401k question

HCL
notathcl

Go to company page HCL

notathcl
Aug 27, 2021 21 Comments

So I recently changed employers and my previous 401k is with principal and new one is with fidelity.

Do I HAVE TO rollover my previous 401k to new one?

Can i keep both 401k accounts active?

Are there advantages/disadvantages to keeping 2 401k accounts active?

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 TOP 21 Comments
  • Square
    owjabao

    Go to company page Square

    PRE
    Glitch
     owjabao
    Don't roll to your new 401k. Leave it where it is if you want. Or roll it to an IRA
    Aug 27, 2021 4
  • What will happen if you have an outstanding loan on your account and moving company? Do we need to clear the loan first before moving?
    Aug 27, 2021 2
  • Amazon
    is72jsn01

    Go to company page Amazon

    is72jsn01
    I'm gonna roll into an IRA. I can invest into whatever I want rather than the small set of funds my previous employer gave me
    Aug 27, 2021 3
    • Veritas
      vegetaxoxo

      Go to company page Veritas

      vegetaxoxo
      ^can you explain a bit more? What happens when one rolls over 401k to IRA and then wants to do backdoor (roth) or mega backdoor. Because roll over will result in significant money in traditional IRA. Does that put restrictions for one to do backdoor/mega backdoor?
      Aug 27, 2021
    • For regular backdoor you will be taxed on the ratio of your total pretax to post tax IRA balances when you are doing the conversion. Let’s say you have 100k pre-tax money in rollover IRAs. Now you put 6k post-tax in an IRA and convert it to roth. You’d think you can convert it for free right? No. You’d pay tax again on 94% of the 6k due to the aforementioned rule. You can only convert funds in the same proportion as your pretax to post-tax balance across all of your IRAs.

      For mega backdoor, I may have misspoke above. If you have earnings on the post-tax money, those are pre-tax and you need to withdraw the funds in the same proportion. E.g. if you have 20% gains on your post-tax contributions, any withdrawal of those must be 20% pre-tax funds. Which means earnings are either taxed or you must roll them into a traditional ira while the contributions go to a roth. Providers than can do the mega backdoor will often be able to help you avoid this by immediately 1. converting post-tax contributions to roth and 2. distributing that to your Roth IRA before any earnings happen. You also have the option to skip step 2 if you don’t mind keeping all your Roth funds being in your Roth 401k
      Aug 27, 2021
  • Amazon
    Five9’s

    Go to company page Amazon

    PRE
    Microsoft, Oracle
     Five9’s
    If you do or want to do backdoor Roth, you better keep-up in old 401K or rollover to new 401K. Rolling over to roller/ traditional ITA will kick-in pro-rats rule.
    Aug 27, 2021 0
  • Walmart
    mastryoday

    Go to company page Walmart

    mastryoday
    Not necessarily
    I moved from Amazon to wmt 3 yrs ago. Still have both 401k with separate companies.
    Aug 27, 2021 0