Rollover or not?

[Quasi]

Any thoughts on how important it is to rollover 401K accounts from previous employers? I haven't done this for my most recent former employer because I like the investment options available there much better than the ones available at my current employer. How important is it? Other than the ability to take out 401K loans, what are the other considerations in deciding whether or not to rollover?

FYI - the former employer is a huge, very respectable....

[Ms. Re]

Have you looked at the fees you are being charged in your 401-K account? Apparently not -- otherwise you would have rolled your money over to Vanguard or some other fund family. Unless you enjoy being ripped off and paying sky-high fees, roll your money out of your previous 401K plan

[Quasi]

Help me out Ms. Re, are you saying that the 401K account would be ripping me off with fees or just the fund family where the account is invested? The previous 401K is actually in Vanguard, which I love, that's part of the reason I'm thinking about leaving an account there. I'm so used to Vanguard that the funds available at my current employer look like crap.

I could roll it over into a Vanguard IRA, maybe that's the way to go....

[Cho Da]

Roll it to an IRA. Many 401(k) plans suck outrageous fees from your account.

[Intents]

What is your life situation? For example, there are educational tax advantages in getting money out of an IRA, and hardship withdrawals may be easier. What is the size of the account? Loan provisions are usually not available from a former account, but they may be. For instance, my employer allows a 15 year loan which means it qualifies as a real estate loan and interest payable (to myself, with after tax dollars that get taxed at full income tax rate when later withdrawn) are tax deductible. I floated one of these loans rather than setting up a bridge loan when in the middle of a real estate transaction. There were no fees and I paid the loan off in full (something that's required if you wish to change the payback stream). Just having the fallback position of being able to get my hands on some relatively quick cash, even if it is only 50k, allows me to have less in my rainy day cash fund from an asset allocation perspective.

[Quasi]

Good questions, Intents. I don't think that I'll be tapping into the money for a good long time through loans or withdrawals. The account is in the $75K-$85K range. I'm pretty sure that my former employer won't do loans with an ex-employee. I don't anticipate paying for any college expenses.

I guess I would like to be able to tap into the account in an emergency situation....I know about 401K loans, if I roll it into an IRA would there be any similar way to get my hands on some of the money in an emergency? It seems like there would be more investment flexibility with an IRA, and potential tax benefits if money is used for education, are there any other benefits that might outweigh the ability to take out a loan when needed?

[bongo]

"Many 401(k) plans suck outrageous fees from your account."

And many 401k plans have the fees subsidized by the employer. Find out which category yours falls in before you do anything. Rolling over to a Vanguard IRA should be easy and keep the fees pretty low. At one of my old employers the 401k got the institutional rate at Vanguard, so the expense ratio was 0.04% in the 401k nstead of 0.2% in an IRA.

[Ms. Re]

Bongo: you were fortunate to have such low fees in your 401K plan...my employer currently levees a fee of 40 bps for an S&P 500 Index fund...they are in the process of changing fund providers, and after the change the fees for the S&P 500 Index fund will jump to 79 bps (for comparison purposes, the Vanguard Index 500 Fund charges around 18 bps)...according to ERISA, the plan fiduciary is supposed to act "solely in the interest" of plan participants and beneficiaries in carrying out her fiduciary responsibilities...I'm in the process of investigating whether this change would involve a violation of ERISA, in which case I'll be filing a claim against the plan...the bothersome thing to me is that I got a letter from my employer telling me of the "exciting" changes in our 401K plan, but the change in fees is anything but transparent and is not easily discerned from the disclosures made to us...certainly it makes sense to contribute the required amount to the plan in order to obtain the maximum employer match...but for "excess" contributions over and above what is needed to get the maximum employer match, it is debatable whether the tax deferral compensates for the reduced return (due to the much higher fees) vis-à-vis investing in the Vanguard fund

in closing, I think that Andy is on to something when he talks about the chicanery related to the high level of fees being charged on DC plans...and it's strange that the fees seem to be escalating at the same time that contribution limits to 401K plans have been increased