Now that I’ve recently changed jobs, I’m once again trying to figure out what to do with all of my old retirement accounts. Luckily, I’ve got a little bit of experience in this area. I’ve switched jobs twice in a little over a year – first leaving my biglaw associate position to work as a state attorney, then leaving that job to take a non-traditional attorney position with a branch of my state bar association.
With my latest job change, my retirement savings are now scattered throughout a bunch of different retirement accounts held by my old employer. That’s actually not that big a deal since I use apps like Mint and Personal Capital to track my investments, but it still helps to think about what I should do with all of that money now that I have this new job. Today’s post addresses that question.
*Note that for simplicity, I refer to 401k’s throughout this post, but everything here applies to any retirement accounts you might have with prior employers, including 403b’s, 457s, and certain types of pension plans.
What Should You Do With Your Old 401k?
401k’s are an interesting beast. When you’re working for your employer, there’s not a lot you can do. In general, it’s just put money in, look for low cost, index options, and sit back and relax.
Where things get interesting is once you leave your employer. It’s like a switch gets turned on and suddenly, you have a whole bunch of options in front of you.
Most people, when faced with all of these choices, do the same thing – nothing. That’s what happened with my wife. She completed a one-year hospital residency a few years ago, started a new residency right after that, and simply forgot about the money that she had saved in her 403b.
To be fair, sometimes, doing nothing is the right choice. But, we want to be making our choices actively. You don’t necessarily have to act right away, but eventually, you do want to take action with your old 401k once you’ve had time to assess your situation.
So what are some of the things you can do with your old 401k?
1. Leave It Where It Is.
This is a pretty easy and straightforward option. If you have a good, low-cost 401k with your old employer, then it might make sense for you to just leave it where it is.
Most 401k plans should have an option that’ll automatically rebalance your accounts. Just set it up to rebalance your account once or twice per year and you should be set. If you use apps like Mint and Personal Capital to track your accounts, you won’t even have to log into them to see how things are going.
2. Roll It Over Into A Traditional IRA.
A lot of experts blindly say to rollover your 401k into a traditional IRA whenever you leave a job. This has the nice advantage of giving you access to potentially cheaper and better investment options than what you might otherwise get through your employer sponsored plans.
However, if you’re in a high tax bracket and want to maximize all of your potential tax-advantaged space, then this option might not be optimal. That’s because, in order to take advantage of a backdoor Roth, we’ll need to leave all of our traditional IRA space empty. Whether you take this option will really depend on your current or anticipated income level and whether you have ways to get any money you put into a traditional IRA back into a 401k bucket.
3. Roll It Over Into Your New Employer’s Retirement Plan.
If you have a good retirement plan at your new job, then it’ll often make sense to just roll over your old 401k into your new plan. In many ways, this is the simplest option – you’ll have all of your retirement funds in one place, instead of scattered everywhere. If your new 401k plan stinks, then obviously, you won’t want to do this.
4. Other Potential Options For Your Old 401k.
To be sure, the above choices aren’t your only options. You could cash out your retirement savings, which I obviously wouldn’t recommend because it’s stupid.
Another option would be to roll over your funds into a Roth IRA and pay taxes on the conversion. If you’re saving aggressively, this probably won’t be a realistic option just because of how much money you’d be converting, but it could be something you can do if you’re converting a small amount into a Roth or if you’re in a particularly low-income year and can afford to pay the taxes.
An interesting option that I’ve been thinking about is rolling over your old 401k into a Solo 401k. Not all solo 401k plans allow rollovers from other retirement accounts, but the Solo 401k I have with Fidelity does appear to allow this. If you’ve been side hustling, you should have already created a Solo 401k for yourself – it’s the bonus retirement account that side hustlers get to have. I see the 401k to solo 401k rollover as useful for someone who’s moving into a job that doesn’t have a great 401k plan, has an old 401k that isn’t all that great, and still wants to leave their pre-tax IRA space empty in order utilize the backdoor Roth.
Things To Consider When Deciding What To Do With Your Old 401k
1. Simplicity.
This is pretty self-explanatory. The more retirement accounts you have, the harder it might be to keep track of everything. For many people, rolling over funds into their new employer’s 401k makes sense simply because it keeps their money all in one spot.
