Should I roll over my 401k? Part 1 – Stay put with old 401k?

So it’s time to decide whether I should keep my 401k money at the original manager Fidelity, or roll it over to join my IRAs at Vanguard. I have enough in there to be allowedto leave it indefinitely. I’m not considering any other options as I’ve already chosen Vanguard as my retirement broker. Here are the funds I have in my Fidelity 401k right now, with expense ratios (e.r.):

40% in S&P 500 Index Fund (like FSMKX), e.r.=0.10%
20% in Spartan Extended Market Index Fund (FSEMX), e.r.=0.10%
20% in Spartan International Index Fund (FSIIX), e.r.=0.10%
20% in PIMCO Total Return Admin Fund (PTRAX), e.r.=0.68%

I list the expense ratios because as I only invest in index-type funds, expense ratios are one of the major ways (but not the only way) to predict performance.

Option #1: No Rollover, Stay with Fidelity
Pros:
- Only really looking for index funds, and Fidelity has decent ones that currently have really low expense ratios of 0.10%. These Spartan funds usually have a minimum opening balance of $10,000 each to get such low expense ratios.
- Don’t have to file any paperwork
- No maintenance fees or extra costs.(?) Have to double-check this.

Cons:
- Limited choice of funds, especially no low-expense ratio bond funds.
- Low expense ratios are only temporarily capped at 0.10%, and may go up later.
- IRAs have better estate planning benefits when you die. Beneficiaries can make withdrawals gradually, keeping the rest in the tax-deferred IRA. You can’t do this with 401ks.

…will finish this later after looking into my Rollover IRA alternatives at Vanguard.

(Continue reading the rest of this in Should I roll over my 401k? Part 2 – Maybe Rollover into Fidelity?)

Comments

  1. I like Vanguard, but I like Brownco.com a lot more. Even though you have to pay by the trade (only $5) there is absolutely no expense fee. Vanguard charges if you have less than 10k, and you can’t trade funds more than once every few months I believe. Since its a roll over and you aren’t going to be dollar cost averaging I think vanguard isn’t the best choice.

  2. Thanks for the comment! I guess I should do a more thorough search, but I just feel like I’ve done it already. Vanguard does have those annoying minimum-balance fees for low amounts ($5k for the funds I want in an IRA), but their funds are no-load and some funds don’t have the low-balance fee. Regarding expenses, every fund or ETF has their own expense fee built-in, no way to avoid those no matter what broker you use. BrownCo sounds like a good brokerage if I was aiming to actively trade stocks.

  3. Just wanted to add that I’m pretty sure you were referring to maintenance fees when you mentioned expense fees. Yeah it is nice that BrownCo doesn’t charge for expense fees, but Vanguard charges the same fees no matter which broker holds the funds, and I like Vanguard’s funds. I may look into their new ETFs though…

  4. I’m pretty sure Fidelity made the 0.10% expense ratios permament for their index funds. I use Fidelity for my IRA rollover and I’ve had no complaints.

  5. Anonymous says:

    A little (okay… a lot) off topic. I see that your links to other blogs rotate periodically and that they also show the last time that a blog was updated. Is there anyway that you can sort them to where the most recently updated blogs are at the top of your list?

  6. Fidelity changed their fee structure for the index funds. The .10% is permanenet for most parts. Any change to it will have to go through the board of trustees. If e.r. is your main concern you are fine with Fidelity index funds. Also, under certain circumstances Fidelity waives their account maintenance fees. The easiest way to avoid it is to sign up for online instead of paper statements. ‘d say roll over but if you like your Fidelity options why not open a fidelity Roth IRA?

  7. Anon – Blogrolling.com does support a feature that shows the most recent blogs first. However, I’ve found that not all blogs ping Blogrolling every time they post (including mine actually) so it’s not very accurate. Instead, I set it to random, so everyone has an equal chance of being on top.

    mmb2 – You’re right, my info was outdated. Yes, I do the e-statements, but they do charge a low balance fee of $10 for each fund below $10k. Vanguard does the same.

  8. This post has been added to the Carnival of Personal Finance #8!

  9. Just wanted to thank you for this article since I am currently trying to make the same decision.

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