

Uptosnuff

Uptosnuff

Member
Location
Great Plains, USA
I am at a point now where I need to decide whether to leave my money in my 401k or roll it over to an IRA. I've heard the pros and cons of both.

What choice did you make and are you happy with it? Like some "real life" experience.
 

I rolled mine over into a self directed IRA. It saved the 401k management fees plus gave me a wider selection of investment vehicles. Do not buy an annuity for your IRA, in fact, do NOT ever buy an annuity.
 
Take it out .

I had a company fail and it took almost a year to get the money out ….

the company could no longer pay the custodian so they liquidated the 401k and turned over to the court .

the court then has to get a custodian to distribute the plan
 

@mathjak107 The company I worked for used Fideltiy Investments for their 401k plans. My 401k has a good selection of mutual funds. I know if roll it over, though, I will have a larger selection. I don't see Fidelity failing any time soon.
 
Uptosnuff said:
@mathjak107 The company I worked for used Fideltiy Investments for their 401k plans. My 401k has a good selection of mutual funds. I know if roll it over, though, I will have a larger selection. I don't see Fidelity failing any time soon.
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It wasn’t fidelity I was worried about failing …the company I worked for failed ….then the money gets trapped un invested in the courts..

fidelity didn’t get paid from the company so they turned it over to the court
 
I also moved my 401K into an IRA, shortly after I retired. It has performed well, and adds nicely to our retirement income, with no hassles, other than the normal taxes being held out. Even after all the market "ups and downs" over the past years, the funds are holding up well.
 
I did all the investing decisions while we were working. We could have kept Spouse's 403b funds in the state account, where fees are low. However, we wanted to travel in retirement and I was leery about having to deal with taxes if we took distributions (e.g., sold funds for monthly payouts).

We were already using an independent CFP firm for MIL's portfolio (she lived with us for seven years before moving to a senior facility). So we moved the funds to an IRA under their mgmt. Eventually after she passed, we continued taking the same amount she had been getting - never did take any distributions from our own portfolio, Spouse's pension being sufficient for our needs.

It has worked out very well. Performance has been excellent, net of fees and distributions; and the distributions are disbursed with an eye towards tax management. Less than a quarter of what we take monthly, is taxable. This is important to us as Spouse's pension is completely taxable and my SocSec is 85% taxable (I hope I have that right - it's whatever the max is).

Our tax adviser has complimented our CFP firm, saying they have substantially lowered our effective tax rate.

Sadly, Roths became popular too late for us....the state pension management didn't approve Roths for employees until a couple of years after Spouse retired :confused:
 
I'm one of those who was blessed to have a pension. Two years before I retired I decided to finally contribute to the state's Deferred Compensation plan, which I guess was similar to a 401K. Didn't before that because I didn't like the wording of the contract but Gov. Christine Todd Whitman changed that. Once the state changed their policy and permitted rollovers, I did that (crazy story on what happened but more on that later).

I was heavily into self directed investing at the time and I wanted to be able to invest the money the way I wanted. I am very pleased with the growth of the investments I purchased. For you it would be a matter of where the money would best serve your retirement goals. Can you invest the money better than your 401K allocation? If you leave it in the 401K, is the company reputable enough that you are unlikely to lose what's invested? I took a look at my son's 401K investments and must say I was pleasantly surprised at the holdings in it as well as the low fees.
 
mathjak107 said:
It wasn’t fidelity I was worried about failing …the company I worked for failed ….then the money gets trapped un invested in the courts..

fidelity didn’t get paid from the company so they turned it over to the court
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Well, I worked for an electric utility. I would hope that it won't fail, at least not for a long time, but you never know. So, how does rolling your money to an IRA make any difference in that scenario?
 
I have rolled most all of my 401k $ into IRAs, but am not sure that was the right decision. My biggest problem is the more I try to manage investments the worse things get. I am a lot better off with the money in large stable mutual funds than trying to mess with things myself.

A question to consider is what are the fees you are paying and will pay if you roll over. Sometimes big companies can get reduced fees, if that is the case I would consider leaving it in the 401k. Wish I had done that with a lot of my $.
 
Particularly for seniors, I think it is very risky to practice buy and hold with our investments. If the market takes a big dip, time is not on our side to make up for losses. My experience with 401K's is that they are slow to respond to changing market conditions. By definition, they are designed for long term buy and hold investing.
 
