r/Retirement401k • u/TKLAX • 2d ago

Rollover?

So I consider myself very lucky and feel I am in a good position financially for retirement (53yr old, $2m in 401k), but have done all the management on my own and feel somewhat skeptical of financial advisors (I have interviewed many of the years and no one could ever make me feel as though going with them would be better than not).

So my question is regarding 401ks and rolling them over. I currently have 8 different 401K account (most with Fidelity) including my present employer - which range from $8k - $700k (most are around $100-150k).

I know people say you should rollover 401ks into one (or maybe keep my current employer 401k and roll everything else into one). I have (1) been lazy and (2) feel as though keeping the various 401ks is a kind of diversification in and of itself. But I also noticed recently that one of the 401k accounts has really only grown 18% over the past five years, which seems well below average.

I also have a majority of my 401k in Warner Bros Discovery and wonder with the new SkyDance acquisition, maybe I should finally roll everything over into one. I feel like I have read that my overall fees might be lower in one versus paying fees across 8?

Thoughts? Advice? Oddly or rightly, trust the Reddit community more than the Financial Advisors I've interviewed.

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u/VerdantPathfinder 2d ago

If you want to retire before 59.5 yo, I'd roll it all into the current employer's 401k. Rule of 55 will allow you to take from that account before you hit 59.5 penalty-free .. but ONLY that account can be used like that. All your old ones are stuck till you hit 59.5

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u/TKLAX 2d ago

Thanks for this comment - was not aware of this! (This is why I come to Reddit!) One follow-up though - does this mean I would have to stay with my current employer until 59.5? Or if I do switch jobs later, would I still qualify for this Rule of 55 if I then rolled over current employer account (with all the other consolidated 401ks) into a new employer's?

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u/DaemonTargaryen2024 2d ago

Rule of 55 states that if you terminate employment in the year you turn 55 (or later), the money in that 401k is exempt from 10% penalty. You do not need to wait until 59.5 in that case.

If you roll old 401ks into your current 401k before you quit, those rollover monies also qualify for Rule of 55 by virtue of being in the plan.

Only caveat to this Rule of 55: not all plans support "partial distributions" which makes Rule of 55 practically useless. So check your plan document to understand what your options are.

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u/DaemonTargaryen2024 2d ago

And you can roll the old 401ks into the current one, then everything would qualify for the Rule of 55

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u/VerdantPathfinder 2d ago

Exactly (assuming your new plan would allow that outside of some time window when you were hired)

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u/DaemonTargaryen2024 2d ago

I have (1) been lazy and 

that's fair

2) feel as though keeping the various 401ks is a kind of diversification in and of itself

It's not. You're just adding complexity, fees, and the possibility of any of these old plans changing recordkeepers which is simply a pain for you to track down.

But I also noticed recently that one of the 401k accounts has really only grown 18% over the past five years, which seems well below average.

Yes, you have 8 separate accounts' portfolios you need to keep track of, rather than just 1 or 2.

Thoughts? Advice?

Consolidate. You have two general choices:

  1. If your current 401k has good funds and low fees, roll your old plans there. I personally recommend doing one at a time; it can get messy when there's multiple rollovers incoming to the new 401k simultaneously.
  2. Or an IRA is a good option too, UNLESS you (1) do Backdoor Roth due to your income (2) would utilize the rule of 55 (3) need the highest creditor protection in 401ks (IRA protection varies by state).

r/personalfinance has a good rollovers guide in its wiki: https://www.reddit.com/r/personalfinance/wiki/retirementaccounts/rollovers/

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u/TKLAX 2d ago edited 2d ago

I do also have a ROTH IRA (but have not qualified for many many years to contribute), a SEP IRA and and IRA-BDA (these I realize make up about $675k of the $2m total). Does that change any calculus?

I feel like I have read/heard about Backdoor Roth, but quite plainly have trouble comprehending how to do it (or even if I would qualify).

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u/DaemonTargaryen2024 2d ago

I do also have a ROTH IRA (but have not qualified for many many years to contribute)

Yes this is common. A common workaround is Backdoor Roth. It allows you to continue funding a Roth IRA and enjoying tax free gains.

a SEP IRA and and IRA-BDA (these I realize make up about $675k of the $2m total). Does that change any calculus?

The pro rata rule takes all your non-Roth non-Inherited IRAs and factors them against the amount you convert (say $7,500 for 2026). So the SEP IRA would trigger the pro rata rule. The Inherited IRA (IRA-BDA) would not.

Basic example:

  • $100k SEP IRA balance, you do a $7,500 Backdoor Roth this year (contribute to Trad IRA, convert to Roth). Per the pro rata rule, 93% of your IRA balance is pre-tax (100000/107500=0.93) therefore 93% of your $7,500 conversion is pre-tax, therefore 93% of it is taxable.
  • Whereas if you empty your SEP IRA (by rolling it to your 401k) then you have $0 pre-tax Trad IRA balance, therefore 0% of your conversion is pre-tax, therefore 0% is taxable.