2. Administrative Fees.
I feel like this aspect of retirement plans doesn’t get talked about enough. Most people I talk to don’t even realize that their employer sponsored retirement plan probably isn’t free. I’ve now had three different employer sponsored retirement plans, and all three plans charged some sort of administrative fee. It’s possible that your employer paid your administrative fees for you when you were employed with them, but once you leave, you’ll probably have to pay those fees yourself.
Administrative fees will generally come in two types – either a fixed fee (i.e. the plan will charge you a fixed dollar amount each year) or a percentage based fee (i.e. the plan will charge you a percentage of assets you have in the plan each year). Â The 401k at my biglaw firm charged a fix administrative fee of around $89 per year. My 457 plan with the state charges an annual administrative fee of 0.1% on the first $125,000 I have in the plan, while my state pension plan charges me $4 per month on amounts over $10,000 and under $30,000.
As you can probably tell, a fixed administrative fee can be problematic if you don’t have a ton of money in your old 401k, which, if you change jobs often, can be pretty common. Fixed fees have less impact as your account grows – the bigger your account gets, the lower percentage of your account the fixed fee will be. However, if you’re not contributing to the account anymore, your account can’t grow as quickly. Thus, if you’re paying a fixed, administrative fee, it’ll often make more sense to get your old 401k’s into one plan in order to avoid paying multiple, unnecessary administrative fees.
3. Backdoor Roth Eligibility.
If you’re a high-income earner, you’ll want to consider whether you want to be able to make it easy for yourself to utilize a Backdoor Roth. To take full advantage of a backdoor Roth, you’ll need to make sure that you keep all of your pre-tax IRA space empty. Otherwise, you’ll be stuck dealing with the pro-rata rule, which, in many cases, will basically make it impossible for you to use a Backdoor Roth.
This is why I think the conventional wisdom to rollover your 401k into a traditional IRA isn’t necessarily right for everyone. Many of us current and future high-income earners are going to want to keep all of our IRA space empty.
One thing to note is that, if you do have money in a traditional IRA, it’s not very hard to get it out of there. You can pretty much roll over any money you have in a traditional IRA into any pre-tax 401k type plan. You’ll just have to check to see if your employer sponsored plan allows you to rollover traditional IRA funds into it or if your Solo 401k plan allows you to do the same.
4. Any Special Characteristics Of Your Old Retirement Plans.
The final consideration to think about is whether your old retirement plans have any special characteristics to them that make keeping your money in them advantageous.
The big thing that comes to my mind is money that you have in a 457 plan. The amazing thing about a 457 plan is that any money you contribute to it can be withdrawn, penalty free once you leave your employer. In other words, a 457 is basically a tax-deferred account that you can take money from, without penalty, just like a regular taxable account. You basically get the best of all worlds with a 457 plan – tax-deferred growth and the ability to withdraw your money when you need it.
You lose these advantages if you roll over your 457 funds into a different type of retirement plan. So, before you do anything, make sure to check whether your old retirement plan has some sort of special benefit that makes you want to keep your money there.
What I’ll Do With My Accounts
So what’s my retirement world look like? My new job only gives me access to one type of account – a 403b plan. It’s a pretty crappy plan, at least when compared to the plans that I had access to before.
For sure, I’m going to keep all of my 457 contributions where they are. The administrative fee is only 0.1%, which is completely reasonable, and since the majority of my contributions in the 457 plan are invested in Vanguard funds, I’m only paying a few basis points per year in expenses. But, most importantly, I don’t want to move my 457 contributions out of that plan because I want to be able to have the possibility of accessing those funds later without an early withdrawal penalty.
My state pension plan is another story. Our contributions were fixed by state law – 5.5% from me and 6% from the state – which means that I only have a little over $10,000 in the pension plan. A monthly fee of $4 on a $10,000 balance isn’t ridiculous, but it’s also unnecessary and pretty duplicative of other administrative fees I’m already paying. Luckily, I found out that once I leave state service, I can rollover my state pension plan funds into my 457, which is what I’m going to do.
Final Thoughts
There’s a bit of thought that goes into figuring out what to do with your old 401k’s. I’d say the main things to think about are whether your old plans are any good, what sort of fees you’re paying in them and whether your new plans are good. Remember that the expense ratios of the funds you’re invested in probably aren’t the only fees you’re paying.
