Should I rollover funds from previous employer’s 401k and consolidate into existing Vanguard IRA & Roth IRA accounts? At a minimum, it’s one less maintenance fee to pay... what are your thoughts?
If you do backdoor roth conversation, then your average of all iras will be used. Look that up first.
I had indeed been doing backdoor Roth, and current Trad IRA balance is $0 since I did the backdoor conversion for 2018. Maybe I’ll open up new Traditional & Roth IRA accts with another broker? This way I could do backdoor Roth there instead of Vanguard, since the 401k rollovers will result in high Vanguard IRA balances?
For clean Backdoor Roth ***ALL*** your Trad IRA ***anywhere*** needs to be zero. It doesn’t matter what brokerage it is or if you use one or seven. IRS considers all the Trad IRA as ONE they just sum all the money together. Refer to pro-rata rule.
If ur current employer 401k fund options are good, you can roll over the old 401k into it. Greater variety of self directed options of ira doesn’t mean better return.
Exactly this ^
Yeah if you want to do clean Backdoor Roth Conversions then you want to keep it as a 401k. Refer to the pro-rata rule. You can also “roll in” the old 401k into your current employer 401k. Or if you have side income (drive for Uber/Lyft, mTurk, walk dogs) you can open a solo401k and roll into that. A nice side benefit of 401k is if you use it for alt investing (like real estate) it’s not subject to UDFI/UBIT unlike an IRA. Also 401k have stronger protection in bankruptcy and 401k allows you to borrow against it if you really need to. For those reasons I kept my old 401ks alive, ironically it’s just invested in a plain boring Vanguard Target Fund. I am meaning to open a solo401k and consolidate so I can do more self-directed and alt investing while still being able to do clean Backdoor Roth Conversions yearly. Also at some point your principal will dwarf the Roth IRA Backdoor contribution (ie: adding a $6k non-deductible contribution to a $1M IRA isn’t going to be that significant) at that point may not be worth the trouble. Unless you can do a mega-Roth contribution. Good luck!
Financial firms such as Fidelity, Vanguard, etc usually advise people to transfer their 401k to IRA with the argument that you have more investment options. Which is true. But it’s also true that by transferring your funds, they can sell you services such as financial advising. It’s like asking a real estate agent if you should buy a house. Depending on who you work for, those funds can be a lot more expensive than what you would get in your company’s 401k. Bottom line is, check your current company 401k funds and see what the expense ratios are. Then compare that to the funds you would invest in your IRA.
If you’re buying standard index funds, move all to G 401k. They have amazing institutional plus level funds with tiny expense ratios you can’t get in IRAs.
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Why not into your current 401k?
Vanguard rep told me I would have greater variety of self-directed options with rollover to IRA accts ... hence I’m trying to figure out what I might be missing...