I'll be changing jobs in the next week and have a fairly tidy sum of money in my current employer's 401(k) plan, and I'm trying to figure out which is in my best interest, move the money into my new employer's plan (which I have yet to see, so I don't know what my options are with this plan yet), or roll the money over to an IRA.
On the surface, the two most important factors from my perspective are:
- Pro 401(k): I'm 68 and am planning on working until I'm at least 72 or 73, so RMDs of an IRA may come into play whereas with a 401(k) I should be able to defer any RMDs until I retire.
- Pro IRA: In my experience, 401(k)s have limited options when it comes to where to invest the money, however, IRAs are pretty much open to whatever I want to invest in.
I'd love to hear thoughts from the collective here on which of the two options might be best for me. Having said that, I suppose a third option would be to split the rollover, say half to an IRA and half to the new 401(k) plan.
@AndySoCal wrote:In the times that I have done this in the past have used the IRA option. Some 401K plans will allow you to bring funds from other 401k plans into their 401k some will not. Look at the new 401k plan then make a decision. If you go the IRA route use the provider to provider option.
Using myself as an example it would from company 401k to Vanguard. On the Vanguard side I would give the instructions on how to invest the money that is being rolled over
I also followed the above strategy. Rollover IRAs to Vanguard (and also Schwab), and then do self-directed investing.
Thanks for the advice folks; a few comments on your comments, in no particular order:
- While my experience is relatively limited, I have never seen a 401(k) which didn't allow you to roll money from a previous employer's plan into the new one.
- Regarding the Rollover IRA option; I absolutely agree, the self directed investment option is a huge benefit versus a 401(k) plan which only offers several dozen mutual funds to choose from.
- Regarding rolling the money into Google's 401(k) plan; as has been pointed out, I don't yet know what it looks like, so I can only make some assumptions on other plans my wife and I have been involved with; it may be way more flexible than others. That said, the benefit of choosing this option opens up the possibility of avoiding RMDs if I work past 73.
- As for how much longer I'll be working, that is a tough one; I love what I do and Google subscribes to the "Golden Handcuffs" philosophy in that they grant sizeable chunks of equity annually which vest on a rolling four year schedule, so regardless of when I retire, I'll be walking away from many thousands of unvested RSUs (Google calls them GSUs), so the "just one more year" syndrome will definitely be in effect when it comes time to consider retirement.
@iced wrote:Knowing you're dealing with Google's 401k changes the conversation. I'm also living in the world of trillion dollar valuation tech companies, and our 401k is IMO strictly better than an IRA. I get access to funds at lower fees than I would in a traditional IRA, and I have full flexibility to do open brokerage accounts under the 401k to invest in any individual stocks or non-plan funds I want. I can borrow against it (but never, ever will). In fact, I cannot think of a single thing I can do in a traditional IRA that I can't do with my 401k.
I would be surprised if Google's plan isn't substantially similar.
I still keep a separate IRA (and Roth IRA) that's an annual dump bucket for backdoor Roth rollover contributions, but other than interest earned on those contributions that sit for a day before rolling over, it's empty, and anything outside of that bonus Roth I kept in the corporate 401k.
Thanks! Your information is reassuring; I've been leaning toward rolling over into Google's 401(k) plan, and now I'm leaning even further. I won't actually get to see the plan for another ten or so days, but if I like what I see, I'm going to initiate the transfer immediately.
FWIW, back in late May when I was informed an offer was forthcoming, I cancelled my 401(k) contributions with my current company so I could take as much advantage of Google's 50% match as possible for 2025. My current company was purchased by a firm from Pune, India several years ago; two years ago they cancelled our independent 401(k) plan, which included Safe Harbor and a minimalist match of up to 4% of our contributions (dollar-for-dollar for our first 3% and then fifty-cents per dollar for the next 2%); their plan had no match and no Safe Harbor. In my case, I've been contributing the IRS max and maxing out the "Catch-Up" contributions for years now; so, what happened when our plan got converted? The plan administrator audited our contributions and said, "Oops, sorry, you are a highly compensated employee, and as such, you are ineligible to contribute the full IRS limited amount. So, we're executing a taxable distribution and sending you a check!"
Our group has had several "all-hands" meetings over the last year; it turns out the vast majority of our associates were deemed "highly compensated" and spanked for our excess contributions. Not surprisingly, there has been a mass exodus of talent at every level.
@iced wrote:Most employees in these companies fall under the highly compensated umbrella, so traditional IRA contributions (and most deductions are off the table. You can still do a after-tax IRA contribution of $7k (or whatever the max happens to be that year) and backdoor roll it into a Roth IRA, though both your 401k and IRA will eventually fall behind your brokerage balance anyway (those RSUs really get rolling after 3-4 years).
Also, don't forget to max the HSA too.
Yup, already doing the backdoor Roth IRA and the max HSA thing as well. 
@Horseshoez wrote:I'll be changing jobs in the next week and have a fairly tidy sum of money in my current employer's 401(k) plan, and I'm trying to figure out which is in my best interest, move the money into my new employer's plan (which I have yet to see, so I don't know what my options are with this plan yet), or roll the money over to an IRA.
On the surface, the two most important factors from my perspective are:
- Pro 401(k): I'm 68 and am planning on working until I'm at least 72 or 73, so RMDs of an IRA may come into play whereas with a 401(k) I should be able to defer any RMDs until I retire.
- Pro IRA: In my experience, 401(k)s have limited options when it comes to where to invest the money, however, IRAs are pretty much open to whatever I want to invest in.
I'd love to hear thoughts from the collective here on which of the two options might be best for me. Having said that, I suppose a third option would be to split the rollover, say half to an IRA and half to the new 401(k) plan.
I wouldn't even consider putting it into the 401k. I would definitely want the flexibility of an IRA.
I wouldn't worry about required minimum distributions because they are small.