Don’t be like most people who do nothing with their money and then forget where it is or how to even find it. Instead, put a little thought into what you want to do with all of that hard earned money you’ve been saving away.
Finally, make sure you track your accounts using apps like Mint or Personal Capital. These apps allow you to see all of your accounts in one spot, so you don’t have to go around manually looking at every investment account you have.
If you’re trying to get a good, overall picture of your investment accounts, I recommend you sign up for Personal Capital and link of your accounts to it. Best of all, it’s completely free to use, so you have nothing to lose.
More Recommended Ebike/Scooters
Check out these other ebikes and scooters I've reviewed:
- Urban Arrow Ebike – Last year, I made one of the largest purchases I’ve ever made – I bought a $9,000 electric cargo bike from Urban Arrow. In my Urban Arrow review, I will discuss what it is and why I decided to buy this bike, as well as discuss how impactful a bike like this can be on your journey to financial independence.
- Troxus Explorer Step-Thru Ebike – The Troxus Explorer Step-Thru is a fat-tire ebike that I’ve had the pleasure of riding for a while now. It has amazing power, great looks, and awesome range. If you’re looking for a great fat-tire ebike that offers a lot for the price, the Troxus Explorer Step-Thru is definitely one for you to consider. Check out my Troxus Explorer Step-Thru Review.
- Hovsco HovBeta Ebike – The HovBeta is a folding ebike with great specs and a lot of interesting features, and importantly, it’s sold at a good price point. I’ve had a blast commuting with it and using it to do deliveries with DoorDash, Uber Eats, and Grubhub. Check out my Hovsco HovBeta Ebike Review.
- Vanpowers Manidae Ebike – The Vanpowers Manidae is a fat tire ebike that I’ve been riding as my primary winter commuting bike and have also been using it to do food delivery with apps like DoorDash, Uber Eats, and Grubhub. After clocking in a decent number of miles with this ebike, I wanted to write a post sharing what my experience with the Vanpowers Manidae ebike has been like. Check out my Vanpowers Manidae Review.
- Sohamo S3 Step-Thru Folding EBike Review – A Great Value Folding Ebike – The Sohamo S3 Step-Thru Folding Ebike is an entry-level folding ebike that offers a lot of value for the price point. I’ve been riding the Sohamo S3 for a while now, putting the bike through its paces, and I have to say, this bike has exceeded all of my expectations. Check out my Sohamo Review.
- KBO Flip Ebike – The KBO Flip is an excellent bike. I’ve had a great time riding it and think it’s a versatile bike that can be used for a lot of purposes and can fit a variety of lifestyles. It’s worked out great for me as a general commuter bike and as a food delivery bike. Check out my KBO Flip Review.
- Hiboy P7 Commuter Ebike – The Hiboy P7 is an excellent electric commuter bike that’s offered at an affordable price point. The range and speed of this bike are both very good, so you won’t have any trouble getting anywhere you need to go with it. As a food delivery vehicle, this is also good – with how much range it offers, you’ll be able to work all day on a single charge. Check out my Hiboy P7 Commuter Electric Bike Review.
- Himiway Escape Ebike – The Himiway Escape is an interesting bike for anyone looking for a moped-style ebike. If you’re a gig economy worker, the Himiway Escape is particularly interesting and it’s possible to think of it as an investment, especially if you can opt to do deliveries with the Himiway versus using a car. It’s not cheap, but you can definitely make your money back when you compare the mileage you’ll put on your car versus using an ebike. Check out my Himiway Escape Bike Review.
- Espin Sport Ebike – The Espin Sport is a good ebike for someone who is looking for an ebike that feels and rides more like a regular bike. There are many ebikes that are really only bikes in name. In reality, they’re basically electric mopeds. The Espin Sport, by contrast, is a bike you could probably ride without the battery and you’d feel like you’re just riding a regular bike. Check out my Espin Sport Review.
- Varla Eagle One Scooter – The Varla Eagle One is an excellent scooter that can make sense for a lot of people. It can work as a primary mode of transportation. You can use it to work on gig economy apps like DoorDash, Uber Eats, and Grubhub. And it can also be a recreational vehicle if you’d prefer to use it for that. Check out my Varla Eagle One Review.
