So I just recently quit my job to work at a newer company and am unsure what to do next. I’m know I have several options on what to do with my previous 401k through my old employer but I just would like anyone to comment on their suggestions or experience. What would you do with this?? I’m not new to finances but will admit, I have a lot to learn.
Quit job with 10k+ in Roth 401k, need advice.
byu/ly_can inpersonalfinance
Posted by ly_can
4 Comments
I always roll my 401ks to IRA. So you’ll need a Roth IRA. If you got any employee contributions those will bf pretax, so you’ll also need a traditional Ira to accept those funds.
Transfer the funds to a Roth IRA with Fidelity or Vanguard. Lots of low cost or no cost fund options.
I presume your new employer has a 401k, do they offer Roth as well? You should probably roll it into something else and not keep it there. You will get better investment options in an IRA, and you may end up paying some additional fees that were covered by your employer in your old 401k (not always, my wife’s 403b had no additional fees after she left the company). Really there is no real good reason other than laziness to keep the 401k with your old employer. Rolling it into your new employer is just convenient to have everything in one place, but rolling it to an IRA gives you the best options.
Beware, if you roll to a Roth IRA, you will most likely still get a tax bill. That 10k is probably something like 6k your own money and 4k money your employer put in or whatever. The amount your employer put in is most likely pre-tax money even though it is a Roth account. The Roth IRA cannot distinguish between pre and post tax money, so it will roll it all in as post-tax money, which means whatever your employer put it (assuming it is pre-tax) will be taxed as income. So you’ll owe Uncle Sam 1k or so come tax season.
Roth 401k dollars are probably best moved to a Roth IRA.