I wish I knew this when I was working. My employee would make me so mad with always switching funds and limiting options. I had no interest in target funds and over half of the options were these. Early on my employer offered all of fidelity funds, It was great. I always wondered why it changed. I could have made a lot more money had I been able to stick with my allocation/fund plan. Thanks for the info. The things we would change if we could do it over again. I wish I knew then what I know now. TH-cam wasn’t around then.
Taking a 401(k) in-service withdrawal can offer short-term financial relief, but it's crucial to weigh the benefits against potential tax implications, penalties, and the impact on retirement savings.
Yes, like separation from service, disability, or substantially equal periodic payments. These exceptions can provide financial relief without incurring the 10% penalty.
Yes, if the plan permits it. Repayment terms and interest rates apply. It’s essential to review your 401(k) plan documentation to understand the specific loan provisions.
My plan offers index funds with incredibly low expense ratios. I made the mistake of rolling over one 401(k) to an IRA and found out the expense ratios I was paying (to the broker and for the funds themselves) added up to almost 2% a year! I moved that money to my employer-sponsored plan and have been seeing much better growth, since there are almost no fees.
I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm retired and living off my savings.
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as in an individual invstment account or employing the services of a retirement planner/invstment advsr.
I just googled her name and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a call.
Your IRAs are protected from your creditors under federal law if you declare bankruptcy, but this protection is currently limited to $1.51 million for all your IRAs.1 The limit doesn't apply, though, to amounts you roll over to an IRA from an employer plan, or any earnings on that rollover. Source: www.nusenda.org/news-resources/financial-library/blog/2023/02/27/what-is-a-rollover-ira-and-do-i-need-one#:~:text=Your%20IRAs%20are%20protected%20from,million%20for%20all%20your%20IRAs.&text=The%20limit%20doesn't%20apply,any%20earnings%20on%20that%20rollover.
I appreciate the honesty! I've talked with several to make sure my avoidance of professionals isn't my bias because I had two I had to let go. They give me the sene advice and that's even after knowing my situation. It's a cookie cutter aptoach and I feel like I could give the same advice and I'm not even certified. Haha. I decided I like to manage my own and I do very well educating myself through reading and watching - you're a huge help!
Nice video! My 401K has good enough investment options, but the "advisory" and other fees that I can't opt out of are eating away at savings. I'm glad you mentioned right at the start that you need to be 59.5 in order to do an in-service rollover to an IRA, since you will probably save people's time. It took me a while to determine this last year. Counting down the remaining 3.75 years when I can roll over my balance to an IRA at Vanguard. I intend to do this annually until retirement or until my employer uses another 401k provider. I know there will be transfer fees, but not anywhere near the fees I'm paying.
I retired at 52 with a government defind pension currently netting 7k monthly. 3% annual cola with 100% spousal benefit and 100% lifetime healthcare for me and my wife. I also have a 457 worth 1.5 m that's continuing to grow. I realize I'm blessed to have that type of pension, and i have a great cfp who's guided me over the years. But i do enjoy and appreciate the information you and James put out at Root. Thank you!
If you have access to Fidelity's Brokerage Link in your 401k that should give access to any EFT, stock, bond, and treasury. Plus, retain the 401k legal protections (aka: OJ money..lol).
i did this as well as over the years my employer went to so few fund options as well as always changing the funds. It made it difficult for me to keep my allocations where I wanted them. I honestly feel I could have made a lot more money had my employee not done this. Hind sight, I should have switched a lot sooner & stayed on course with my plan. I know enough to look for low expense ratios. I’m now retired pand did a rollover IRA. Makes life a lot simpler.
Good video. I came to know fees or expenses ratio in each funds after many years of starting 401k. Even though, most of the 401k plans has very limited options, each plan must definitely have low cost funds (example large cap or sp 500). It is better to park there rather than IRA. Sometimes, too many options are bad, particularly in retirement. Furthermore, 401k is flexible than IRA, if I am not mistaken..
Nuveen is not like Vanguard as it produces high-cost funds compared with low-cost Vanguard funds. The example portfolio illustrates an investor without an asset allocation plan. Three of the funds in the example are large-cap growth. Our 401k plan has access to low-cost institutional-class index funds, including S&P 500, S&P 400 Midcap, Russell 2000 Small Cap, Developed ex-US, and Emerging Markets indexes.