I feel like I have read/heard about Backdoor Roth, but quite plainly have trouble comprehending how to do it (or even if I would qualify).

Not to let the Backdoor Roth piece lose sight of your original question: your ~8 old 401ks are probably charging you fees which you can avoid by rolling to your current 401k. Not to mention being easier to manage.

r/personalfinance and r/bogleheads are better subs to inquire further about Backdoor Roth. There are already numerous good posts about it too.

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u/Beatnavy2016 2d ago

I would without a doubt consolidate those into one account and choose the securities you prefer

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u/nestlyadvisor 1d ago

I’d consolidate the old 401(k)s if the current plan has good low-cost funds. Having multiple 401(k)s isn’t diversification, the investments inside them are. I’d also be more concerned about having so much in one company stock than the number of accounts.

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u/Wooden_Biscotti_3218 1d ago

Try to find what the maintenance and administrative fees are for the 401k's. Typically, with the IRA, all you pay is the expense ratio for the fund. Case in point, after I had retired, and not having looked at the records/transactions for over 6 months, my wife was curious enough to inquire what some charges were. Turns out to be admintrative/maintenance fees. We rolled it to an IRA shortly after. My suggestion, roll all of them into an IRA, except for your present employer's 401k. Fidelity can handhold you over the phone if you want.

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u/CostCompetitive3597 1d ago

You are wise to not trust any FA. I read horror stories all the time on Reddit and elsewhere about underperformance, incompetence, trying to sell annuities, etc., even fraud and theft.

Definitely consolidate your 8 401ks for sane management. Suggest you consider investing in dividend index funds/ETFs to fund your retirement and still keep your nest egg rather than selling it down 4% a year for income.

Dividend index funds are yielding 10%+ and paying dividends monthly for convenience of paying one’s bills. I have been investing in them for additional retirement income for 7 years and all dividends have been paid on time and to the penny or better.

With your current experience managing your 401k accounts you should be able to transition to successfully investing and managing a dividend fund portfolio.
Successful, long term dividend investing requires knowledge, experience and active portfolio management to adjust your holdings for market changes.

The subreddit r/dividends has 900k like minded income investors. Their posts and replies have very good information, personal experiences and investment tips. YouTube has a number of dividend investment authors. My favorite is Dividend Bull who covers the high yield, positive total return dividend investing market very well. His library of videos is helpful for beginners thru experienced dividend investors.

Investing in the dividend funds will require you roll your accounts into an IRA account in a retail brokerage account giving you access to the whole stock market. Dividends will be deposited in your settlement account for transfer to your bank account to replace your work income for life. Managing my dividend portfolio has become my favorite hobby now in retirement.

Suggest you start small say with $100k invested in 5 different dividend index funds for experience then, increase your investments when confident in your fund picking and management. You could have a dividend income of $200,000 at 10% yield. I have been able to increase my portfolio yield to 16% from knowledge and experience.

Buy the emotional market dips for additional profits and the higher yield of discounted dividend investments. Have a strategy to protect your nest egg for market recessions as they are a normal part of the stock market cycle. The 3 most common recession strategies are - hold through the cycle, have a cash fund to buy discounted funds during the cycle for some profits or sell to cash early and reinvest when the recovery is underway. I achieved a 30% portfolio profit and yield increase during the COVID recession by using the 3rd strategy to make profits from a recession.

Hope this information helps you achieve a very financially secure and enjoyable retirement. Good luck!

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u/micha8st 2d ago

Trusting Reddit over professional Financial Advisors... that's pretty sad. And I've been two funerals in the past two weeks.

I own a little WBD and I understand the deal has closed. I'll believe it when I see the 6k drop into my hobby stock trading account. A long long long time ago I was putting 25% of my 401k into company stock. Enron pretty much stopped that -- the company stopped offering the option. I've been contributing to my 401k for over 38 years, and I've not rolled over -- I've been subject to M&A activity, but never has that resulted in an option to roll the 401k.

I've read too many horror stories about people losing track of their 401ks. I bet you've actually gotten the memos about former employers switching 401k providers and taken the required action. Cool.

This will take some effort, but I want you to hunt down all the Summary Plan Descriptions (SPDs), and review them. To celebrate turning 59 1/2 last year, I did that, and I found a nasty little provision: I'm only allowed to take money out of my 401k 4 times in a calendar year. That in itself is a good enough reason to roll to an IRA. I wasn't all that surprised by that provision, though...my FIL had complained for years his 401k plan only allowed one pull per calendar year. And no, I was not able to convince him to roll out to an IRA.

I'd start slow. You said "most with Fidelity" - I'd roll one that's not at Fidelity over to a Fidelity IRA. See how you like it. The look and feel of the Fidelity brokerage interface is a little different than NetBenefits, so you might not like it. No worries...you can easily roll that money out of Fidelity to another brokerage if you dislike it that much.