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Advice for old 401K

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  • Advice for old 401K

    I recently changed jobs and am trying to determine what to do with my old 401K. It’s through Fidelity and the administrative fees are 0.11%. I have 100K in this and it is invested in Vanguard institutional Target date 2045 (VITLX) with an ER of 0.09 % (About 88K) and Vanguard Total Stock Market Index Fund Institutional Fund (VSMPX) with ER of 0.02% (about 12K). In case anyone is wondering, these fund choices were made a while back before I knew WCI existed. I had initially thought of just leaving my 401K where it is. Based on some research, it seemed to suggest that may not be the best idea in case things change at my old hospital and I may have problems gaining access to the account and money. My current employer has benefits through a state pension fund as part of a public retirement system since I now work at a county hospital. Their plans have essentially similar ER as to what I have now. I am trying to determine if I should rollover my 401K to my current employer plan, which perhaps may give me some more asset protection in case of bankruptcy or liability lawsuits, even though I am somewhat hesitant to transfer my money into a public retirement system. Other option is rollover to a Fidelity or Vanguard IRA and have control over my money though lose the potential asset protection. Any input on this would be appreciated.

  • #2
    Leave it alone. I don't know why you think you would lose access. Of the course if the funds change then move it to current 401k. I dont know why you think asset protection changes.


    • #3
      Because asset protection does change depending account type, source and state. This is especially true if you rollover the assets to an IRA.

      You only receive full ERISA anti-alienation protection for bankruptcy and creditor protection for defined benefit and defined contribution plans that cover non-owner employees. All such DB plans and 401k plans are covered, many 403b and all 457b plans are not.

      You receive unlimited federal bankruptcy protection for assets rolled over to an IRA from an ERISA qualified plan. Other IRA assets only receive $1M (inflation adjusted from the 2005 act date) in federal bankruptcy protection.

      IRA, owner-only employer retirement plans, many 403b plans and 457b plans, receive creditor protection outside of federal bankruptcy law subject to state law. About 10% of the states (most notably CA) provide extremely limited creditor protection to traditional IRA account balances. That number doubles when it comes to Roth IRAs.