- Varla Falcon Scooter – The Varla Falcon is an excellent scooter that offers a good amount of power at a lower price point compared to more powerful scooters. It’s not exactly an entry-level scooter, nor is it a high-powered scooter. I think it fits somewhere in-between those two categories – an intermediate scooter if I had to give it a category. Check out my Varla Falcon Review.
- Hiboy S2 Scooter – The Hiboy S2 is an excellent entry-level commuter scooter that's perfect for someone looking to save some money in transportation costs and improve their commute. Check out my Hiboy S2 Review.
- Hiboy S2R Scooter – The Hiboy S2R is one of the more interesting electric scooters I’ve been able to test out. It’s not a high-powered scooter, but for an everyday transport option, it’s very useful, especially given some of the unique features that it has. Indeed, for the price, the Hiboy S2R might be the best value scooter I’ve used. Check out my Hiboy S2R Review.
- Fucare H3 Scooter – The Fucare H3 is a fun scooter and I’ve enjoyed testing it out. For a daily commuter or quick trips or errands, the Fucare H3 is probably the scooter I’ll use. It’s portable and easy to maneuver, so it’s just easier to take on the road when I need it. Check out my Fucare H3 Scooter Review.
More Recommended Investing App Bonuses
For additional investing app bonuses, be sure to check out the ones below:
- M1 Finance ($100) – This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account. Check out my M1 Finance Referral Bonus – Step-By-Step Guide.
- Webull (20 free stock shares) – Webull's current promotion gives you 20 free shares valued between $3-$3,000 each if you open an account using my referral link. Here’s a guide I wrote about how to earn your free shares using Webull.
- Moomoo (15 free stocks) – Moomoo is a free investing app currently offering 2 different referral bonuses if you open an account using a referral link. Read my Moomoo referral bonus guide for more information.
- Robinhood (1 free stock) – Robinhood gives you a free stock valued between $2.50-$225 if you open an account using my referral link.
- Public (1 free stock) - Public gives you a free stock valued between $3-$70 if you open an account using my referral link.
- SoFi Invest ($50) – SoFi Invest is an easy brokerage account bonus that you can earn with just a few minutes of work. Use my SoFi Invest referral link, fund your SoFi Invest brokerage account with just $10 and you’ll get $50 of free stock. I also have a step-by-step guide for the SoFi Invest referral bonus.
More Recommended Bank Account Bonuses
If you’re looking for more easy bank bonuses, check out the below options. These bonuses are all easy to earn and have no fees or minimum balance requirements to worry about.
- Upgrade ($150) – Upgrade is a free checking account that’s currently offering a $150 referral bonus if you open an account and complete a direct deposit. These bonus terms are easy to meet, so it’s well worth doing this bonus as soon as you can. Here’s a post I wrote with more details: Upgrade $150 Referral Bonus – Step By Step Directions.
- SoFi Money ($275) – SoFi Money is a free checking account from SoFi. They’re currently offering a $25 referral bonus if you open a SoFi account with a referral link and deposit $10. You can also make an additional $250 as well if you complete a direct deposit. This is a good bank that is also 100% free, so you won’t have to worry about managing this account. Here’s a post I wrote with instructions on how to earn your SoFi Money bonus: SoFi Money Referral Bonus: Step By Step Guide.
- Chime ($100) - Chime is a free bank account that offers a referral bonus if you use a referral link and complete a direct deposit of $200 or more. In practice, any ACH transfer into this account triggers the bonus. This bonus is easy to earn and posts instantly, so you’ll know if you met the requirements as soon as you move money into the account. I wrote a step-by-step guide on how to earn your Chime referral bonus that I recommend you check out.
- US Bank Business ($800) – This is a fairly easy bank bonus to earn, since there are no direct deposit requirements. In addition, you can open the Silver Business Checking account, which comes with no monthly fees. Check out how to earn this big bonus here.
- Fifth Third Bank ($350) – This offer is limited to customers in the following states: Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee, West Virginia, and South Carolina. If you don’t live in one of those states, you won’t be able to open an account online but you can still open an account in-branch if you happen to be visiting a city that has a branch. This is a fairly easy bank bonus to earn, especially since there are plenty of data points showing what will trigger the direct deposit requirement. In addition, you can open the Fifth Third Momentum Checking bank account, which comes with no monthly fees or minimum balance requirements. Read my guide on this bonus here.
