[USER]

I just got laid off from my job. I have been advised by Fidelity advisors to move my 401k money to IRA account.

I am not familiar with IRA account. Is it advisable to move the money from 401K to IRA?

I have around 84k in one of my previous employer’s 401k account and another 86k in another from my recent employer and the advisor is suggesting to move over so I can get a high interest with the combined amount(170K).

Please let me know your suggestions.

[Mica]

Roll it over to an e-trade IRA and do if yourself – otherwise leave it there in the 401k if you can still manage the funds yourself

[Bill]

Just hit pause. You don’t have to do anything today. You can roll it over at any point.

Just concentrate on getting back on your feet here.

[Bill]

Nobody will be able to give you a clear answer if it’s advisable to roll to an IRA without additional details, namely what are the fees and investment options at your 401K?

And does the 401K plan administrator require you to move the funds out?

I’m not saying there’s anything funky with the Fidelity advisor telling you to move to an IRA, but beware one motivation may be for them to sell you their managed services on the IRA, which they cannot do on the 401K.

[Sam]

It’s your decision.
Your firm is in good shape financially? Issues?
Probably a good idea. DO NOT let them mail it to your home address or it’s a taxable event.

You’ll do better with fidelity.. fees are less I imagine…less hassle.

Walk it through with a fidelity representative to check on the status of the transfer.

[Smith]

If you do a back door Roth IRA – having it in an Ira vs 401k could trigger the prorata rule.

[Melissa]

You want to put it in a rollover IRA as this does not trigger a taxable event.

[David]

Sorry to hear about your layoff. Former HR guy here, and I was also laid off in December of 2023. Are you 55 or older this year?

If so, you may be able to leave it where it is and access the funds using the Rule of 55.

That is what I did to retire early. If not, you may want to leave it alone and wait to see the options your new employer provides. Then you could roll into that account.

If you go the IRA route, it will give you a lot of freedom to pick different funds. Nothing wrong with doing that if you want to move things over.

The main thing do not to make any big decisions in the first few weeks after a layoff.

You may be doing things based on emotions vs logic.

Good luck! You will land on your feet.

[Adam]

Who is your plan administrator for the 401(k) and what fees do you pay?

If you have a low cost plan with good investment choices then it might make more sense to leave it alone especially if you are worried about backdoor Roth IRA contributions and/or protections against creditors.

Fidelity has a conflict of interest where they would obviously recommend that because they want as much of your money invested within their brokerage as possible.

In general, I wouldn’t take financial advice from them or any other big name institution without a 2nd opinion.

[Author]

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