401k status after lay off?

Dell / Eng 💾Floppy💾
Oct 6, 2018 20 Comments

I have recently got lay off. What happens to the 401k investments in sectors that are only offered by my [former] employer?

I have fidelity and picked low cost index funds when I was employee. I am not sure if fidelity moves my money to some other expensive target funds that I not interested in.

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TOP 20 Comments
  • Finale Inventory / Eng huHG50
    I think you can roll it over into an IRA wherever.
    Oct 6, 2018 4
    • Dell / Eng 💾Floppy💾
      OP
      So you mean I have to take an action, otherwise I will be in trouble?
      Oct 6, 2018
    • TI / Product IOlOl0
      You have 90 days to roll it over, if you take no actions the money just sits there and is no longer invested in anything. Roll over to traditional or Roth IRA and just out it in index funds like VOO if you don’t invest in individual stocks
      Oct 6, 2018
    • New / Product
      Dukemon02

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      Dukemon02more
      There’s no trouble. You can choose to keep whatever you had there or you need to send them a rollover for to move that money to Fidelity. I would suggest that -if you have low cost index funds as part of your Roth or IRA - to move it. The fees in a lot 401k funds are horrible
      Oct 6, 2018
    • Atlassian / Eng
      Luffy, M.D

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      Luffy, M.Dmore
      TI, there's no 90 days at most companies. In most 401k plans as long as you meet a minimum balance you can't make contributions once you are out but you can keep your old investments and in some cases even rebalance.

      Usually if you are under some minimum balance you get a check which starts the clock on a forced rollover unless you want a nasty tax hit.
      Oct 6, 2018
  • Google rWKS54
    Depending on the amount that you have and status of any outstanding loans against the 401k, you may not have to roll over or take any immediate action. Although, I would argue that rolling to an IRA makes a lot of sense for most folks. Also - this is not usually a one way decision: One can usually roll one’s IRA back into a 401k in the future. There are pros and cons for each savings vehicle (e.g., protection from divorce, ability to pay college loans, and investment flexibility).

    Critical Note: If you do have a loan outstanding, the debt becomes automatically due in [about] 90 or so days else there will be tax consequences. Feel free to hit me up if you would like more pointed advice.
    Oct 6, 2018 3
    • Dell / Eng 💾Floppy💾
      OP
      Thank you for your advice. I don’t have loan on my 401k since I am young and recently started investing in 401k. The balance is less than $20k.
      I like the freedom of IRA that let me invest my money in any ETF. Why someone choose to give up such a freedom and move his/her money back into 401k ? I heard 401k in general is more expensive in terms of fees.
      Oct 6, 2018
    • Cisco Glasswall
      You work for a large company and so it is likely that they negotiated 401K fund fees well below what is available to the public. Before you move your money out compare the expense ratios of what you are invested in with what is available outside
      Oct 6, 2018
    • Google rWKS54
      Yeah - it kind of depends. Some people borrow against 401ks might find them useful. Also, for those looking for protection from divorces may favor 401ks because they’re better protected in US courts. In your case, it sounds like an IRA is probably a good choice to run with. The majority of my retirement funds are in an IRA and I’m pretty satisfied with the flexibility.

      Note: I’m neither a lawyer nor a financial planner. :)
      Oct 6, 2018
  • Atlassian / Eng
    Luffy, M.D

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    Luffy, M.Dmore
    Once you're employed again, you may do better with your new 401k than with an IRA. The rollover rules are a little simpler direct 401k to 401k, so if you can leave the money invested in your current plan until you land somewhere else that's what I'd do and then decide between an IRA and the new employer's 401k based on the quality of the investment options in the new plan.
    Oct 6, 2018 2
    • Dell / Eng 💾Floppy💾
      OP
      I see. Make sense. Is there any fee associated with 401k roll over to IRA and vice versa?
      Oct 6, 2018
    • Atlassian / Eng
      Luffy, M.D

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      Luffy, M.Dmore
      No fees at least that I've ever heard of for 401k to IRA or 401k to 401k unless it's right after you leave and you hit early redemption fees on a particular fund. Have seen fees to roll over out of an IRA with a cruddy bank IRA but it's relatively unusual there.

      As the Google person said above there are some other differences in legal treatment but the tax part is mostly the same. IRA has broadest range of investment options (unless the 401k offers a linked brokerage account - FB's does, the only place I've seen it) but a good 401k will as Google said often offer lower costs both on account fees (usually 0) and by having access to institutional fund offerings with lower costs at the fund level. OTOH not all 401ks are good and at smaller companies even if the funds are good there can often be a narrower range of them.
      Oct 6, 2018
  • Citibank / Eng TQtT37
    Open an account at vanguard or another low cost index fund company if you don’t already have an account and do roll over 401k. They’ll run you through the process
    Oct 6, 2018 0
  • Dell / Eng 💾Floppy💾
    OP
    Thank you guys. Do you guys recommend Opening an IRA in the fidelity itself or somewhere else (e.g. vanguard)?
    Oct 6, 2018 2
    • Citibank / Eng TQtT37
      Been with vanguard for 15+ years. No complaints
      Oct 6, 2018
    • Finale Inventory / Eng huHG50
      I just put mine all in wealth front. It automatically invests in a variety of index funds based on your level of risk. I have mine set to 9 which was recommended.
      Oct 6, 2018
  • Microsoft Kingof2019
    What about moving to brokerage account
    Oct 6, 2018 1
    • Atlassian / Eng
      Luffy, M.D

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      Luffy, M.Dmore
      You can get an IRA at a brokerage, but the tax hit for moving tax deferred funds from a traditional IRA to a taxable brokerage account will usually make this a bad deal. Roth contributions can be moved back after the 5 year seasoning period but you lose the future tax free growth so unless you have only really suck options that is rarely worth it.
      Oct 6, 2018
  • Amgen Fin4eng
    Keep in old 401k, move to new 401k or rollover to IRA. If you want to do backdoor Roth IRA then do one of the first two options
    Oct 6, 2018 0
  • POWER Engineers / Other
    NtTy44

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    NtTy44more
    Easy process as described above. Get account somewhere else and transfer the funds with no penalty
    Oct 6, 2018 0