Sure, if your 401(k) happens to allow those options. Chances are if your 401(k) has high fees it also won't allow any in-service anything unless it allows them to charge a fee. Loan? Of course, just a $150 initiation fee and a $10 per payment processing fee. Hardship withdrawal? Naturally, with a $150 processing fee. So glad to be done with that nonsense! (still must deal with federal nonsense - they are experts at creating complexity and I don't see any solution)
I'm nearing retirement within 2 years. I've been transferring some 401K to my IRA's the past 8 years. Will continue to so and will transfer the remaining balance to IRA once i official retire. The options in most if not all 401K's are limited. IRAs on the other hand provide maximum flexability to invest.
Appreciate your videos/explanations to a variety of financial planning topics. Does the 'Early Retirement Academy' software for withdraw amount(s) utilize the Guydon/Klinger guardrails approach (a withdrawal approach you mentioned and discussed briefly in a prior YT video) ? Is said software potentially modified for a Kitces risk-based approach?
I’ve got 5-Rental Houses we hope to Retire on but, the Wife has a 401K and has been a good saver! We are at about 30% ROTH (and increasing!) We can roll over the ROTH to a ROTH IRA right? Yes, I like the idea of converting it all to ROTH as we have the Rentals so, the longer we can keep that money invested the better for us! (Avoid RMD’s!)
I have a 401k where I contribute as after tax (roth 401k). My employer matches with pretax. As a result my 401k is listed as 66% roth and 33% 401k. If I use the rule of 55 after leaving work next year (I'm currently 55) how are the distributions treated?
Ari, I just left my old job. Part of my 401k is in a ‘Roth Basic.’ So, can I roll over that portion to my Roth IRA then the traditional portion to my Traditional IRA?
You don't have to be 59 1/2 to rollover a 401k. If under, the company will make the check out to your brokerage firm without any tax liability. The problem with rolling over is most folks have no clue on investing, thus the need for a financial advisor, but he / she will wind up putting you in high expense ratio investments with their added service fee. Probably better off staying in the target fund and forget about it, or learn how to do it yourself, which I did! 😁
Perhaps a diversified investment portfolio is advantageous compared to an all in the S&P500 index -- I honestly haven't decided. But I do think that S&P index will beat the best investment portfolio Root financial can devise if it has a 1% AUM expense attached. So for those who are young and afraid to leap to IRA to save 401k ER expenses, I say jump and go for a low ER S&P index. Things to not get easier than that. I add the 'young' proviso because bonds should be added when closer to retirement.
401K’s are dinosaurs. All they do is keep your money hostage. Use your money when you want to. Plus, the financial advisors get rich off of you by stealing your money.
Read this: www.nusenda.org/news-resources/financial-library/blog/2023/02/27/what-is-a-rollover-ira-and-do-i-need-one#:~:text=Your%20IRAs%20are%20protected%20from,million%20for%20all%20your%20IRAs.&text=The%20limit%20doesn't%20apply,any%20earnings%20on%20that%20rollover. “Your IRAs are protected from your creditors under federal law if you declare bankruptcy, but this protection is currently limited to $1.51 million for all your IRAs.1 The limit doesn't apply, though, to amounts you roll over to an IRA from an employer plan, or any earnings on that rollover.”
I have videos to help all ranges regardless of where you are on your financial journey. If you don’t like the style of content, you may enjoy other channels like the Money Guy Show and Rob Berger.
I like your video - thanks for sharing. So let’s say I rollover 401k to IRA - it still seems like there still needs to be follow-up with rebalancing and other changes as the market changes? Where will one go for assistance with that? Also I didn’t see bonds listed? I’m afraid I don’t know what I don’t know?
@@earlyretirementari exactly- but your I thought your point was to save on fees with a self managed IRA instead of 401k 😊 I do admire your wanting to feel good about your work and how you left a big financial institution to help people by sharing your knowledge!