- GO2Bank ($75) - GO2Bank is an easy bank bonus that I recommend people take advantage of if they have an easy way of meeting the direct deposit requirement. I like that it’s easy to open the account and that the bonus pays out quickly. Check out my step-by-step guide on how to earn your GO2Bank $75 referral bonus.
- Current ($50) – Current is a free fintech bank that’s offering new users a $50 referral bonus after signing up for an account using a referral link. Current is an easy bonus to earn and also gives you access to three savings accounts that pay you 4% interest on up to $2,000. That means you can put away up to $6,000 earning 4% interest. That’s very good and makes Current an account I recommend to everyone. Check out my step-by-step guide on how to earn your Current Bank bonus.
- Netspend ($40 + 5% Interest Savings Account) – Netspend is a company that provides 5% interest savings accounts. If you sign up using my referral link, you’ll get a $40 signup bonus once you make your first deposit into your Netspend account of $40 or more. That means you get a 5% interest savings account and a free $40 to start! Make sure to check out my in-depth guide on how to set up these accounts.
- Digital Federal Credit Union ($20) – Digital Federal Credit Union (DCU) is a free, nationwide credit union that I recommend to readers for two reasons. First, DCU has a $20 referral bonus if you open a free DCU checking account with a referral link. Second, DCU has a saving account that gives you 6.17% interest on your first $1,000. Check out my in-depth post on how to set this account up.
- Novo Bank ($40) - Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. In addition to being a good bank bonus, Novo is also a good business checking account. It has no monthly fees or minimum balance requirements and operates a good app and website. Indeed, it’s the business checking account I currently use for this blog. Check out my post on how to easily open a Novo account.
- Varo ($30) – Varo is a free fintech banking app similar to Chime or Current. It’s currently offering a $30 bonus to new users that open a new Varo account with a referral link. The bonus for this bank is very easy to meet, all you need to do is spend $20 within 30 days of opening your Varo account. Check out my step-by-step guide to learn how to earn this bonus.
Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.
Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.
Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:
- SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $250 if you complete a direct deposit.
- 5% Savings Accounts. I'm currently getting 5.25% interest on my savings through a company called Raisin. Opening a Raisin account takes minutes to complete, it's free, and all of your funds are FDIC-insured. I explain how it works, why I'm now using it to store my emergency fund and any other cash savings I have, and why I recommend everyone check it out in this review.
- US Bank Business. US Bank is currently offering new business customers a $800 signup bonus after opening a new account and meeting certain requirements.
- M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account.
- Personal Capital. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.
Feel free to send Kevin a message here.
I have a 457 plan and I was pretty excited when I learned that you can withdraw the money penalty free. Definitely a big plus if I can retire early. I worked in the federal government for the first few years after college and I left my money in the TSP (401k for fed govt workers). The costs are even lower than Vanguard so you can’t beat that. How long were you in state government? Is your pension/457 money vested?
TSP is definitely sweet. You can’t beat that.
My 457 money was all my own contributions, so that’s vested, of course. My Pension also had immediate vesting, so everything was vested automatically as it was contributed.
Ahh yes, this little detail! Admittedly it’s been almost 12 years since my last company move, but I took the rollover option from company A to company B. Keeps it simple, and avoids any tax implications.
Yep. Easy peasy to just roll it over to your current plan, if you’ve got a good plan.
Interesting advice about using a 457 account. I don’t know much about 457s and will have to study up on them. Do you have to work for a non-profit to open one? Do they have solo 457s like solo 401ks?
457’s are a really unique and awesome retirement account if you happen to have one. I’ll probably write an in-depth post about it since I get some questions about it every once in a while. I’d never heard about a 457 either until I actually had one.
They’re really only available in two settings – state government jobs or some non-profits. The typical people who have 457s are people like state government workers (every State of Minnesota employee has a 457), teachers, university employees, and hospital employees. So, for example, my brother and sister in law both work for a hospital and have both a 401k and a 457.
They don’t have Solo 457s. For people who earn 1099 income, your options are generally Solo 401k or SEP-IRAs, and for a number of reasons, I recommend the Solo 401k over a SEP.