I did my 401K to IRA rollover at Fidelity a number of years ago. I was worried that I would be out of the market for a day. I was assured that I would stay in the market during the rollover by my Fidelity advisor. Turns out my advisor was wrong, the market had a big up swing so I was out about $45k. I called my advisor immediately and complained. To my amazement Fidelity adjusted my account so I was made hole. What a standup company Fidelity is.
That’s impressive. And a benefit of doing business on a recorded line. Good on you for being aware of the potential issue and standing up for yourself when it went wrong.
That's great that Fidelity made you whole for their mistake. I just completed a 2022 $184K 401K to Roth IRA conversion. I just asked Fidelity to transfer shares from the 401K account to the Roth account Although I completed all paperwork & appeared in person at the Fidelity Branch Office with my wife on December 30, 2022; and although Fidelity assured us that all the paperwork was complete... Fidelity failed to completely process the transaction for 19 days. Apparently the Fidelity Representative was supposed to confirm our identities, check our drivers licenses & provide a "medallion signature guarantee". Although Fidelity had our state drivers licenses & notarized my wife signature, which I don't understand because she is not on either account, Fidelity failed to apply a "medallion signature guarantee" for my signature. Why Fidelity needs a medallion signature to transfer from my 401K to my Roth IRA with the same name, date of birth & social security number & is part of the same Fidelity monthly statement is perplexing. Although Fidelity repeatedly assured that we had done everything needed, when the paperwork was sent back to Fidelity administration, the Fidelity "backroom" stopped the transaction & failed to contact me for two weeks. Fidelity now insists that it is a 2023 conversion. Although Fidelity admits Fidelity screwed up by not processing paperwork before year end, it says its sorry but can't correct the paperwork. Fidelity dropped the ball but the local branch says its out of their hands.
Another reason to transfer: My Roth 401k and my Pretax 401k are in the same account. It will not let me separate the pre-tax withdrawals from the after-tax withdrawals, but requires an pro-rata distribution from all the investments. I also cannot invest the Roth 401k money differently than Pre-tax Roth. All withdrawals from my 401k have pre-tax and after-tax components making everything more complicated tax-wise.
Good video, but the key reason I will not roll over into an IRA is the loss of ERISA creditor protections. I feel that every discussion of a 401k to IRA rollover should highlight this as perhaps the biggest negative to the rollover which should be balanced with the positives.
Yes, Protects from litigants and bankruptcy. Lot of people don't know about this. See my other posts in here about this and losses from pro-rata method.
1:38 certain government employees (including state and local workers, police officers, firefighters, and some teachers), as well as highly compensated employees of non-profit organizations. with a 457b have no age limit as long as they are retiring or ending their employment.
Rolling a 401(k) to the same custodian to reduce out-of-market time is brilliant! One curve ball about rolling over in chunks: in my experience, ~ 50% of 401(k) plans require 100% of funds to be withdrawn if any funds at all are withdrawn.
You missed a negative of rolling over. I currently have a large after tax IRA, a pretax IRA and a 401k. When I retire and move to a zero income tax state I will be doing Roth conversions that will be prorated based on the total size of all my IRAs. So if I don't roll over the 401k, I only pay taxes on about 75% of the conversion. If I do roll over, I end up paying on about 90%. Much higher tax bill and since I am only converting some of my funds an important one. Once I am done with my conversions then I will roll my 401k over for all the advantages you cite.
You can actually fix your IRA pro-rata problem by going the other direction… a reverse rollover. Roll 100% of your traditional IRA funds into your 401k. The pre-tax IRA funds go into your pre-tax 401k bucket, and the after-tax IRA funds go into your Roth 401k. This satisfies the tIRA pro-rata distribution rule and doesn’t trigger any taxes. The only requirement is that at the end of the tax year you have $0 left in your tIRA accounts. (Your Roth IRA accounts can’t be rolled, and don’t need to be.). The only wrinkle is whether your 401k plan will accept both types of roll-ins. If it doesn’t, you can setup your own Solo 401k to accept the roll-ins, if you have enough to make the cost worthwhile. There’s cost to setting up a solo 401k, but it has the best of 401k and IRA benefits. Then, the next tax year you can move funds from your 401k to IRA as you wish, subject to what the 401k plan allows. In every case I’ve seen, roll-in funds are not restricted from rollover.
