Menu

Workplace 401k has new fees. To transfer or not to IRA ?

Home General/Welcome Workplace 401k has new fees. To transfer or not to IRA ?

  • Avatar Raddoc123 
    Participant
    Status: Physician
    Posts: 108
    Joined: 07/03/2016

    My workplace 401k recently began annual fees of .15% of assets held.  This will end up costing me about 800 dollars at current levels.  About half of my workplace 401k is eligible for rollover to an IRA because that money came from previous employers.  I do backdoor Roth’s every year and would lose the ability to do so tax free if I rolled the money to an IRA.

    What would you guys do?  Eat the fees and do the backdoor Roth’s or rollover to an IRA and save 1/2 the fees but not do backdoor anymore?

    I have very little self employment income so I don’t think a solo 401k would work for me.  I would contribute maybe 100 bucks every year but transfer in hundreds of thousands.  That might be a red flag.

    #229407 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2374
    Joined: 03/01/2018

    Do nothing. You could easily lose $800 or $8000 being out of the market during the rollover. Forget about it

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #229408 Reply
    Liked by Peds
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1807
    Joined: 02/11/2019

    Yeah it sucks but I think it is best to live with it.

    I didn’t know that you can roll out money that was rolled in?

    “Never let your sense of morals prevent you from doing what is right.”

    #229412 Reply
    Avatar jhwkr542 
    Participant
    Status: Physician
    Posts: 1312
    Joined: 02/15/2016

    That’s not enough of a fee to get worked up about

    #229413 Reply
    Liked by CordMcNally
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2806
    Joined: 01/03/2017

    The new fee sucks but the alternate is worse.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #229414 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2374
    Joined: 03/01/2018
    I have very little self employment income so I don’t think a solo 401k would work for me.  I would contribute maybe 100 bucks every year but transfer in hundreds of thousands.  That might be a red flag.

    Click to expand…

    there is no lower limit on what reasonable self employment income amount qualifies one for a solo 401k. If whatever you’re doing for self employment is reasonable, ongoing, operated in a businesslike manner, I would at least consider the option. It’s within the law. Perhaps you could make a goal of growing your self employment income.

    Also there may be more than just rollover dollars that would be eligible to be removed from the workplace plan by rollover. Vested profit sharing, match, or safe harbor contributions might be eligible as well. Ask for and read the SPD.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #229417 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1903
    Joined: 02/01/2016

    Yeah it sucks but I think it is best to live with it.

    I didn’t know that you can roll out money that was rolled in?

    Click to expand…

    From the IRS point of view, any rollover contributions are always fully distributable and almost all plans allow such assets to be rolled over without restriction.

    #229424 Reply
    Liked by Lordosis, Peds
    Avatar G 
    Participant
    Status: Physician, Small Business Owner
    Posts: 1799
    Joined: 01/08/2016

    This kind of BS makes me furious.  Let me guess, they started charging this fee for “bookkeeping expenses” or did your CEO have dinner with their CEO?

    1) I would be pitching a fit, trying to get the rest of the proletariat worked up.

    2) I would absolutely transfer everything out, preferably to solo401k.

    3) See what kind of protections you have for IRA–in my state, only 500k is protected from creditors.

    4) Don’t sweat the bdRoth–if it makes you feel better, PoF did some math that showed it wasn’t that big of a deal.

    5) $800/yr is real money; with only growth of principal, it will likely be $1600/yr in 7-10 yrs, etc etc.  and of course you are still adding each year.  I mean, this is what it looks like EACH YEAR:
    decade 1, free Balvenie 30yo

    decade 2, free Macallan 25yo

    decade 3, free Balvenie 40 yo

    decade 4, free Dalmore 40 yo

    …you get the idea

    #229442 Reply
    Liked by spiritrider
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2374
    Joined: 03/01/2018
    4) Don’t sweat the bdRoth–if it makes you feel better, PoF did some math that showed it wasn’t that big of a deal.

    Click to expand…

    That post showed that the initial tax benefit of the backdoor Roth is trivial (avoidance of taxable yearly dividends) but didn’t try to quantify the main benefit which is of course avoidance of capital gains.

    I absolutely would not give up the ability to do yearly backdoor Roths to avoid a couple hundred dollars in admin fees per year. That doesn’t mean I wouldn’t consider rolling the funds out to a solo k and solving both problems.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #229474 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4405
    Joined: 01/08/2016
    I absolutely would not give up the ability to do yearly backdoor Roths

    Click to expand…

    ikr

    #229495 Reply
    Avatar Raddoc123 
    Participant
    Status: Physician
    Posts: 108
    Joined: 07/03/2016
    4) Don’t sweat the bdRoth–if it makes you feel better, PoF did some math that showed it wasn’t that big of a deal. 

    Click to expand…

    That post showed that the initial tax benefit of the backdoor Roth is trivial (avoidance of taxable yearly dividends) but didn’t try to quantify the main benefit which is of course avoidance of capital gains.

    I absolutely would not give up the ability to do yearly backdoor Roths to avoid a couple hundred dollars in admin fees per year. That doesn’t mean I wouldn’t consider rolling the funds out to a solo k and solving both problems.

    Click to expand…

    I’ve considered opening a solo 401k but I only have non W2 income from surveys and rare depositions.  Maybe 1-2k of income per year.  If I rolled in hundred of thousands it may be a red flag.  Kind of like a tax shelter.  Anyone have any experience with this scenario?  What do you think spiritrider?

    #229638 Reply
    Liked by okayplayer
    Avatar okayplayer 
    Participant
    Status: Physician
    Posts: 124
    Joined: 05/25/2016

    Have the exact same question.

    #229643 Reply
    Avatar zback 
    Participant
    Status: Physician
    Posts: 42
    Joined: 12/05/2016

    I tried rolling over money from my active group’s plan (profit sharing 401k) to a solo 401k I had from residency 1099 income to avoid the 40 basis point the plan custodian is charging me for doing nothing other than picking a menu of 20 funds we can invest in. Both of these accounts are with fidelity and they told me that I couldn’t do a yearly rollover because of the binding contract we have with this financial advisor that does not allow it.

    #229669 Reply

Reply To: Workplace 401k has new fees. To transfer or not to IRA ?

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

Notifications Mark all as read  |  Clear