I (42) am changing jobs, hooray… I’ve got ~50k (I know, not enough) in a 401k, and I’m wondering what the pro’s and cons are to rolling it into an IRA v. just rolling it into my new employers 401k plan? Does it make a difference in terms of taxes/taxable income for this year? Long-term does it matter?
New employer offers 2:1 matching on 401k salary contributions, but that doesn’t include rollover stuff. I’m also pretty sure it would just be from Vanguard to Vanguard if I do go for a 401k rollover and not an IRA… tbh, I don’t even know where to start if I was gonna roll into an IRA?
There are no tax implications as long as you do a direct rollover- regardless of moving it to an IRA or your new 401k plan.
I would compare the fund options of both plans, along with the fee structures of each, to see if it’s worth it to keep it where it is, or move it.
Generally, the benefits of an IRA is that you have more funds available and there are often better / cheaper options available since you’re not limited to what you 401k plan selects and allows. A rollover, if done properly, will not impact taxes or taxable income.
If you plan to do a Backdoor Roth, then don’t rollover any pre-tax money into a traditional IRA. It will face the pro-rata rule and make conversions partially taxable.
Unless you’re over the income limit for direct roth IRa contributions or your new 401k has poor fund choices, it doesn’t *really* matter
Def roll over into an IRA. More fund options, generally lower fees, better access (although don’t condone withdrawing from either). As always contribute enough to your new 401k to get the match at least.
You may find these links helpful:
– [General Information on Rollovers](/r/personalfinance/wiki/retirementaccounts/rollovers)
– [401(k) Fund Selection Guide](/r/personalfinance/wiki/401k_funds)
– [Retirement Accounts](/r/personalfinance/wiki/index#wiki_retirement)
– [“How to handle $”](/r/personalfinance/wiki/commontopics)
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Pick a broker you like (Vanguard is great) and roll it into an IRA. You open it just like you would a bank account.
As you said, your new employer won’t match the rollover. All you’d be doing is limiting your investment options and volunteering to pay a small management fee.
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