I think another estate related one is if you you are leaving it to a secure act EDB (like a disabled child). I saw a Kitces webinar that said the company 401k plan does not have to allow the lifetime scretch and can still dictate 10 year period.
A brand new wrinkle in the state of Michigan. They recently passed a change where IRA withdrawals may be an allowed 'subtraction' for income tax purposes, reducing state income tax. However, 401(k) withdrawals (where you've made contributions above minimums), are NOT an allowed subtraction. So it might be withdrawals from 401(k) are subject to state income tax while IRA withdrawals might not. Just passed this change in March and need to find more info about the change, but if you live in Michigan it may be a factor.
TIAA 403B allows distribution from a specific fund or pro-rata, your choice. Vanguard 403B: Newport administers, their system can only handle pro-rata, forces loss of your money when money comes out of declined stock funds while having sufficient money in stable value fund.
Good video. I plan on converting to Ira after retiring for the flexibility, might keep some in the 401k but I never thought about the mandatory withholding differences. Good point.
I'm 63 and just recently laid off. I would like to RO my 401k and 401k Roth from my previous employer to my Fidelity RO IRA and my Fidelity Roth IRA. I don't like the fund options from my previous employer. Rolling over is a good idea? I'm not ready to retire.
After my 401k crossed 1.5 million in 2019 I did an in service rollover with 70% of my Fidelity BrokerageLink account to a rollover pretax and Roth IRA. My 401k was self directed anyway and can do the same as IRA so that wasn't an issue. I just wanted to set things up for income payout ahead of time. Retired debt free at 49 in 2020. Retirement portfolio crossed two million. Thanks to Covid I got an early out package with paid healthcare and pension with other savings,taxable investments,passive income,and 20 year emergency fund so no financial issues.
I learned a few things here but will continue to keep 70% in my investments in my 401k my only reason for doing that is protection for lawsuits. My investment strategy is the same in both accounts. So far I think it is worth all the rules and hassles of the 401k. I feel this should have been mentioned.
Ira's are protected from creditors with a law passed in 2005 (BAPCPA). The limit is about 1.5 million for 2023 above that creditors may be able to access some of your retirement assets.
What if you stopped working in December of a year and get paid a large payout in the next year. Can you contribute pre tax to your personal 401K IRA and then immediately do a roth conversion? What about a post tax contribution to an IRA?
Suggestion for future subject, cover what IRMAA brackets will be or an estimate in 2024 (based on 2022 income) for us to plani end of year. income this year. As always great video
Can you do a video on having a mortgage in retirement? Dave Ramsey says take out a 15 year loan and pay it off faster. Rick Edelman says take out a 30 year loan and never pay it off. The logic from both of them makes sense. What do you do with mortgages?
This video might offer some valuable guidance - ua-cam.com/video/XPf9Ffmp2UE/v-deo.html Debt is neither inherently good or bad, in my opinion it comes down to the rate you are paying.
1. Read 401K/403B protect from law suits and bankruptcy. Some states give same protection to IRAs, but may not be solid 401K/403B protection. 2. Heard 403Bs are not subject to RMD?
I’m finally making money now. My 2 401k company sponsored plans only allow you to pick plans. Plans that are all in the stock market . All into tbills now.Reliable high income now every month that pays all my bills
In reason 3, RMD complexity, you said that a couple can aggregate their IRAs and take the total RMD from a single IRA. Don't they need to do the aggregation of IRAs separately for each spouse? In other words, doesn't each spouse need to take his/her own RMD from his/her own IRAs? After all, IRAs are individual not joint accounts.
Yes, each spouse needs to take a RMD based off their IRAs but each spouse can aggregate together their own IRAs and take the one RMD. Great clarification question.
If possible roll it into a 401kRoth instead as 401K plans are more protected from law suits then IRA esp in Cali and Mass where your IRA are not full protected. Fortunately they are in Florida and Texas. and beginning in 2024 401KROTH will have no RMDS.
