401(k) Rollover -- What To Do With Your 401(k) When You Leave Your Job or Retire

[@rob_berger]

One additional consideration is a backdoor Roth IRA. If you plant to make after-tax contributions to an IRA and then convert to a Roth IRA, you might want to keep 401(k) money in the 401(k) to avoid the pro-rata rule. Of course, Roth IRA conversions may end up being a thing of the past depending on what Congress does.

[@bridgecross]

One thing to keep in mind if you keep a 401k account from a former employer in place: if that company ever goes out of business or is acquired by another company, they might wind down that 401K plan or switch the plan to another brokerage. Existing employees are given their options through the HR department, but as a former employee, you're long gone. You might have a long-forgotten account that you suddenly need to take action on. And if you somehow miss the communication from your old company, they may end up issuing a disbursement and sending you the funds. You normally have 60 or 90 days to get those funds into another qualifying retirement account, or risk owing income tax on the entire disbursement. It's just something I would rather not worry about; I would rather move the funds into an account which I control.

[@spambaffle]

A word of warning about rolling former employer balances into your current 401k. I did this and only discovered later that my employer's plan segregates this money as a "rollover source" and excludes it from their In Service Rollover Withdrawal option, so I am unable to do partial Roth Conversions with any of this money while I remain employed there. The HR department straight up told me that the only way for me to regain access/control of my lifesavings was to quit/retire. This wouldn't have been an issue if I had rolled the former employer accounts into an IRA.

[@TravelingtheWorld96]

Another great video...thanks Rob. I just did a crazy rollover last month. Four 401Ks (all at Fidelity) and some of these had post tax contributions that qualified for rollover to a Roth IRA. It took all of 5-10 minutes to setup my new rollover IRA account at Fidelity and a 30 minute call with Fidelity (yes their customer service is outstanding) and they took care of everything in just over 48 hours. Wednesday night call. Thursday night they pulled the money out of the old 401Ks. Friday morning I was able to choose my investments in the new rollover account and my existing Roth IRA. Saturday morning, the funds were exactly where I wanted them. I know you partner with Capitalize but this was so incredibly easy that I thought I had done something wrong. Next year, I will probably split that account into a second broker but now I can do so from a single consolidated account.

[@allbaugh04]

The main reasons to rollover for me were to avoid the high expense ratios and pick a wider range of funds or individual stocks.

[@TheDealHunter]

Excellent video. I have 2 401k's (1 current employer and 1 former employer). I plan on keeping both because they both offer a decent stable value fund which can't be found in IRA accounts.

[@MarkMatthewsNJ]

Nice video! love your style. One thing to really call out with the "Rule of 55" is that you HAVE to leave it in the 401k and withdrawal from there. I have a friend who started rolling it out into an IRA and was sadly surprised that from the IRA it no longer qualifies for the 10% exception. It sounds like common sense, but they had a financial planner give them this advice (and I imagine it was so that planner could get a commission!)

[@jamesodell3064]

Another way to take money out of an IRA when retiring before 59.5 is to make substantially equal periodic payments. The rules are complex and need be be followed carefully.

[@ph5915]

Yeah, my mistake (sort of) was rolling everything out of my former employer's 401K and pension into an IRA, on the presumption I had a future job lined up in a couple months (start up company). So, of course, that fell apart. There is a verry squirrelly way to withdraw penalty free from an IRA prior to 59.5 (still taxed). It's called the Rulte of 72T in the IRS code and it uses a table to compute substantially equal payments for 5 yrs or 59.5, which ever is GREATER, if i recall correctly. It's very odd and easy to make a mistake and get pounded. So I declined that.

[@frankgrandelski2273]

Another very good video. One additional consideration, in the State of Connecticut, larger distributions UNDER $100k, from IRAs, are mostly/ fully taxed by State of CT. However, distributions, from 401ks, are 42% partially exempt (2021 tax year), from CT income tax. Distributions from IRAs, UNDER 100k, become 25% partially exempt starting tax year 2023 from CT income tax, and fully exempt 2026. I believe distributions from 401ks 42% partially exempt now, 2021, are fully exempt, starting 2025. UNDER $100 k is the key amount in both cases. This amount is not indexed, 2021. These rules probably apply to Roth conversions, so choose carefully, which accounts to draw/convert from. Also choose carefully before, rolling over 401k, to IRA. We were encouraged by Schwab, ( but most financial institutions advertise and encourage people) to roll over 401k to IRA. I should have checked with CT CPA, before rollover. Up till a few weeks ago I did not realize, that CT, did not treat, IRAs the same as pensions, annuities and 401ks.

