My spouse is 58 and their 401k has a substantial balance.
I has a solo 401k for my retirement savings.
I have the option of creating a 401k account for them under my company's solo 401k plan.
If they were to change jobs, assuming they are likely to work for the new employer for ~7 years, is there a compelling reason to not create the account and roll their existing 401k into my company's plan, and then let the savings for the new employer accrue separately?
I've taken a Boglehead approach to both of our accounts, simply relying on index ETF's and SGOV.
401k Options if My Spouse Changes Jobs?
byu/CJoshuaV ininvesting
Posted by CJoshuaV
2 Comments
Reasons *to* roll into your solo 401k:
* Control & simplicity. One plan, one investment lineup, one custodian. If your solo 401k has low-cost index options, that’s a real plus.
* Potentially lower fees. Many employer plans are still mediocre; a good solo 401k often beats them.
* Backdoor Roth flexibility (if applicable). If either of you does backdoor Roths, keeping pre-tax money out of IRAs matters. A solo 401k preserves that flexibility.
Reasons *not* to (or at least pause):
* Age 55 rule. If your spouse separates from service at 55+ and their 401k stays with that employer, they may be able to access funds penalty-free before 59½. Rolling it into *your* solo 401k would forfeit that option.
* Creditor protection & plan features. Employer plans can have stronger ERISA protection than solo plans, depending on state law.
* Admin burden. Once combined balances exceed $250k, you’ll need to file Form 5500-EZ annually. Not hard, but it’s another thing to remember.
* Investment optionality later. If the new employer has a *great* plan, it may be nice to keep the old 401k portable rather than locked into your plan.
What until they secure their next job. If that company offers a 401K, rolling over into that account might make the most sense. Whatever you do, be sure to track the fees that are being charged – that should be what ultimately guides you.