Moving 401k money

Over at Morningstar we read a conversation: Moving 401k money

With a change in employer and thus a new 401k provider (Fidleity) is it possible to move ALL the money from the previous 401k provider (Principal) at one time into a money market account at Fidelity and then slowly DCA it into the new funds of theh 401k?

Re: Moving 401k money

01-09-2014, 3:08 PM | Post #3505120

You have to move it inside the new 401K at Fidelity.  Does your employer offer a cash option inside the new 401K?  My own employer only offers a Stable fund, not exactly cash or a money market fund in our 401K.

Unless all the money from your previous 401K is in cash for an extended period of time (months), there is no point in DCA into the new 401K.  If you are sellling low in the previous one, you are buying low in the new one (or vice versa) and it's a net zero effect.

Re: Moving 401k money

01-09-2014, 3:27 PM | Post #3505128

I don't agree that you "have to move" the old 401k to Fidelity.

You have the option of transferring the funds to a variety of qualified providers. 

Re: Moving 401k money

01-09-2014, 3:41 PM | Post #3505132

Usually on rollover the previous provider will liquidate and you specify which fund in your new 401K the money is placed in.  I've not seen a 401K without a money market option or "stable value" option, if you have a "stable value" option that is likely better than a money market.

After that you just have to follow the plan rules for allocation changes.  The 401Ks I have dealt with all let you exchange into and out of the cash/stable fund whenever, but once you buy a different fund you must leave it 31 days or you get blocked from trading.  They are designed for long term buy/hold DCA, not trading.

Re: Moving 401k money

01-09-2014, 4:09 PM | Post #3505145

"don't agree that you "have to move" the old 401k to Fidelity.

You have the option of transferring the funds to a variety of qualified providers"

One can rollover an old 401K to a trad IRA and use any number of providers. 

 But, if the OP want to use his new employer's 401K to rollover his old one to (as he said), then He has to move the money to inside the new Fidelity 401K in as a lump.  He can't have some of it sitting outside the 401K in cash and DCA it into the new 401K.

Re: Moving 401k money

01-09-2014, 5:20 PM | Post #3505168

You have the option of rolling the old 401k into a Rollover IRA [most flexibility] or moving it into new 401k [if the new plan options are great; plan restrictions will apply].

In both cases, you can initially be in the cash/money-market fund [may be stable-value in the new 401k]. But you should quickly restore the allocation of the old 401k, this being just a lateral move.

Re: Moving 401k money

01-09-2014, 7:33 PM | Post #3505208

 dragonpat:

"don't agree that you "have to move" the old 401k to Fidelity.

You have the option of transferring the funds to a variety of qualified providers"

One can rollover an old 401K to a trad IRA and use any number of providers. 

 But, if the OP want to use his new employer's 401K to rollover his old one to (as he said), then He has to move the money to inside the new Fidelity 401K in as a lump.  He can't have some of it sitting outside the 401K in cash and DCA it into the new 401K.

The same thing is happening at my employer. I do not believe you can roll the old account into an IRA, as he is still employed with the company. It is just a change in the custodian of the 401k account. They usually move each fund  to a "similar" fund (LCG to LCG, etc). If it is like my new 401k, there is a brokerage account option that is available for a fee. But the benefits outweigh the costs, IMO. Anywho, as dragonpat said, it is a net wash--selling "high" and buying "high," as it were.

Re: Moving 401k money

01-10-2014, 12:49 AM | Post #3505281

 Graust:

 

The same thing is happening at my employer. I do not believe you can roll the old account into an IRA, as he is still employed with the company. 

The OP's first sentence is "with a change in employer", which sounds like he is changing employers.  Thus rollover to rollover IRA is an option if he doesnt want everything in the new company's 401k.

Re: Moving 401k money

01-10-2014, 8:34 AM | Post #3505343

If you transfer across asset managers (i.e., Principle to Fidelity), there may be fees associated with each fund transfer, if you can transfer in-kind. If the fee is not a front-end fee, it might be a back-end fee should you choose to ever exchange the fund.

Actually, depending on what funds you are currently invested in at Principle, they may not transfer in-kind to Fidelity at all. This is a common problem with 401K transfers since your former employer's plan may consist of blended or unique funds. That may require a pre-transfer conversion to cash, which based on the OP, that may not be a concern.

For many of us, being out of the market with large sums is an unsettling risk.

Re: Moving 401k money

01-10-2014, 8:38 AM | Post #3505344

The OP said a change in employer, not a change in the 401k provider under the same employer. A rollover to IRA is allowed for the former, but not for the latter.

Re: Moving 401k money

01-10-2014, 11:24 AM | Post #3505404

Sorry if the initial post caused confusion but let me thank you all for your insightful comments.  The hospital my wife works for was sold to another company and their 401K plan was with Fidelity.  The previous hospital owner had Principal as their 401k provider.  So we can either let the money stay with Principal (I think) or move it to Fidelity which offers a variety of mutual funds in this plan (but only a few from Fidelity; e.g. Low Priced and Small Cap).  Interestingly enough, they even offer a number of Vanguard Target funds.  

Thanks again for all the input.  Much appreciated

Re: Moving 401k money

01-10-2014, 1:36 PM | Post #3505450

Fidelity is one of the best plan sponsors and likely has better funds available than the old Principal plan.  The funds included in the plan are mostly up to your company's negotiator and can include the excellent Vanguard and T Rowe Price target date funds as well as wells fargo stable value funds.