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

[Raddoc123]

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.

[jacoavlu]

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

[Lordosis]

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?

[jhwkr542]

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

[CordMcNally]

The new fee sucks but the alternate is worse.

[jacoavlu]

Raddoc123 wrote:

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.

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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.

[spiritrider]

Lordosis wrote:

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?

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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.

[G]

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

[jacoavlu]

G wrote:

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.

[Peds]

jacoavlu wrote:

I absolutely would not give up the ability to do yearly backdoor Roths

Click to expand...

ikr

[Raddoc123]

jacoavlu wrote:

G wrote:

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?

[okayplayer]

Have the exact same question.

[zback]

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.