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I suppose that it’s different for each of us.

How much we have to invest, how much income our investments generate, how we allocate our investments, how heavily we rely on our investments, etc...

I buy and hold a mix of mainly balanced mutual funds. I also hold a cash reserve.

“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” - Warren Buffet
 
Think its so interesting that so much of the money in the stock market will just stay there and keep growing. If you invest with money you don't figure you will ever need (God willing) then it just stays there, doesn't it. Passing it down to your heirs who will probably also just leave it there to
accumulate. Hub calls it the biggest casino in the world.
 
Liberty said:
Think its so interesting that so much of the money in the stock market will just stay there and keep growing. If you invest with money you don't figure you will ever need (God willing) then it just stays there, doesn't it. Passing it down to your heirs who will probably also just leave it there to
accumulate. Hub calls it the biggest casino in the world.
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That’s the way I would like it to work.

Sort of like passing on the family business.

In my experience it seems like a generation of frugal savers and investors produces a generation of spenders.

Money and how it works is one of the subjects that more people should be willing to discuss with the people that they care about.
 
I am also at the same point... retire in 2 months..
My 1st suggestion is to go to forums like FIRE retirement or Bogleheads... and do some research.
Do you have a pension also? Or are you relying on SS and your 401K moneys?
A lot depends on WHERE your 401K is invested... If its in just a companies stocks then it can be riskier.
The more diversified, the safer, and funds with lower fees means more money for you.
Personally (I also will have a pension) I am planning on taking about 1/2 my 401K out and move it to an IRA. Gives me a wider choice of investments. We also started Roth accounts for us both.. (were younger) and intend of converting out our contributions to stay in our lowest tax bracket.
The old saying ..... dont put all your eggs in one basket.... works here well...
 
old medic said:
I am also at the same point... retire in 2 months..
My 1st suggestion is to go to forums like FIRE retirement or Bogleheads... and do some research.
Do you have a pension also? Or are you relying on SS and your 401K moneys?
A lot depends on WHERE your 401K is invested... If its in just a companies stocks then it can be riskier.
The more diversified, the safer, and funds with lower fees means more money for you.
Personally (I also will have a pension) I am planning on taking about 1/2 my 401K out and move it to an IRA. Gives me a wider choice of investments. We also started Roth accounts for us both.. (were younger) and intend of converting out our contributions to stay in our lowest tax bracket.
The old saying ..... dont put all your eggs in one basket.... works here well...
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Thanks for the names of those forums. I will take a look.

I do have a pension. I am 62 and will officially retire 11/1/21. Fortunately, I can start collecting the pension right away. It is not a huge pension but adequate. For the next year this will be the main source of income. We will also take some money out of one of our IRAs or 401ks to supplement if need be. When hubby turns 65 other income streams open up. He has a couple of small pensions he can start collecting. He will get a decent amount of SS when we decide to start that. Since I have a pension I have paid into for many years, I will not collect much SS.

Interesting about moving 1/2 of your 401k to IRA. My 401k is in mutual funds in Fideltiy. I have been very satisfied with my selections so far.
 
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@Liberty "Hub calls it the biggest casino in the world." Lol. My husband and I talk about the same thing. Neither of us really likes to go to a casino and gamble, but we have no problem investing money in the stock market.
 
Uptosnuff said:
Interesting about moving 1/2 of your 401k to IRA.
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My 401K is stable with Prudential, but very limited fund choices. and with retiring I cant add to it.
By rolling some into a tIRA, I have a wider range of funds, and can still contribute more if I wish.
Roth is with the same company so its easier to do backdoor conversions.

Uptosnuff said:
My 401k is in mutual funds in Fideltiy.
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They are a good stable company... you will love bogleheads then
 
I retired in June 2020. I kept my money in my company's 401k for a while because I could change investment direction every few months with no fees. However, I knew my financial advisor who was handling my other accounts, was better at investing than I am, so I moved it in with my other accounts. I was fortunate that my company's 401k accounts were with Wells Fargo and so is my financial advisor so I simply moved it over. It is still in a 401k but it is now overseen. I do have both an IRA and Roth IRA as well.
 
Actually, I stand corrected. My 401k is now in my IRA. I rarely check the individual accounts. I just look at the overall balance to see if I will be able to outlive my $$$.
 

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