[@frankshyu8810]

Thank you so much for sharing Rob, love your thorough information!

[@lleiden2]

Rob, Could you please do a video on VTWAX?

[@krihanek117]

Thank you, I think this is one of your best topics ever.

[@cceerr11]

If I understand correctly, you stated if you roll a 401k (defined contribution pension) into a rollover IRA you retain the ERISA protections. If that is true, can you also roll your lump sum payout of a defined benefit pension into that same rollover IRA to retain the ERISA protection? This rollover IRA would contain exclusively pension (defined contribution and defined benefit) funds. Also a consideration for maintaining some 401k money by only doing a partial rollover to IRA would be state tax. In Maryland an individual can exclude approximately 35K (adjusted annually) of pension income from state income tax after age 65. That would be 70k if MFJ. Must be from a defined contribution or defined benefit pension, not an IRA.

[@buyerclub2]

You are making this far more complicated than it needs to be. As soon as you can transfer a 401K to a IRA you should. Why, very simple the 401K manager is likely charging you approx 1% in fees, and their funds also have more fees than many other funds. So for example if you had $200K in a S&P index fund in a 401K, you would pay $2000 a year in fees, the simple act of moving to a rollover IRA will eliminate those fees. BTW it would be absolutely fool hardy to move it from one 401K to another (where you will also be locked in.) When you leave an employer your money should leave to. To a roll over IRA.

[@janzelm505]

Great program! Wish, would see your program.... before transferring my 401 Roth to IRA Roth....did not know about 5 years rule...Thanks anyway

[@losinglouie]

I'm a little confused about the five year rule for Roth 401k's. I'm 64 and would like to start taking tax free distributions. The vehicle has been in place for five years. OK to grab the money tax free?

[@bakntheday]

If you retire from a company and start drawing your 401k from that company can you go back to work somewhere else?

[@jaclynbriggs9088]

What an amazing video Mr. Berger. It was so informative and I learned a lot . You had some really great advanced planning strategy ideas.

[@anujgupta9293]

Mr rob excellent video. One thing to remember is that, if you leave your 401k with previous employer , you will pay higher fees then you were paying when you were employed

[@rob_berger]

Perhaps in some cases, although I've never had to pay higher fees.

[@JosephDickson]

[Forbes has left the meeting]

[@davidfunvideos]

the employer match in a Roth 401 is in a taxable account by your employer can you roll over the taxable amount to Roth IRA and the match to a traditional IRA, typically?

[@toddhallam9598]

Question: I have a Roth IRA that I opened at age 55. When I roll my Roth 401k into that account at age 60, I have immediate access to all of those funds, right? I don't plan to tap into those funds at that time but would like to know if it is an option if something unexpected comes up.

[@kevinbrashear9370]

Rob, can you discuss the rules for Roth conversions and the 5 year rules? Various sites have some nuanced conflicts. I would like your take on the Roth conversion 5 year rules. Thanks for your content. It’s helpful to me!

[@rob_berger]

It is conversion. I'll add this topic to the list. Just remember that there are 2 5-year rules. One applies to opening a Roth IRA, the other applies to each and every Roth IRA conversion you make.

[@johnbick3884]

@Rob Berger I am retired (over age 59 1/2) and have a 401k at Fidelity and want to keep this 401k to have access to the Stable Value fund for my fixed income portion of my portfolio. However, I want to get some of my 401k converted to my Vanguard Roth IRA. Can't I take a partial distribution from my 401k and within 60 days, deposit it into a Traditional IRA (currently $0 balance) and then convert it to my Roth IRA? I know this is a taxable distribution and I have cash to pay the taxes. I also understand that this kind of rollover is limited to one every 12 months.

[@fowziazia6193]

Love ur advice!!!!

[@leeharrell777]

Enjoyed the video, did not know about the 55 rule!! Also, the new chair with writing directly behind your ear is distracting.

[@ShOwStOpp3rr]

does it make much sense to invest in your 401k at work other then to achieve the matching amount by the employer,,i have the extra money to put in after maxing out my ROTH IRA but in our 401k im paying 1.5% fee to have American Funds and our advisor manage my money whereas wouldn't i be better off just chucking my extra investable income into a taxable brokerage account and buying into a Vanguard SP 500 index ETF that only charges .03% ?...for what i'll be paying in fee's over 30 years in a 401k at 1.5% vs what little id pay in taxes on a SP 500 index fund ETF (example VOO) in a taxable brokerage account wouldn't it be a smarter financial move to invest my money in VOO over any tax advantaged 401k mutual fund at work thats charging me 1.5% ?

