OurNextLife.com // Transitioning Our 401(k)s After We Retire // What To Do with a 401(k) post-retirement, How we'll shift our assets after we retirethe process

Transitioning Our 401(k)s After We Retire

If you missed Monday’s post on how much the work world is speeding up, check it out. It’s our most research-heavy post yet, and will definitely reassure you that you’re not alone if you feel like you can never get caught up at work.

As we promised in our recent pre-retirement to do list post, we’re dedicating a whole post to the question of what we’ll do with our 401(k) accounts after we retire next year. And for our friends in other countries, while the direct intricacies of U.S. tax code are not applicable to you, a lot of the same principles apply universally. ;-)

For a lot of us retiring these days, especially those who don’t figure out the FIRE concept early in their 20s, 401(k)s are our single biggest holding of assets, and what we do with them can make a meaningful difference in how much money we’re able to take out of them down the road. This is something we’ve thought a lot about, and today we’re sharing our full thought process. Let’s go!

OurNextLife.com // Transitioning Our 401(k)s After We Retire // What To Do with a 401(k) post-retirement, How we'll shift our assets after we retire

First, a quick backgrounder/refresher on our specific 401(k) situation. We (mostly Mr. ONL) were good about saving in our 401(k)s way before we figured out that early retirement was an option, and as a result, our 401(k)s have been at a level for about a year now where we can basically stop contributing to them and they’ll still provide all we expect to need once we hit age 60 (not for 20+ years). Hooray for compound interest!


We’re still maxing our 401(k)s because we’re able to, and we’re not sad about the tax deduction (high bracket + AMT = a painful combo), but we could also make a case for stopping, given that our 401(k)s combined still dwarf our other assets and we could use that money instead to build up our taxable accounts faster.  If we weren’t beyond ecstatic with our trajectory, we’d definitely consider making that change.

OurNextLife.com // Early Retirement, Happiness, Adventure // 2016 Q2 Financial Update

While lots of folks are very legitimately thinking of ways to access the tax-deferred funds like 401(k)s and non-Roth IRAs before 59 1/2, our plan is to try to leave that money alone as much as possible, to provide ourselves some padding for our older years, and allow us to increase our standard of living when we get to that point. Short version of the reason why: We want to be able to travel more comfortably then, we expect our health care costs to be higher, and we wouldn’t be sad to have more money to donate to good causes in our post-60 years. Shorter answer: We might want to be ballers again in our 70s.

So that’s our 401(k) situation at this point in time. Let’s talk about the future.

Considerations After Quitting

After leaving a company where you have a 401(k), there’s technically no need to do anything. You can usually leave it just as it is, and that’s apparently something a lot of people do, probably just because of the hassle and intimidation of trying to figure out a better plan. (That’s just my guess as to why.) Or, you can do a rollover into a new 401(k) at a new job, or — more likely for the FIRE crowd — do a rollover into an IRA at the financial institution of your choosing. You already know all of that, right? So did we, until we dug a little deeper. (Psst. There are a few legitimate reasons why you might actually leave that money in your employer plan as the best course of action. But only a few.)

When researching what to do with our 401(k)s after we pull the ripcord next year, three big factors rose to the top:

  1. Cost
  2. Control
  3. Liability

We’ll get into each of these individually, but the questions we learned we needed to answer to determine our best course were: 1. What is the cost of having our 401(k) funds with a given institution? 2. Do we have full control over our funds with that institution? 3. Does the structuring of our accounts give us good liability protection?

It’s worth taking the time to get this right because there are no do-overs. Once you’ve rolled money over from your 401(k) into an IRA, you never get that option back.


It’s pretty well known at this point that most employer retirement plans are rife with high fees, but if you need more proof, watch this episode of Frontline that I have made every person I’m related to or have ever met watch. Or if you want the same information rehashed with jokes and swearing, you can watch John Oliver’s version instead.

Bottom line: You want to make sure you’re not invested long-term in accounts with high fees, including 401(k) management fees that many employers pay for you while you’re employed there but stop paying after you quit. Even seemingly low fees like 1 percent can make a tremendous difference in your returns over the course of many years or especially decades. Want to see this in action? Check out the $600,000 difference that one percentage point makes in our pretend retirement math scenarios. And that’s only over 30 years, not a whole lifetime!