There are Self Directed Brokerage option in 401k.. so investment options is not limited as you claim. One reason not to Rollover to IRA is to avoid Pro rata rule when doing Backdoor Roth conversions. These are obvious why would you not mention it at all ?
Although your 401k may have a self directed brokerage option, most don't. We have an entire video on reasons to do a reverse rollover or keep money in 401k: ua-cam.com/video/QCM8tWWpqWw/v-deo.html
@@SafeguardWealthManagement Just don't advise assuming all don't have when you know some have. I am sure you should know about Backdoor Roth.. my puzzle is why not even mention it here. btw.. I have never come across Retirement Planning videos as thorough and advanced as yours.
If it is to a traditional IRA, then the answer is no, not at all. (I did this yesterday.) However, if you are rolling it over to a Roth IRA, then yes, the money is considered a withdrawal and it will be added to your taxable income and yes, taxes will be due on the amount.
Wait, so for reason 5, even if you designate your child as the beneficiary in the 401k, that gets disregarded and it is your spouse? That sounds deceiving.
Thanks for breaking down the 401k to IRA rollover process! It's essential to know your options. By the way, have you considered diversifying with crypto? My Digital Money is making it super simple to get started. It's the future of retirement planning!
I did my 401K to IRA rollover at Fidelity a number of years ago. I was worried that I would be out of the market for a day. I was assured that I would stay in the market during the rollover by my Fidelity advisor. Turns out my advisor was wrong, the market had a big up swing so I was out about $45k. I called my advisor immediately and complained. To my amazement Fidelity adjusted my account so I was made hole. What a standup company Fidelity is.
That’s impressive. And a benefit of doing business on a recorded line. Good on you for being aware of the potential issue and standing up for yourself when it went wrong.
Things like that is why I am still with them.
That's great that Fidelity made you whole for their mistake. I just completed a 2022 $184K 401K to Roth IRA conversion. I just asked Fidelity to transfer shares from the 401K account to the Roth account Although I completed all paperwork & appeared in person at the Fidelity Branch Office with my wife on December 30, 2022; and although Fidelity assured us that all the paperwork was complete... Fidelity failed to completely process the transaction for 19 days. Apparently the Fidelity Representative was supposed to confirm our identities, check our drivers licenses & provide a "medallion signature guarantee". Although Fidelity had our state drivers licenses & notarized my wife signature, which I don't understand because she is not on either account, Fidelity failed to apply a "medallion signature guarantee" for my signature. Why Fidelity needs a medallion signature to transfer from my 401K to my Roth IRA with the same name, date of birth & social security number & is part of the same Fidelity monthly statement is perplexing. Although Fidelity repeatedly assured that we had done everything needed, when the paperwork was sent back to Fidelity administration, the Fidelity "backroom" stopped the transaction & failed to contact me for two weeks. Fidelity now insists that it is a 2023 conversion. Although Fidelity admits Fidelity screwed up by not processing paperwork before year end, it says its sorry but can't correct the paperwork. Fidelity dropped the ball but the local branch says its out of their hands.
@@boynton120 Sorry for your experience. Clearly the extreme opposite from mine. They clearly screwed up your 2022 & 2023 taxes.
Dang! I have a Fidelity investment acct. This makes me think I should also use Fidelity for my 401K>IRA rollover.
Another reason to transfer: My Roth 401k and my Pretax 401k are in the same account. It will not let me separate the pre-tax withdrawals from the after-tax withdrawals, but requires an pro-rata distribution from all the investments. I also cannot invest the Roth 401k money differently than Pre-tax Roth. All withdrawals from my 401k have pre-tax and after-tax components making everything more complicated tax-wise.
Good video, but the key reason I will not roll over into an IRA is the loss of ERISA creditor protections. I feel that every discussion of a 401k to IRA rollover should highlight this as perhaps the biggest negative to the rollover which should be balanced with the positives.
Yes, Protects from litigants and bankruptcy. Lot of people don't know about this. See my other posts in here about this and losses from pro-rata method.
@@Just_forfun9140
I did an in service IRA rollover with 80%.
The 401k and IRA is protected in my state.
Many don't know this either.
I'm pretty sure he listed that at the beginning?