[@SirAnthony25]

Can a 55 year old retire and continue to work part time with same employer and withdraw from 401k?

[@rob_berger]

Not sure about same employer. I've read that you can go back to work at a different employer. I would talk to your 401k administrator.

[@dougm1985]

great information. question. if i leave my job and leave my 401k with them. but. start a different job, can i with draw from that 401k with out the 10% penalties?? i'm 56.

[@CalKidWilly]

Hey Rob I'm interested to learn more about the information you mentioned regarding rollovers having the same creditor protections vs. 401ks. Can you provide that source link please so I can take a look at it? Thanks, Bill

[@Geoff--]

Regarding creditor protection from 401k to rollover IRA. Are you referring to ERISA?

[@bigtoeknee11]

Can I also use rule 55 to do Rith conversions from my 401k into my Roth without 10% penalty

[@akwolf1434]

Regarding the rule of 55 - my wife and I were told that after you retire/quit/get laid-off that you can start pulling money out of those retirement accounts, 401/503/etc without penalty, BUT after separation and after you begin pulling money out, you CAN go back to work for that same employer and still continue to pull money out, and work for them at the same time. Is this correct?

[@rob_berger]

I haven't heard that before, but I suspect the 401k administrator could help confirm if that's true.

[@dwalker6868]

Thank you

[@focusedfreebird]

What about a Roth 401k? Do i have to have a Roth IRA 5 years old already to roll it into?

[@susanandre1776]

@rob what do you think of RSP vs. Vanguard Total Stock Market Index since inflation may be a concern next year/in the future and tech is currently so overvalued (which makes up a lot of the S&P as you know).

[@darcymateo4561]

What to do when you inherent a 401k

[@rag1569]

Thank you for a good info...What if the person relocates back to his home country with same employer after working for 3 or 5 years in states? Regards!!

[@rob_berger]

I'll cover this in a future video.

[@charlesmohr3238]

Considering doing a In-Service rollover from current employer 401K to roll over IRA to have more investment options and reduced costs. I’m 60. Any issues I need to consider?

[@CalKidWilly]

Thank you Rob for the helpful information. Am I able to post replies here that contain links for reference? My comments seem to be disappearing.

[@rob_berger]

I've sent comments to require my approval due to spam. I'll set it so your comments are auto-approved.

[@CalKidWilly]

@@rob_berger Understood thank you Rob.

[@johnguertin5054]

what about 403b's????

[@fastdeliveryl708]

I have a huge question . im about to leave my company next year and i have around 60,000 in a traditional 401k there. i opened a vanguard PERSONAL INVESTING ACC, not a 401k or Roth IRA and plan to invest in a index fund such as VTSAX or VFIAX etc. would I be able to do a rollover of my 401k to my vanguards personal investing account or thats not possible? because i wont be able to contribute to both my old 401k at the company and the new personal investing acc at VANGUARD. whats your suggestion?, also would i be penalize on the 10%? THANK YOU

[@rob_berger]

I'm assuming the account you have at Vanguard is a standard taxable account. If so, you would need to open a separate Rollover IRA at Vanguard to roll over your 401(k). That's not an issue, however, as it's common to have multiple accounts at Vanguard or any other broker. And there is no 10% penalty for properly executed 401(k) rollovers. To get help with your rollover, just call Vanguard. They will help walk you through the process.

[@rozaelkinyuk4401]

How about opposite case to rollout not 401K to IRA, but traditional IRA to 401K. What are cons and pros? I’m 67 and soon will be retired.

[@alanconley5005]

So suze Orman was saying that you can withdraw money from your Roth IRA with no penalty as long as you withdraw from your contributions not the interest or dividends you earned? Can you confirm that and let us know if their is a catch? Exampl you contribute 9,000 but have 20,000 in your Roth IRA you can withdraw up to 9000 because that is your contributions with no penalty. Basically because it has already been taxed.

[@kentadams4589]

Absolutely never roll your former 401k into your new employer's 401k....Unless you plan on borrowing against those savings. There is absolutely no other reason to do it that I can think of. You should roll over to a self directed IRA. A self directed IRA you can invest literally anything rather than what the employer picks for you. Fidelity Investments took care of my 401k to IRA transfer for me. I didn't have to do anything.

[@KBTadieh]

These boomers are still talking about 401k's??? 🤣🤣🤣