Fictional Two Tier Math

Of course, the financial institutions that run 401(k)s and other mutual funds aren’t known for their transparency in making fees easy to figure out. If your plan prospectus doesn’t make things enormously clear, you can use a fee analyzer like the one at NerdWallet to figure out what you’re paying now, and then compare it to the low-cost option you’re considering.


Another key factor in whether to keep your 401(k) with your employer or roll it over into the IRA of your choosing is whether your current option gives you full control over your assets and allows you to invest in the types of funds you want. For example, if your 401(k) invests in your (former) company’s stock, and you happen to like that stock, you may not have that same option at another brokerage in a non-401(k) account. Or, conversely, if you really want to invest in index funds but your employer’s 401(k) brokerage offers no such product, then you may want to move along.


Something that we’ve very rarely seen discussed in relation to retirement accounts is how they relate to liability against future claims. [BIG DISCLAIMER HERE: We aren’t lawyers. This isn’t legal advice. Verify any of this with your own attorney.] But how you convert your funds out of a 401(k) actually matters a lot in terms of whether someone could get their hands on that money in the future. (And we’re not just talking to hotel moguls who declare bankruptcy after overleveraging in Atlantic City. Plenty of people get sued over accidents or declare bankruptcy because of health care expenses. And of course we’re already assuming that you have or will soon buy umbrella insurance as your first line of liability defense.)

A law called ERISA protects certain qualified retirement plans from legal proceedings against everyone except the federal government. As Investopedia puts it:

The Employee Retirement Income Security Act (ERISA) relates to federal protection of 401(k) and other employer-sponsored retirement accounts from creditors. The federal government ensures the safety of these accounts to protect retirement even in case of a lawsuit.

And thanks to the Bankruptcy Abuse Protection and Consumer Protection Act, many IRA funds are also protected from bankruptcy, but not necessarily from legal judgments. (And if you’re being sued by the IRS, then forget about it — they can get at all your funds.)

Though state laws vary, the consensus seems to be that accounts that originated as employer-sponsored retirement accounts (protected in full from creditors) can still maintain that status even post-rollover so long as they are held separately and maintained as their own standalone accounts.

Our Plan

Though we don’t plan to get sued or go bankrupt, it feels like a pretty serious no-brainer to maintain the assets currently held in 401(k)s as their own distinct accounts in the future, just in case. So when we do our rollovers, it will look like this:

OurNextLife.com / Our 401(k) rollover plan to limit liability

If we have years in retirement when we earn enough that we can sock money away in an IRA, we’ll make sure we have separate accounts set up so there’s never any mixing or matching. Our 401(k) funds will (we hope) continue to grow once we roll them over, but we won’t add to them so that we kept their “employer-sponsored” nature intact for liability protection. (P.S. That’s another great reason not to convert all those funds over through backdoor Roths — once that stuff is modified or converted, it’s no longer protected, or at least you can’t ensure that it is.)

As for where we’ll put the money, we’re dedicated index investors, so we’ll give you three guesses. ;-) We can’t wait to get our 401(k) funds out of the greedy hands at Merrill Lynch and Fidelity, and into those of the more modestly compensated Vanguard. We’re not wed to Vanguard for all eternity (index funds could become too big and defeat the whole purpose at some point, not that that’s likely), and will keep assessing our options over the years.

What’s Your Plan?

For those of you who are on the road to early retirement, what do you plan to do with your 401(k) after you leave your career? And for those of you who’ve already left, any lessons learned that you can share?

What’s YSave


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100 replies »

  1. Interesting analysis! I’ve never had access to a 401(k). However, I expect that to change as my income changes in self-employment. I like the idea of leaving your 401(k)s untouched until 59.5. It’s hard to predict how much healthcare expenses will be in retirement. I want to start investing in an HSA for the long-term for this reason.

    • Fingers crossed that you get 401(k) access soon! The fact that they have much higher limits than IRAs in terms of annual contributions just makes them a much more realistic place to sock away money for the future, and the tax benefits don’t hurt. (You could always do a self-employed or solo 401k.) And I love your HSA as long-term investment idea. We’re the opposite of you — we’ve never had access to an HSA! ;-)

  2. Very interesting, I haven’t read the legal information anywhere and that is really good to know.

    Vanguard rules!

