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.
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
Easy process as described above. Get account somewhere else and transfer the funds with no penalty
Thank you guys. Do you guys recommend Opening an IRA in the fidelity itself or somewhere else (e.g. vanguard)?
Been with vanguard for 15+ years. No complaints
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.
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.
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.
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
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.
I see. Make sense. Is there any fee associated with 401k roll over to IRA and vice versa?
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.
What about moving to brokerage account
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.
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
I think you can roll it over into an IRA wherever.
So you mean I have to take an action, otherwise I will be in trouble?
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