I’m curious if you guys charge your AUM fee on the current 401k funds or if you would now charge 1% or more now on $1.4 million which equates to ~$14k a year in fees. In that case, you would be $4k a year more expensive a year than his current holdings (which I agree the index fund route would be better). It’s hard to say there is $14k of value this year and every year going forward when it’s a 1 time implementation. Please be more transparent with all fees associated with your case studies.
I don’t recommend working with us until you have $2M outside of a 401k (IRA, Roth, Brokerage). I’d say we’re not a good fit at this time and start with the academy: ari-taublieb.mykajabi.com/early-retirement-academy
I appreciate the response but to have a more complete answer. Let’s assume the person had $2 million beyond this $1.4 million. Once that $1.4 million leaves the 401k and is in the IRA, does that trigger the AUM fee (not sure if you guys charge that fee for funds in a 401k or not)? I believe there is value in advisors but potentially not telling someone they avoiding paying $10k in expense ratios to in turn pay $14k AUM fees doesn’t seem value added
@@YT2024-HB We have a tiered structure, and I don’t recommend hiring us if you are solely seeking investment guidance because I don’t believe an advisor can justify the fee. I recommend you watch this. Is It Crazy Paying $30k/Year to An Advisor? th-cam.com/video/H4DN2CgPMX0/w-d-xo.html
I understand your tiered fee structure. For the $2 million outside of this 401k/IRA would be $10k for the first million (1% * $1 million) and $7.5k for the next million (.075% * $1 million). So a total of $17.5k for those assets. Now moving to the 401k, as you mentioned this person is paying $10k in expense ratios and would pay $800 for that $1.4 million in the low cost vanguard funds. You simply need to answer if a client of yours would pay an additional $10.5k (.075% * $1.4 million) for the AUM. So to avoid paying the $10k in fees to the 401k they end up paying $11.3k ($10.5k AUM fee + $800 expense ratio). Again transparency would be great, at the end of the day, the person would be paying $1,300 more in combined fees than they currently are, although you make it sound like they are saving $10k in fees.
If I do an in-service withdrawal but continue to work, my ongoing contributions will continue to go into my 401k, right? So I would do more in-service withdrawals? I guess how cumbersome it is to do this process would determine how often to do it. Thoughts?
You are ignoring the liability protection that 401k accounts enjoy. Telling people to roll over large IRAs without considering that is bad advice at best, malpractice at worst.
As long as it's a "rollover" IRA, not a "traditional" and goes direct from 401k to IRA, the protection remains. I'm unclear as to whether the protection extends to Roth conversions from the rollover. Have to look that up.
that was my case. however, we also had a linked brokerage account with Schwab. since the Schwab mmkt was paying 1%+ in excess of the 401k side i moved the funds. also bought a couple CD's at Schwab while I waited for rates to peak. This year I have gone back into bond funds...
I wish I knew this when I was working. My employee would make me so mad with always switching funds and limiting options. I had no interest in target funds and over half of the options were these. Early on my employer offered all of fidelity funds, It was great. I always wondered why it changed. I could have made a lot more money had I been able to stick with my allocation/fund plan. Thanks for the info. The things we would change if we could do it over again. I wish I knew then what I know now. TH-cam wasn’t around then.
At least you know now!!
Taking a 401(k) in-service withdrawal can offer short-term financial relief, but it's crucial to weigh the benefits against potential tax implications, penalties, and the impact on retirement savings.
Absolutely, understanding the tax implications is key. Are there any exceptions to the 10% penalty?
Yes, like separation from service, disability, or substantially equal periodic payments. These exceptions can provide financial relief without incurring the 10% penalty.
And what about loan provisions? Can you borrow from your 401(k)? Yes, many 401(k) plans allow participants to borrow from their account Balance.
Yes, if the plan permits it. Repayment terms and interest rates apply. It’s essential to review your 401(k) plan documentation to understand the specific loan provisions.
That's crucial. How do I determine if my plan allows loans and what the terms are?
My plan offers index funds with incredibly low expense ratios. I made the mistake of rolling over one 401(k) to an IRA and found out the expense ratios I was paying (to the broker and for the funds themselves) added up to almost 2% a year! I moved that money to my employer-sponsored plan and have been seeing much better growth, since there are almost no fees.