    Thanks for sharing your research as usual!

  3. I’m just here to stand in awe over all the foresight you both have…and all the graphs! Graphs, oh my! Posts like this make me so frustrated with my pension. Don’t get me wrong. Being afforded a pension is wonderful, and I know they’re dying breeds of retirement vehicles. What’s frustrating, though, is I have no idea if I’ll actually get one. I’m also not really privy to how it is managed or what its current status is. Basically, all our state likes to do is talk about what it might look like when I’m 55 (or 60 or whatever absurd number it gets raised to). Thanks for the insight!

    • Haha — the secret of graphs is once you make them, you can keep repurposing them again and again and again. ;-) And I can definitely see where your frustration is coming from — that lack of certainty would make me batty. Thank goodness you guys are *also* saving, and not relying on that pension that you may or may not get one day!

  4. Team ONL has been cranking out some serious high quality material for some time now…Plutus worthy indeed. :) I’m in the same boat/bucket with you guys as it relates to wanting to leave IRAs/401ks untouched/unfettered for as long as possible. I have just over half in this tax deferred “space”. I’m in the process now of pulling multiple IRAs/401ks into one @ Vanguard. There is a bit of angst as some of it requires “selling” ( into cash equivalents ) prior to moving it over. If only there was a true easy button/switch to flip….

    • Thanks, Jon! What a nice compliment. :-) Nice to know we’re not alone in wanting to leave our “later money” grow without messing with it. In our case, the wheels might already be in motion, but it’s worth looking at whether you’re better off creating separate rollover accounts with Vg as you bring things over to maintain your liability protection on that 401(k) money. But yeah, regardless, it doesn’t seem to be an easy process!

  5. We rolled Mr. AR’s 401K into an IRA, currently managed by the same brokerage that manages our other assets. Our intention was, and remains, not to utilize those funds until we’re forced to do so. Much has been written about the tax benefits of potentially accessing IRA funds before other options (such as social security), but in our case that is not an issue due to disability. Current plans include keeping the IRA in more aggressive investments than our other assets since we have several years to even out the ups and downs of the market, and postpone my filing for social security until age 70. It could all change next week, but for right now that’s still the plan.

    • That sounds like a solid and well thought out plan, assuming you are comfortable with the fees your brokerage is charging. And it warms my heart to hear of people postponing social security as long as possible — I’m not surprised at all that you’re in that camp, though! :-)

      • I actually am getting tired of the fees and considering moving all of it to Vangaurd. I need to do the research first to find out if everything we’re invested in can just stay the same or some of it would have to be moved. If that’s the case (and I think it is), I would consider moving the IRA first, since we won’t be accessing those funds for five years.

  6. This is a great analysis. I hadn’t considered the impact of rolling funds into a previously established IRA vs. a separate and distinct IRA.

    I will probably keep my money in my employer sponsored account. I have a 457, which means that I can pull the money out penalty free any time after leaving employment. Plus the fees are very minimal and I am invested in Vanguard funds.

    On the downside, because my employer is a government they rebid the contract for account management every few years and I will need to keep an eye on the changes to make sure that someone new doesn’t come in and increase the fees.

  7. Like you guys, we are big fans of Vanguard as well, but we’ll probably use the Roth Conversion Ladder when the time comes – at least that’s the plan now. But as you guys probably know, plans always change, especially for us, so we’ll see if we actually follow through with that or find another way. We’ll have at least three years of living expenses in Ally, though, so we shouldn’t have to touch anything for at least that amount of time.

  8. Sounds like you guys are definitely in good shape!

    We’re in the same boat as Steve over at ThinkSaveRetire. We’re planning on doing the Roth IRA Conversion Ladder as part of our plan. In the meantime, we’re padding the buffer needed to cover those first five years – savings plus setting up the rental property scene for other income.

