Can I maintain Two 401k plans?

Question

I recently left my job and have a small investment in 401K. My new employer has their 401k plan, and I am also familiar with Rollover option. However, I dont understand the process too well. Is it advisable:
AA) that I leave my 401k with my former employer (as it is) and start fresh another 401k with my new employer? Will it have any negative impact?
BB) I roll it over to IRA (Schwab) and then also continue with the new 401k with my new employer?
CC)If I directly rollover to my new employer, will my former employer come to know the details of my new employment (my employer, my position etc??) Appreciate any sincere advise as I have never done this before.-Thanks folks...God Bless you all!

Answer 1

I recommend option C if your new 401k will accept. Yes you will be limited to what your company will let you invest it, but usually for the average joe investor every 401k has more than enough options. I work for a company that deals with retirement plans. It is relatively easy. Usually 3-4 steps to get it done.

1. Find what paperwork you will need to a take a distribution and also the paperwork needed for the rollover at you new financial institution.

2. On your rollover paperwork to your new plan generally there are 5 sections you need to fill out. 1-4 is information about yourself (you address, where the money is to be invested, signatures etc ...) Section 5 can be the tricky part. This is where generally have to get information that your PRIOR company had a qualified 401k. 2 ways to get that done. Have your prior plan administrator (usually someone in HR) sign off on the paperwork. OR sometimes easier your prior plans financial company (Vanguard, Fidelity, T Rowe Price) when you call to take the distribution ask for something called an LOD or letter of determination. Its a letter from the IRS stating that it was a qualified plan. That will satisfy the section about your prior companies plan. Some people don't like to go back to the previous company so that way could be easier.

3. Submit paperwork where it needs to go. See if the check can go directly to new company. Less hands the better.

To answer your question, your new company will not know about your previous employment unless you tell them anything. Since everything goes the new financial company that holds the 401k, no information will be sent to your company. Just find out who the recordkeeper is the NEW 401k and call them you are looking to do a rollover. They will usually go out of their way to get your money into the new plan since for me new rollovers is a metric I am based on so i go way out my way to help complete it.

IRA is another solution, but then you have 2 retirement plans and then two companies to deal with. Find out about the fees in the IRA. Inactivity fees, small account fees, trading fees, and also closeout fees (when you close your IRA)

Two more pieces of advice. If you roll it into an IRA, it is actually coded as a rollover IRA. Until you put money into it, is it technically a Traditional IRA. Sometimes you cannot roll IRA's into a 401k so once its in there you wont be able to consolidate accounts.

If you are eligible for an employers retirement plan, you cannot contribute to an IRA tax deferred. It must be done with after-tax money.

LONG STORY SHORT. roll it into employers new plan, find out what you need to do by calling old AND new plans.

Answer 2

You can do any of the above and it would be advisable if your specific circumstances warrant it. Recommending that you do something without all of the pertinent facts is simply foolish. If your former employer plan is a quality plan with quality investments then leave them. Just make sure they always have your current address. If they are going to change investements (as another poster warned you about) they have to let you know AND give you 30 days before they switch..plenty of time to open an IRA if you so choose. If your funds aren't so good then BB might not be a bad idea. Schwab has good fund choices...but the fact that you have 1000's of choices means little. Average investor actually gets overwhelmed with a dozen choices. CC would be a better option then BB or AA if you need temporary access to your funds via loan. Only options through AA or BB would be distribution which devestates your retirement balances.

I deal with retirement plans on a daily basis (IRA's and 401k's) and for 75% of the population....the 401k is the best investment choice they have available. That is including those who's fund options may be "limited". For every plan where they claim to have poor fund choices I could show them an IRA where the participant is STILL making poor fund choices or I can show them a 401k participant with a Schwab account and the participant is letting their money sit/accumulate in the money market.

What's the best for you? I don't know...if you're in institutional funds in your old 401k then leave them there. If you have institutional pricing in your current 401k AND they allow you immediate access to rollover funds then roll the money in there. If neither plan has decent funds then put it into an IRA....in 7-10 years you'll be at a NEW job and you may have better fund choices/withdrawal options there.

Answer 3

My opinion:

B is OK. C is OK.

If you select C, it is a deal made between the 401k administrator of your new plan and old plan - simply paperwork, so none of your employeement statistics should be shared.

A is not adviseable, though it is acceptable. I did this once (no, there is no penalty). But I learned later that even though your money is kept active, if your former employer decides to do something to their 401k plan (such as change investment options or adminstrators), you will be automatically affected. As an example, my old employer used Vanguard investments, which i liked. If they wanted to switch to fidelity, they could. Since I liked Vanguard adn wanted all my investment options to stay the same, I simply rolled over to a Vanguard IRA.

Answer 4

Yes you can maintain 2 or more 401K's if your old plan allows you to keep plan and most do. However, suggest you do a rollover from previous employer plan to someone like Schwab. Reason: most 401K employer plans have very limited choices. Not always best funds to park your money. Schwab and others can give you access to thousands of funds that are better investments. Suggest you call local Schwab office ask about a rollover. I've done it. It's painless.

Can suggest following mutual funds for consideration because they have stellar track records and fund managers who are very good at their trade.....

Mxxix...Marsico 21st Century
Camox....Cambiar Opportunity
Umbix....Excelsior Value&Resturcturing
Fbrvx....FBR Small Cap
Ssaix.....SSGA International Stock
Wtibx....Westcore Plus Bond

These funds will give you most excellent diversification opportunities depending on your tolerance for risk. Good luck!

Answer 5

I think you can leave your 401(k) with your former employer if it is allowed or roll it over to your new employer or another institute like Schwab. But make sure you will do an institute to institute transfer. If you do not want your new employer to know anything from your past, transfer it to Schwab.

Answer 6

Yes! (you know what is going on. ) (a-b, or c. )...KEEP them separate. Why? Every one will tell you to be diversified,or to keep them together.Do it to be diversified,BUT mainly to get another prospective on different types of investments-company's-brokers...(cc),yes,but no know one will talk.( Scared of lawsuit. )...