I converted my 401k to a Roth IRA to avoid higher taxes in the future. I'd rather pay taxes now than be stuck paying taxes on my retirement income when I'm retired and living off my savings.
Roth Conversion = Tax Insurance :)
Pre-tax contributions may help reduce income taxes in your pre-retirement years while after-tax contributions may help reduce your income tax burden during retirement.
Both have their perks but you can also save for retirement outside of a retirement plan, such as in an individual invstment account or employing the services of a retirement planner/invstment advsr.
I have thought about this, but haven't figured out how to get consultation, I don’t live in a big city.
I just googled her name and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a call.
Great video. My only concern from moving from a 401K to an IRA, is my legal protection. 401K's are more protected from legal action.
If you move it to a Rollover IRA instead of Traditional IRA, ERISA protection remains.
Your IRAs are protected from your creditors under federal law if you declare bankruptcy, but this protection is currently limited to $1.51 million for all your IRAs.1 The limit doesn't apply, though, to amounts you roll over to an IRA from an employer plan, or any earnings on that rollover.
Source: www.nusenda.org/news-resources/financial-library/blog/2023/02/27/what-is-a-rollover-ira-and-do-i-need-one#:~:text=Your%20IRAs%20are%20protected%20from,million%20for%20all%20your%20IRAs.&text=The%20limit%20doesn't%20apply,any%20earnings%20on%20that%20rollover.
@@earlyretirementari Awesome, thanks
@@coastalhillbilly3419 my pleasure
Does the Erisa protection include include Roth conversions from funds originally in 401k/457b?
I appreciate the honesty! I've talked with several to make sure my avoidance of professionals isn't my bias because I had two I had to let go. They give me the sene advice and that's even after knowing my situation. It's a cookie cutter aptoach and I feel like I could give the same advice and I'm not even certified. Haha. I decided I like to manage my own and I do very well educating myself through reading and watching - you're a huge help!
Nice video! My 401K has good enough investment options, but the "advisory" and other fees that I can't opt out of are eating away at savings. I'm glad you mentioned right at the start that you need to be 59.5 in order to do an in-service rollover to an IRA, since you will probably save people's time. It took me a while to determine this last year. Counting down the remaining 3.75 years when I can roll over my balance to an IRA at Vanguard. I intend to do this annually until retirement or until my employer uses another 401k provider. I know there will be transfer fees, but not anywhere near the fees I'm paying.
Thank you!
I retired at 52 with a government defind pension currently netting 7k monthly. 3% annual cola with 100% spousal benefit and 100% lifetime healthcare for me and my wife. I also have a 457 worth 1.5 m that's continuing to grow. I realize I'm blessed to have that type of pension, and i have a great cfp who's guided me over the years. But i do enjoy and appreciate the information you and James put out at Root. Thank you!
Awesome!!
Great advice, thank you!
You’re welcome!
If you have access to Fidelity's Brokerage Link in your 401k that should give access to any EFT, stock, bond, and treasury. Plus, retain the 401k legal protections (aka: OJ money..lol).
I have brokerage link (403b) and have a fidelity brokerage account, but I can only invest in mutual funds for the 403b.
i did this as well as over the years my employer went to so few fund options as well as always changing the funds. It made it difficult for me to keep my allocations where I wanted them. I honestly feel I could have made a lot more money had my employee not done this. Hind sight, I should have switched a lot sooner & stayed on course with my plan. I know enough to look for low expense ratios. I’m now retired pand did a rollover IRA. Makes life a lot simpler.
Good video. I came to know fees or expenses ratio in each funds after many years of starting 401k. Even though, most of the 401k plans has very limited options, each plan must definitely have low cost funds (example large cap or sp 500). It is better to park there rather than IRA. Sometimes, too many options are bad, particularly in retirement. Furthermore, 401k is flexible than IRA, if I am not mistaken..
Nuveen is not like Vanguard as it produces high-cost funds compared with low-cost Vanguard funds. The example portfolio illustrates an investor without an asset allocation plan. Three of the funds in the example are large-cap growth. Our 401k plan has access to low-cost institutional-class index funds, including S&P 500, S&P 400 Midcap, Russell 2000 Small Cap, Developed ex-US, and Emerging Markets indexes.