    — Jim

    • Seems like you’ve got your bases covered, too! We know it’s a luxury to not need our 401(k) for Roth conversion purposes, so we are by no means preaching our approach. But I’m not gonna lie — I sleep better at night knowing that even if we blow it in our first few years of ER, we have something big to fall back on. :-)

  9. Like you guys, we will leave the 401k’s untouched. And in a more aggressive asset allocation compared to our taxable after we roll them both over into Vanguard. It will be fascinating to watch how the whole Active Management space plays out. Mr. Bogle is boldly predicting in a recent WSJ article (Sept 2) that Fidelity Investments may not even exist in 5 years and be gobbled up. He is also predicting in the same article that investors will be lucky to clear 2% in returns over the next decade which is not a pleasant thought at all for any investor. Although I am not a fan of any predictions (perhaps other than the weather), when someone of his stature in the investing world makes that kind of statement, it grabs my attention.

    Only thing we have to “deal with” regarding 401K like accounts is the savings I have in an employee savings plan while I was working in the UK. It is purring along in an all equities index fund (40:60 US : ex-US) and we’ll access at my age 65. No idea of the tax implication but it’s a long way off to even bother looking in detail right now – an awful lot can happen between now and then regarding UK/EU tax laws- UK may even rejoin Europe. I do get regular calls from wealth advisors who claim they can help me tax shelter the account in Malta of all places – maybe some sort of tax savings off-set by a very hefty advisor fee no doubt……eh, no thanks.

    • Thanks for the rec on that WSJ article with Bogle’s predictions — will have to check that out! Though none of those predictions surprise me!

      And wow, you must be a serious high roller to get calls about off-shoring in Malta. We don’t get those calls. Haha. ;-) Agree with you, though — so much can change between now and when you can access those funds that it’s not worth worrying about for now. Just focus on the stuff you can control.

      • Oh, wishful thinking that account was of high roller stature…. Ha Ha!
        I suspect the calls are because they think we will relocate back to the UK (no plans whatsoever) and get their hands on the larger slices of our PIE…

  10. Oi. I haven’t yet decided. Mr.T’s retirement accounts have very low cost index funds available, but there is still a “management fee” that hits quarterly, I believe. Honestly, I’m hoping Mr.T’s CPA father or soon-to-be CPA brother will help us figure all that out *after* we retire. (Neither of them know the plan currently.)

    • You haven’t shared your plan with family yet??? Wow! I’m sure you have good reasons, of course. And I don’t think there’s any reason to put figuring this out high on your to do list. You can definitely worry about this later on, when you’re on the verge of pulling the plug. :-)

      • My family knows (even about the blog). Mr. T isn’t a talker, so his family doesn’t know yet. But they are also very much “work until you die” types, so I doubt they’ll be believing/supportive. More because they don’t think that’s what anyone would *really* want more than anything.

      • Ah, gotcha. I guess we are both talkers. :-) And of course you know them better, but we’ve been shocked at how many people are supportive who seem like they wouldn’t in a million years understand our vision.

  11. Great analysis! 401k fees are a major drag for a lot of investors. I wish we had more competition!
    I have a unique situation where a handful of index funds in my 401k are actually managed by my employer (a large asset manager) at zero (!) expense ratio. And, you guessed it, my entire balance is in those zero cost funds. So, I would save the 0.05% or so expense ratio in a rollover IRA. No other fees either in the 401k (no fixed fee, nothing).
    That and the slightly better lawsuit protection for 401k balances will likely entice me to keep the money where it is until I really, really need it.
    I already rolled over a 401k into an IRA (previous job), so maybe play the Roth conversion game with that one but hopefully, I will not touch the current 401k for many years to come.

    • Whoa, you have a SUPER rare privilege with your 401(k)! Do you know for sure that there are no added fees for former employees? If not, then yeah, no brainer to stay put!

      • I checked and it looks like the plan admin fees are currently paid by the employer and it doesn’t say anything about discontinuing that subsidy when I retire. I don’t want to set off alarm bells in HR by asking more question, of course. But even if there’s a small monthly admin fee, it still beats paying the 0.05% expense ratio at Vanguard.
        The zero expense ratio index funds are a nice perk (we get no other perks around here, haha) and it doesn’t even cost the company much. I once heard that $1,000,000,000 (billion with a “b”) worth of S&P500 wholesale indexing creates only about $100 in trading commissions per year.

