401k to Ira at 59.5
I plan to do a direct transfer of my 401k balance to an existing Vanguard Ira when I am 59.5 in January. I am still working and will continue 401k contibutions and get employer match going forward past 59.5.
My 401k plan has an annual .23 admin fee which Vanguard does not. I only invest in index funds. The Vanguard expense ratios are less on funds tracking the same index. Moving the balance out of the 401k would save maybe $1000 annually in expenses.
Are there any cons to making this move?
Permalink Submitted by Alan - IRA critic on Fri, 2020-09-11 21:23
I assume your plan allows this. Some plans do not. If allowed, a possible negative is inferior creditor protection if you live in a state that does not fully protect IRA accounts against creditors. If you are an HCE or otherwise might have over contributed to the 401k for 2020, rolling out the entire balance can create an excess IRA contribution if the plan determines in the next few months that you made an excess contribution. This isn’t costly, but creates more reporting complexity if it happens. One last possible issue is the loss of any employer stable value funds that have a decent comparative yield to the near 0 you will get on MM funds and bond funds at VG or any other IRA provider.
Permalink Submitted by Ray Kaufman on Sat, 2020-09-12 00:22
My plan allows it. South Carolina protects IRA assets up to $1.3 million. I am not a HCE. It does have a stable value fund.