Sure, if your 401(k) happens to allow those options. Chances are if your 401(k) has high fees it also won't allow any in-service anything unless it allows them to charge a fee. Loan? Of course, just a $150 initiation fee and a $10 per payment processing fee. Hardship withdrawal? Naturally, with a $150 processing fee. So glad to be done with that nonsense! (still must deal with federal nonsense - they are experts at creating complexity and I don't see any solution)
I'm nearing retirement within 2 years. I've been transferring some 401K to my IRA's the past 8 years. Will continue to so and will transfer the remaining balance to IRA once i official retire. The options in most if not all 401K's are limited. IRAs on the other hand provide maximum flexability to invest.
I thought mutual fund returns are posted net of fees per SEC rules?
…dude…I didn’t even know this…🤯
For people with large retirement savings, where is there advice about personal umbrella liability insurance?
My 401k has a brokerage option to purchase stocks and ETFs ... Although no ETNs nor options. 401k is protected from lawsuits and bankruptcy. ...
Appreciate your videos/explanations to a variety of financial planning topics. Does the 'Early Retirement Academy' software for withdraw amount(s) utilize the Guydon/Klinger guardrails approach (a withdrawal approach you mentioned and discussed briefly in a prior YT video) ? Is said software potentially modified for a Kitces risk-based approach?
Yes and you can learn more here about the logic: www.rightcapital.com/blog/dynamic-retirement-spending-strategies/
I’ve got 5-Rental Houses we hope to Retire on but, the Wife has a 401K and has been a good saver!
We are at about 30% ROTH (and increasing!)
We can roll over the ROTH to a ROTH IRA right?
Yes, I like the idea of converting it all to ROTH as we have the Rentals so, the longer we can keep that money invested the better for us!
(Avoid RMD’s!)
Roth can go to Roth.
I have a 401k where I contribute as after tax (roth 401k). My employer matches with pretax. As a result my 401k is listed as 66% roth and 33% 401k. If I use the rule of 55 after leaving work next year (I'm currently 55) how are the distributions treated?
Ari, I just left my old job. Part of my 401k is in a ‘Roth Basic.’ So, can I roll over that portion to my Roth IRA then the traditional portion to my Traditional IRA?
Yes.
@@earlyretirementarisweeeeeet! Thank you!
You don't have to be 59 1/2 to rollover a 401k. If under, the company will make the check out to your brokerage firm without any tax liability.
The problem with rolling over is most folks have no clue on investing, thus the need for a financial advisor, but he / she will wind up putting you in high expense ratio investments with their added service fee. Probably better off staying in the target fund and forget about it, or learn how to do it yourself, which I did! 😁
Perhaps a diversified investment portfolio is advantageous compared to an all in the S&P500 index -- I honestly haven't decided. But I do think that S&P index will beat the best investment portfolio Root financial can devise if it has a 1% AUM expense attached.
So for those who are young and afraid to leap to IRA to save 401k ER expenses, I say jump and go for a low ER S&P index. Things to not get easier than that. I add the 'young' proviso because bonds should be added when closer to retirement.
401K’s are dinosaurs. All they do is keep your money hostage. Use your money when you want to. Plus, the financial advisors get rich off of you by stealing your money.
Sounds like you love 401ks and advisors!
So, if your 401(k) fees are high, you’re basically throwing money away? 💸
I’ve heard that IRAs are fair game if you are sued but 401Ks are not. Is there a lawyer among the viewers who can say definitively?
Read this: www.nusenda.org/news-resources/financial-library/blog/2023/02/27/what-is-a-rollover-ira-and-do-i-need-one#:~:text=Your%20IRAs%20are%20protected%20from,million%20for%20all%20your%20IRAs.&text=The%20limit%20doesn't%20apply,any%20earnings%20on%20that%20rollover.
“Your IRAs are protected from your creditors under federal law if you declare bankruptcy, but this protection is currently limited to $1.51 million for all your IRAs.1 The limit doesn't apply, though, to amounts you roll over to an IRA from an employer plan, or any earnings on that rollover.”
IRA rollover has different rules. I did a IRA rollover from a 403b of just under a million as the time.
Which portfolio analysis tool is this? StratiFi?
