401k in retirement

[pdsquash83]

Hello Guys and Gals,

Question for a relative (69.5 y/o):

Wondering if anyone has thought about what they are going to do with their 401k in retirement. I have been reading that normally it is rolled over to a IRA. The problem with keeping my 401k where it is is that they changed the funds that are open to me to ones with rather high fees. I was thinking about rolling my 401 k into a Vanguard IRA.

Thoughts,

PD

[VagabondMD]

I would definitely roll the 401k into the Vanguard IRA. There are few, if any, situations that I can imagine where this is not the best answer.

[spiritrider]

While it is in the distinct minority of 401k plans. There are plans with institutional class shares with extremely low expense ratios lower than you can get from a retail IRA account. Also, many plans have low cost investment options that are comparable to a retail IRA account.

Also, employer 401k plans offers unlimited ERISA federal asset protections against creditors. An IRA only provides limited ($1M CPI adjusted since 2005) federal bankruptcy protection, but does fully protect rollovers from ERISA protected plans. However, the amount of IRA creditor protection while not in bankruptcy is subject to state law. The vast majority +-45 states do provide full creditor protection to traditional IRAs. There are notable exceptions including CA that only protect enough of the IRA assets to provide modest retirement distributions. Note: The number of states with no/limited creditor protections for Roth IRAs rises to about 10.

Even with tail insurance there may be legitimate reasons why a physician would want to maintain the asset protections of a 401k.

[pdsquash83]

Vagabond MD wrote:

"An early-morning walk is a blessing for the whole day."--Henry David Thoreau

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Okay thanks for your input!

[pdsquash83]

spiritrider wrote:

There are notable exceptions including CA that only protect enough of the IRA assets to provide modest retirement distributions. Note: The number of states with no/limited creditor protections for Roth IRAs rises to about 10.

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Interesting so if the lawsuit happens because of medical care in CA does that count? Even though the person is not retiring in CA?

[litovskyassetmanagement]

pdsquash83 wrote:

Hello Guys and Gals,

Question for a relative (69.5 y/o):

Wondering if anyone has thought about what they are going to do with their 401k in retirement. I have been reading that normally it is rolled over to a IRA. The problem with keeping my 401k where it is is that they changed the funds that are open to me to ones with rather high fees. I was thinking about rolling my 401 k into a Vanguard IRA.

Thoughts,

PD

Click to expand...

Ideally you would want to pick up some 1099 income and open a solo 401k with a custom plan document, and then you can do a lot of things, including rolling of IRAs into that plan (even if you have no more 1099 income going forward).  Also, you can do in-plan Roth conversions (ideally this is done prior to 70 and 1/2 to avoid paying RMD taxes).  And of course the assets would be protected vs. an IRA that has caps.