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401(k) Choices: What To Do When You Leave Your Job
Do surrender charges or fees ever come into play when doing a rollover ? The reason I asked. After a recent conversation, I was told mother would have to pay a surrender fee from husband's 401-k, who passed away.
Yes they can, though there may be laws I'm unfamiliar with when the distributions are involuntary (e.g. if the company exercises its right to close a small account or if your mother is required to take distributions by the IRS).
Years ago I worked for a small company that used class B (contingent deferred sales charge) shares. (The 1% 12b-1 fees were used to pay for the cost of the plan - common in small plans.)
The "financial advisor" who set up the plan for the company "promised" that the deferred loads would be waived. But when the company was acquired and I left (taking my plan money with me), I was charged those fees. I'm not sure if I raised any objections with the acquiring company, but it would have been hopeless in any case.
It's my understanding that one has more control over money held in an IRA than inside an employer's plan. If that's the case, deciding between the two should be relatively easy. Of course, there may be other good reasons for staying with the employer's plan in certain cases.
Some fiduciaries impose a small maintenance fee for IRAs that might not have existed with the employee plan. Hardly seems like a good enough reason to stay with the employee plan.
Yep - I've encountered a "closed account fee" a few times when leaving a fiduciary. Strong is one that comes to mind. Those might have better been named an incompetence fee.
It's my understanding that the rules get complex when state laws get involved. Liability, bankruptcy type protections may be lost if moving from a employer plan to an IRA rollover. This varies by state. Also, the state Medicaid exemptions for spousal retirement accounts may include the employer plan but not a rollover account. Again, how spousal retirement accounts are treated may vary by state. This sort of thing keeps the elder lawyer crowd in business.
As far as fees go. I have rolled over three accounts, two from MSF_ to Vanguard and one from Fidelity to Vanguard and have not paid a fee. The first two were traditional IRAs to rollover IRAs. The second was part 457(b) and part 401(a) to one of the rollover IRAs from the MSF_ transaction.
Thanks for all the replies. Let me state this surrender charge applied to friends mother. If I understood her they were very high !! I held my late wife's 401-k for a number of years to receive some extra guidance & liability issues. At this time I'm rolling that one & mine to Vanguard . With that said , I was wondering if I'll get a closing statement or just a notice that the money has been deposited to my account from Vanguard ? Also let it be known I received 10 pages on how to handle the rollover from her 401-k & next to nothing from mine other than the papers to fill out
Just to be clear ... my response was directed specifically to the article@Ted linked under this thread. The article seems a bit unfocused (I think), but does offer up some possible choices one might face when leaving a job where a 401K type plan was being utilized. All else being equal, without penalties, etc., I'd rather have the added control over the funds which an IRA (Roth or Traditional) offers than to roll those funds into a new employer's plan or leave it with the old plan.
Can't begin to address your question about surrender charges or a specific individual's situation - and didn't intend to. But it sounds like you got some good answers from others with experience in that matter.
Comments
Just wondering, Derf
Years ago I worked for a small company that used class B (contingent deferred sales charge) shares. (The 1% 12b-1 fees were used to pay for the cost of the plan - common in small plans.)
The "financial advisor" who set up the plan for the company "promised" that the deferred loads would be waived. But when the company was acquired and I left (taking my plan money with me), I was charged those fees. I'm not sure if I raised any objections with the acquiring company, but it would have been hopeless in any case.
Some fiduciaries impose a small maintenance fee for IRAs that might not have existed with the employee plan. Hardly seems like a good enough reason to stay with the employee plan.
Yep - I've encountered a "closed account fee" a few times when leaving a fiduciary. Strong is one that comes to mind. Those might have better been named an incompetence fee.
As far as fees go. I have rolled over three accounts, two from MSF_ to Vanguard and one from Fidelity to Vanguard and have not paid a fee. The first two were traditional IRAs to rollover IRAs. The second was part 457(b) and part 401(a) to one of the rollover IRAs from the MSF_ transaction.
Let me state this surrender charge applied to friends mother. If I understood her they were very high !!
I held my late wife's 401-k for a number of years to receive some extra guidance & liability issues. At this time I'm rolling that one & mine to Vanguard .
With that said , I was wondering if I'll get a closing statement or just a notice that the money has been deposited to my account from Vanguard ?
Also let it be known I received 10 pages on how to handle the rollover from her 401-k & next to nothing from mine other than the papers to fill out
Thanks again, Derf
Just to be clear ... my response was directed specifically to the article @Ted linked under this thread. The article seems a bit unfocused (I think), but does offer up some possible choices one might face when leaving a job where a 401K type plan was being utilized. All else being equal, without penalties, etc., I'd rather have the added control over the funds which an IRA (Roth or Traditional) offers than to roll those funds into a new employer's plan or leave it with the old plan.
Can't begin to address your question about surrender charges or a specific individual's situation - and didn't intend to. But it sounds like you got some good answers from others with experience in that matter.
Regards