Kwanti
Nice. ‘We only work with millionaires’. Think I’ll start watching other channels.
I have videos to help all ranges regardless of where you are on your financial journey. If you don’t like the style of content, you may enjoy other channels like the Money Guy Show and Rob Berger.
Watch this channel for the education. Whether they want you as a client is irrelevant.
I like your video - thanks for sharing. So let’s say I rollover 401k to IRA - it still seems like there still needs to be follow-up with rebalancing and other changes as the market changes? Where will one go for assistance with that? Also I didn’t see bonds listed? I’m afraid I don’t know what I don’t know?
Hmm, maybe that’s what a financial advisor does 🤔
@@earlyretirementari exactly- but your I thought your point was to save on fees with a self managed IRA instead of 401k 😊 I do admire your wanting to feel good about your work and how you left a big financial institution to help people by sharing your knowledge!
@@christinefarelas6434 don’t ignore moving your 401k, and work with an advisor if you don’t feel confident in your finances.
I’m curious if you guys charge your AUM fee on the current 401k funds or if you would now charge 1% or more now on $1.4 million which equates to ~$14k a year in fees. In that case, you would be $4k a year more expensive a year than his current holdings (which I agree the index fund route would be better). It’s hard to say there is $14k of value this year and every year going forward when it’s a 1 time implementation. Please be more transparent with all fees associated with your case studies.
I don’t recommend working with us until you have $2M outside of a 401k (IRA, Roth, Brokerage). I’d say we’re not a good fit at this time and start with the academy: ari-taublieb.mykajabi.com/early-retirement-academy
I appreciate the response but to have a more complete answer. Let’s assume the person had $2 million beyond this $1.4 million. Once that $1.4 million leaves the 401k and is in the IRA, does that trigger the AUM fee (not sure if you guys charge that fee for funds in a 401k or not)? I believe there is value in advisors but potentially not telling someone they avoiding paying $10k in expense ratios to in turn pay $14k AUM fees doesn’t seem value added
@@YT2024-HB We have a tiered structure, and I don’t recommend hiring us if you are solely seeking investment guidance because I don’t believe an advisor can justify the fee. I recommend you watch this. Is It Crazy Paying $30k/Year to An Advisor?
th-cam.com/video/H4DN2CgPMX0/w-d-xo.html
I understand your tiered fee structure. For the $2 million outside of this 401k/IRA would be $10k for the first million (1% * $1 million) and $7.5k for the next million (.075% * $1 million). So a total of $17.5k for those assets. Now moving to the 401k, as you mentioned this person is paying $10k in expense ratios and would pay $800 for that $1.4 million in the low cost vanguard funds. You simply need to answer if a client of yours would pay an additional $10.5k (.075% * $1.4 million) for the AUM. So to avoid paying the $10k in fees to the 401k they end up paying $11.3k ($10.5k AUM fee + $800 expense ratio). Again transparency would be great, at the end of the day, the person would be paying $1,300 more in combined fees than they currently are, although you make it sound like they are saving $10k in fees.
If I do an in-service withdrawal but continue to work, my ongoing contributions will continue to go into my 401k, right? So I would do more in-service withdrawals? I guess how cumbersome it is to do this process would determine how often to do it. Thoughts?
YES. You can keep doing new contributions and it’s not a hassle. I’d recommend taking the 15 minutes to do the conference call and make it happen.
You are ignoring the liability protection that 401k accounts enjoy. Telling people to roll over large IRAs without considering that is bad advice at best, malpractice at worst.
See comments.
As long as it's a "rollover" IRA, not a "traditional" and goes direct from 401k to IRA, the protection remains. I'm unclear as to whether the protection extends to Roth conversions from the rollover. Have to look that up.
Company 401ks usually have crappy money markets as well
that was my case. however, we also had a linked brokerage account with Schwab. since the Schwab mmkt was paying 1%+ in excess of the 401k side i moved the funds. also bought a couple CD's at Schwab while I waited for rates to peak. This year I have gone back into bond funds...
Can you do this with a 403b too? I turn 59 1/2 next month.
Confirm with your HR. Sometimes 403b require termination of employment.
Will do. Thanks.
fidlity suks ares!
❤🤝