As a young, career change advisor, I really appreciate how in depth your videos always are. I always learn something new.
1:38 certain government employees (including state and local workers, police officers, firefighters, and some teachers), as well as highly compensated employees of non-profit organizations. with a 457b have no age limit as long as they are retiring or ending their employment.
Rolling a 401(k) to the same custodian to reduce out-of-market time is brilliant!
One curve ball about rolling over in chunks: in my experience, ~ 50% of 401(k) plans require 100% of funds to be withdrawn if any funds at all are withdrawn.
You missed a negative of rolling over. I currently have a large after tax IRA, a pretax IRA and a 401k. When I retire and move to a zero income tax state I will be doing Roth conversions that will be prorated based on the total size of all my IRAs. So if I don't roll over the 401k, I only pay taxes on about 75% of the conversion. If I do roll over, I end up paying on about 90%. Much higher tax bill and since I am only converting some of my funds an important one. Once I am done with my conversions then I will roll my 401k over for all the advantages you cite.
You can actually fix your IRA pro-rata problem by going the other direction… a reverse rollover. Roll 100% of your traditional IRA funds into your 401k.
The pre-tax IRA funds go into your pre-tax 401k bucket, and the after-tax IRA funds go into your Roth 401k. This satisfies the tIRA pro-rata distribution rule and doesn’t trigger any taxes.
The only requirement is that at the end of the tax year you have $0 left in your tIRA accounts. (Your Roth IRA accounts can’t be rolled, and don’t need to be.).
The only wrinkle is whether your 401k plan will accept both types of roll-ins. If it doesn’t, you can setup your own Solo 401k to accept the roll-ins, if you have enough to make the cost worthwhile. There’s cost to setting up a solo 401k, but it has the best of 401k and IRA benefits.
Then, the next tax year you can move funds from your 401k to IRA as you wish, subject to what the 401k plan allows. In every case I’ve seen, roll-in funds are not restricted from rollover.
I think another estate related one is if you you are leaving it to a secure act EDB (like a disabled child). I saw a Kitces webinar that said the company 401k plan does not have to allow the lifetime scretch and can still dictate 10 year period.
A brand new wrinkle in the state of Michigan. They recently passed a change where IRA withdrawals may be an allowed 'subtraction' for income tax purposes, reducing state income tax. However, 401(k) withdrawals (where you've made contributions above minimums), are NOT an allowed subtraction. So it might be withdrawals from 401(k) are subject to state income tax while IRA withdrawals might not. Just passed this change in March and need to find more info about the change, but if you live in Michigan it may be a factor.
TIAA 403B allows distribution from a specific fund or pro-rata, your choice. Vanguard 403B: Newport administers, their system can only handle pro-rata, forces loss of your money when money comes out of declined stock funds while having sufficient money in stable value fund.
Good video. I plan on converting to Ira after retiring for the flexibility, might keep some in the 401k but I never thought about the mandatory withholding differences. Good point.
I'm 63 and just recently laid off. I would like to RO my 401k and 401k Roth from my previous employer to my Fidelity RO IRA and my Fidelity Roth IRA. I don't like the fund options from my previous employer. Rolling over is a good idea? I'm not ready to retire.
Good details on IRA rollover
Thank you!
After my 401k crossed 1.5 million in 2019 I did an in service rollover with 70% of my Fidelity BrokerageLink account to a rollover pretax and Roth IRA.
My 401k was self directed anyway and can do the same as IRA so that wasn't an issue.
I just wanted to set things up for income payout ahead of time.
Retired debt free at 49 in 2020. Retirement portfolio crossed two million.
Thanks to Covid I got an early out package with paid healthcare and pension with other savings,taxable investments,passive income,and 20 year emergency fund so no financial issues.
Why 20 year emerg fund?
From which to choose
I learned a few things here but will continue to keep 70% in my investments in my 401k my only reason for doing that is protection for lawsuits. My investment strategy is the same in both accounts. So far I think it is worth all the rules and hassles of the 401k. I feel this should have been mentioned.
It was, under "asset protection." However, in some states, IRAs are protected as well.
