Any downside to rolling an IRA into a 401k?

[VagabondMD]

Everyone here in WCIville and, more generally, in the personal finance blogosphere is all over the "backdoor Roth IRA". I have been doing this since 2011, but my wife, because she has had a sizable Traditional (deductible) IRA from the rollover from a previous job's 401k, has not participating in the backdoor Roth. I was poking around in her 401k account (looking for something else, actually), and I saw a notice that offered to roll an IRA over in to her 401k. Apparently her company permits it, and since the IRA and the 401k are both held at Fidelity, it looks like it would not be but a few clicks (and perhaps a signature) to make it happen.

Her 401k choices include low cost index funds (S&P 500, Extended U.S. Market, Total International, and US Bond) with ERs ranging from 2 to 11 bps. There is also a stable value fund which currently yields similar to the Total Bond Index with zero price volatility. It would seem to be a no brainer to roll this IRA into her 401k...unless I am missing something.

[q-school]

we had to roll ira into 401k to access backdoor roth without pro rata rule.

only downside that I could figure out is what you have already looked at-sometimes investment options are limited compared to ira, especially if you are fee sensitive.

 

[jhwkr542]

Agree, I don't see any reason not to either.

[Peds]

Nope, the only reason to hold off is bad fund selection. Otherwise, get a move on!

[Hatton]

Do it. I wish I could.

[PhysicianOnFIRE]

Not that you would need it, but 401(k) money can be accessed at 55 (if she leaves her employer) as opposed to 59.5 if it remains in the IRA. One more reason to roll it on over.

 

[PHANTASOS]

James Lange in his book Retire Secure lists several advantages of a 401k compared to an IRA:

1. Superior asset protection (ERISA vs state law)

2. Deferred RMDs (if you work past age 70.5)

3. Borrowing privileges (nobody here would)

4. Net unrealized appreciation treatment (not applicable if the money is already in an IRA, only matters if you are considering moving 401k to IRA)

5. Roth IRA conversion for non-spouse beneficiary (this is one of the more compelling reasons in my opinion)

6. Direct Roth conversions

 

He has been wrong on a couple of his major predictions (death of stretch IRA, estate tax limits..), but his book is rather good if you want to learn more about the roll of retirement accounts during accumulation years, retirement years, and when you die.  If you want the fuller explanation - read the book.

 

[Lithium]

My 401k did not accept in-kind transfers when I moved my old 401k and 457b into it.  As a result I was out of the market for a couple of weeks.  Most likely the market went up then, and its debatable whether it was worth it, but I saved about $100 a year in fees.

[Dicast]

You've made 1492 posts so far on this forum. I think you know the answer. Move it over into the 401k and start up the backdoor.

//I've been dragging my own feet on the backdoor roth. For whatever reason I've prioritized loan repayment over backdoor roth contributions.  We have about 110k of tax deferred savings each year though so I don't know that it matters.

[djohnflatfeecfp]

Just double-check the fees on the funds.  Sometimes plans list the internal expenses of the investment choices and not any additional fees the plan may layer onto the investments themselves.  If they are the numbers you quoted - Do It!