New job, 401k to 401k, or 401k to IRA?

[Bades]

What should I be looking for?

IRA you can only contribute $5,500 (I think) and a 401k is something like 16k.

Is the main deciding factor is if my new employer matches on the 401k plan?

[Petunia 100]

What should I be looking for?

IRA you can only contribute $5,500 (I think) and a 401k is something like 16k.

Is the main deciding factor is if my new employer matches on the 401k plan?

Are you asking if you should roll your old 401k into your new 401k or into an IRA?

Your own IRA is usually a better choice. You can control costs and have complete choice of investment in your own IRA. You have much less control in most 401k plans.

There is no match to roll your old 401k into your new one. Matching means you contribute some of your salary and your employer will make a contribution too, up to a stated limit.

If I have misunderstood the question, feel free to say so.

[BuckyBadger]

I agre with all of Petunia's questions. An employer plan is separate from a personal IRA.

If your income level prevents you from contributing directly to a Roth IRA and you are planning on contributing by doing a "back door Roth" then you don't want an IRA hanging around with pre-tax money in it.

If you have no intention of doing a backdoor Roth then everything Petunia said is correct.

[Petunia 100]

Oh, also, rolling over does not count as a contribution. So if you have 100k in your old 401k and want to roll it elsewhere, that is just fine.

[~bs]

I would move it to the new 401k. If that plan is decent. With an ira, you have more control, but a relatively unknown feature of a 401k is the superior bankruptcy and lawsuit protection it offers. An Ira can be taken in an adverse judgement, a 401k cannot. To me, it makes sense to protect some of your assets against that possibility.

[bUU]

Besides the protection of assets angle, also keep in mind that money in all IRAs is pooled and treated in a proportional manner, when doing a Roth conversion, so if you're looking to take advantage of the Backdoor Roth then you want to keep your aggregate, tax-deferred tIRA amount low (or preferably zero).

Having said that, my current-employer 401k is utter crap, with all-but-one fund having ERs in the 1.3%-1.4% range. It is enough for me to at least delay any rollover decisions until I see where things are going with a company acquisition. If we're stuck with this 401k, then I will refrain from acting on my Backdoor Roth plans.

[jpg7n16]

I would move it to the new 401k. If that plan is decent. With an ira, you have more control, but a relatively unknown feature of a 401k is the superior bankruptcy and lawsuit protection it offers. An Ira can be taken in an adverse judgement, a 401k cannot. To me, it makes sense to protect some of your assets against that possibility.

IRA assets are federally protected from bankruptcy up to $1 million. Many state laws protect from lawsuits as well.

http://online.wsj.com/article/SB124181801239401917.html

From: http://online.wsj.com/article/SB124181801239401917.html

IRAs, including Roth IRAs, don't have precisely the same shields -- but under a 2005 law, the Bankruptcy Abuse Prevention and Consumer Protection Act, up to $1 million in IRA assets are protected in the event of bankruptcy, says Jan Jacobson, senior counsel for retirement policy at the American Benefits Council, a Washington trade group.

...

However, even if you live in a state where laws provide less protection for IRAs, "I wouldn't leave the money in a 401(k) just for that reason alone," Mr. Slott says. IRAs often provide easier access to your money, a wider range of investments and may have lower fees, he contends. So, if creditor protection is the only reason you would consider leaving your assets in a 401(k), he suggests two other "lines of defense" -- professional malpractice insurance and a personal umbrella liability policy, which can be relatively inexpensive. "I recently paid $600 for $5 million in coverage," he says.

And just in case it wasn't clear in earlier posts, I'll reiterate: you can do BOTH your IRA contribution and 401k contribution. Limits have no effect on each other.

[~bs]

IRA assets are federally protected from bankruptcy up to $1 million. Many state laws protect from lawsuits as well.

http://online.wsj.com/article/SB124181801239401917.html

And just in case it wasn't clear in earlier posts, I'll reiterate: you can do BOTH your IRA contribution and 401k contribution. Limits have no effect on each other.

heh, didn't know that the law changed to protect iras from bankruptcy proceedings. Good to know! Although, I'd have to guess that the IRA can still be subject to a levy, possibly garnishment? You know if the law changed to protect against that as well?

Some states may provide lawsuit protection for assets in iras, but in many, they're fair game.


Here's a quick link as well.

Many people are given wrong information and believe that their Roth and traditional IRA accounts are completely protected. This is not always the case. Each state regulates the amount of legal protection offered for IRA account holders. Most states, including California, fail to provide traditional individual retirement accounts and Roth IRAs with the kind of protection from creditors given to pension plans and 401(k) plans. This is one of the few times that comparing Roth vs. Traditional IRA's has limited weighting. When there is an active lawsuit, all assets can be considered. Since your IRA account earns interest, thus earning you money, it is considered an asset and can be included in lawsuit settlements. An IRA account can also be garnished when filing for bankruptcy. While IRA's are a great way to prepare for the years ahead, these accounts are not completely protected in all circumstances. Actually, California law does shelter money in IRAs and Roth IRAs that is deemed necessary to support the owner and their dependents in retirement, but a judge will determine what exactly this means and can change from judge to judge.

http://bestirarescue.com/ira-lawsuit.html

[Bades]

Right now I have both my current 401k through my employer and Roth IRA with etrade.

Since a Roth is after tax contributions - how does a 401k rollover work? Would it be taxed? Would it have to go into a traditional IRA?

Can you have both a Traditional and a Roth IRA? If you can, how does the maximum contributions work with two of them?

With my new employer I'll def use their 401k because they have a matching plan, but it looks like it doesn't really matter where the Roll Over cash is going to? It's not a lot, only about 7k.

[Petunia 100]

Right now I have both my current 401k through my employer and Roth IRA with etrade.

Since a Roth is after tax contributions - how does a 401k rollover work? Would it be taxed? Would it have to go into a traditional IRA?

Can you have both a Traditional and a Roth IRA? If you can, how does the maximum contributions work with two of them?

With my new employer I'll def use their 401k because they have a matching plan, but it looks like it doesn't really matter where the Roll Over cash is going to? It's not a lot, only about 7k.

You cannot roll your 401k directly to a Roth. However, after you have rolled it to a traditional, you can then convert all or part to a Roth if you choose. You will be required to pay income tax on any amount converted.

Yes, you can have both a traditional and a Roth. You can contribute to both. The maximum allowable contribution in 2013 is 5.5k (6.5k age 50 and older) for BOTH (not each). You can divide the 5.5k up however you please.

I think it matters a great deal where your 7k is going. Choose a low-cost custodian (Vanguard, Fidelity, T. Rowe Price) and choose a nicely diversified low cost fund (Vanguard's Target Retirement Funds are an excellent choice).