Ira's are protected from creditors with a law passed in 2005 (BAPCPA). The limit is about 1.5 million for 2023 above that creditors may be able to access some of your retirement assets.
What if you stopped working in December of a year and get paid a large payout in the next year. Can you contribute pre tax to your personal 401K IRA and then immediately do a roth conversion? What about a post tax contribution to an IRA?
Suggestion for future subject, cover what IRMAA brackets will be or an estimate in 2024 (based on 2022 income) for us to plani end of year. income this year. As always great video
The Finance Buff provides very good, continuous updates on this complex issue.
Can you do a video on having a mortgage in retirement? Dave Ramsey says take out a 15 year loan and pay it off faster. Rick Edelman says take out a 30 year loan and never pay it off. The logic from both of them makes sense. What do you do with mortgages?
This video might offer some valuable guidance - ua-cam.com/video/XPf9Ffmp2UE/v-deo.html
Debt is neither inherently good or bad, in my opinion it comes down to the rate you are paying.
1. Read 401K/403B protect from law suits and bankruptcy. Some states give same protection to IRAs, but may not be solid 401K/403B protection.
2. Heard 403Bs are not subject to RMD?
401k and IRA is protected in my state.
Wow! Where did you hear that 403bs are exempt from RMD’s? That would be awesome but I don’t think it’s true.
I’m finally making money now. My 2 401k company sponsored plans only allow you to pick plans. Plans that are all in the stock market . All into tbills now.Reliable high income now every month that pays all my bills
In reason 3, RMD complexity, you said that a couple can aggregate their IRAs and take the total RMD from a single IRA. Don't they need to do the aggregation of IRAs separately for each spouse? In other words, doesn't each spouse need to take his/her own RMD from his/her own IRAs? After all, IRAs are individual not joint accounts.
Yes, each spouse needs to take a RMD based off their IRAs but each spouse can aggregate together their own IRAs and take the one RMD. Great clarification question.
Can you have multiple rollover accounts so that you can keep it separate 401ks into rollover accounts in their respective brokerage companies?
Would you recommend spreading the roller over into multiple custodial companies? For FDIC protection?
If possible roll it into a 401kRoth instead as 401K plans are more protected from law suits then IRA esp in Cali and Mass where your IRA are not full protected. Fortunately they are in Florida and Texas. and beginning in 2024 401KROTH will have no RMDS.
There are Self Directed Brokerage option in 401k.. so investment options is not limited as you claim. One reason not to Rollover to IRA is to avoid Pro rata rule when doing Backdoor Roth conversions. These are obvious why would you not mention it at all ?
Although your 401k may have a self directed brokerage option, most don't. We have an entire video on reasons to do a reverse rollover or keep money in 401k: ua-cam.com/video/QCM8tWWpqWw/v-deo.html
@@SafeguardWealthManagement Just don't advise assuming all don't have when you know some have. I am sure you should know about Backdoor Roth.. my puzzle is why not even mention it here. btw.. I have never come across Retirement Planning videos as thorough and advanced as yours.
Appreciate your great information on this video, if we do in plan 401k Roth conversion, will pro rata rule apply to the conversion?
To lower expense ratio!
This is excellent stuff!
#7 - Roth 401Ks have RMDs
I'm good with that.
With Secure 2.0 no RMDs for Roth 401(k) in 2024
What if you are in a crooked 401 and want to get away
Don’t you have to pay taxes on what you rollover?
If it is to a traditional IRA, then the answer is no, not at all. (I did this yesterday.) However, if you are rolling it over to a Roth IRA, then yes, the money is considered a withdrawal and it will be added to your taxable income and yes, taxes will be due on the amount.
Wait, so for reason 5, even if you designate your child as the beneficiary in the 401k, that gets disregarded and it is your spouse? That sounds deceiving.
7:25 Need spousal approval for 401(k) but not for IRA.
#7 - 401Ks are not QCD eligible.
#4 No QCD Ability 6:40
@@alrocky my bad
or better yet an IUL or an annuity....
Thanks for breaking down the 401k to IRA rollover process! It's essential to know your options. By the way, have you considered diversifying with crypto? My Digital Money is making it super simple to get started. It's the future of retirement planning!
like.