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401(a) Rollover options

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  • 401(a) Rollover options


    My wife works in education and has a 401(a) plan (at her current job) and two defined benefit plans (two old jobs) through the three different school districts she has worked with throughout my medical school and training. The 401(a) plan has index funds with moderately high but not outrageous expense ratios (~0.15% for Large Cap Index), one of the defined benefit plans has a 401(k) option also with similar expenses, and the last defined benefit plan is pretty garbage with no clear investment options. So looking to roll over to simplify, lower costs, and increase investment options. To add to all of this, I have a year left in fellowship, so she will also be leaving her current job at that time, as we plan to relocate for our first attending job. I've been researching our options and just want to make sure I am not missing something. Any advice would be greatly appreciated. For reference, we are currently in the 22% federal tax bracket in a state with no income tax. At the time of retirement, I am guessing most likely we will be in a state with income tax for what its worth.

    1. Pay taxes and rollover to Roth IRA at Vanguard - I need to verify exactly how to do this to get the taxes correct, but given our low tax bracket and lack of state income tax, this seems like the most tax efficient method. I don't really know what tax bracket most retirees fall into, so I could be mistaken.

    2. Rollover to Traditional IRA at Vanguard - This seems like the other most ideal option.

    3. Rollover to her future employers retirement plan, depending on what it is - Plans within the education system generally don't seem awesome with some exceptions, especially in the states where we are looking, which mostly appear to be defined benefit plans with unclear options for 401(k) or 401(a). However if we rollover to an IRA now, and it turns out her new employer has a great plan, it appears we could do a reverse rollover to put the money into a new sponsored plan if it made sense. So this remains an option even if we pursue #1/2. Also early retirement would be great and the allowance for withdrawal at age 55 for some sponsored plans seems to be a benefit, but the goal is to also have a taxable account that we could pull from during that time if we were so fortunate to retire early, so that may not be something we really need.

    4. Leave the plans at her current employers - As I mentioned, these plan are at best decent and at worst pretty bad, and none of them are as flexible and low cost as a personal Vanguard account. Also it is becoming a bit of a handful with so many accounts to keep track of.

  • #2
    I should also note that the balance of these accounts is around 20K. We'd have enough in our savings to foot the tax bill without making ourselves uncomfortable.


    • #3
      The Traditional vs Roth debate will rage on for years. But rolling over into a Traditional will kill your ability to backdoor in the future.

      Probably current lower tax brackets compared to future + not a ton of money in play here + you can cover the taxes + keeping back door Roth open = I say option 1. ✓✓✓
      "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓


      • #4
        22% bracket and only 20K? convert everything to rIRA.


        • #5
          Thanks guys