      • Can that possibly be true on a billion dollars of indexing? That’s hard to believe, but maybe it makes sense! And that’s great if your employer pays all your fund fees regardless of whether you work there or not. Sounds like all signs point to staying put with the plan you have, even after you leave.

      • Well, the S&P500 is a cap weighted index so it rebalances itself without any trading. The only trades necessary are the occasional changes in the 500 underlying stocks. Plus small net in/outflows for contributions. So costs are just the small commissions, plus a few (wo)man-hours of trading, plus some small costs for record keeping. Maintaining these large indexes is very,very cheap. Index managers charge 0.01% annual fee, sometimes less, for large institutional clients and on that asset managers still make money. It’s a very cheap perk for my employer to provide, but it saves me a lot of money. In this day and age you have to be grateful for things like that. :)

  12. I rolled my 401k over to Vanguard. I really like Vanguard. It’s simple and they have great customer supports.
    I didn’t know about the liability aspect. Thanks for sharing. I didn’t intermingle new fund so at least we’re covered there.
    We’ll start rolling over to Roth IRA once Mrs. RB40 retires. We want to leave it untouch, but I’d rather have the money in the tax free pile even with less protection.

    • Thanks for sharing that your Vanguard rollover was simple! Not surprising, but great to get affirmation. And we all have to weigh pros and cons of a Roth conversion — sounds like you’ve thought it all through, as usual. ;-)

  13. Ok – I feel very lucky that my employer sponsored 403b actually has VERY low fees! (it’s through TIAA) Slightly lower than Vanguard, even, since I’m still in a targeted retirement fund at Vanguard and it has slightly higher fees than some of the more self-directed investment options. I’ve read some other things about not getting dividends on the 401k/403b as being a form of a “fee” as well. (I get annual dividends on my 403b, but I don’t know what’s common or to be expected.) Hmm…more research to do!

    • You should feel lucky — that’s awesome! Is it lower than Vanguard’s admiral shares, or just general entry level shares? (There’s a big difference there, and in a retirement account, you’d likely qualify for the much lower admiral shares rate. You probably know all of this!) And yeah, the amount of research needed to really understand it all is pretty much endless! Now you’re making me realize we need to look into our fund dividends on our 401(k)s, too! :-)

      • My TIAA rate is like 0.12%, looks like most of the Admiral Shares are in the 0.08-0.12 range. So it’s pretty close, but could be a little lower. And I do need to look into Admiral Shares for my Vanguard IRA since I’m currently in the entry level shares for a targeted retirement fund. I could definitely be a little more proactive there, although it’s probably a much smaller fund than yours right now :)

      • Still, that’s a pretty awesome rate for an employer plan! Hooray that you have that at your disposal! And hey, it’s not a competition. We ALL win just by being on this path. ;-)

      • glad you mentioned this – they (TIAA) do have a couple of great products unique to the market like their Real Estate fund (directly invests in real estate, not REITs) and the TIAA traditional – depending on the contract you have with them and IF you have those options just remember that for the traditional you cannot just roll over (one contract you can others you either conert to annuity when time comes or do a TPA – 9 years and 1 day I think (installments) to get your money rolledover).

      • certain contracts and products I believe are only for participants AND their families but I think you can open individual products (like insurance, IRAs and annuities, and banking products and brokerage even (!?) even if not a participant.

    • Yeah, it’s something that’s not talked about a lot but is good to know! And even though the number of people who will be affected is teeny tiny, it’s such an easy thing to do to protect your assets that there’s no reason NOT to do it.

  14. My current employer’s 401(k) plan is really great and has no fees, so I will likely leave it there for now when I take some time off so I don’t complicate any future backdoor Roth IRAs, e.g. If my boyfriend and I were to get married and he worked while I was unemployed for a bit. When I’m ready to roll it over, I’ll probably put it in a Vanguard Rollover IRA like you guys laid out. I love me some Vanguard index funds! As of now, I am not against using Roth conversions to access some of my money early, but that’s because I already have enough in my 401(k) to sustain my current lifestyle after age 60 and continuing to max it out seems like a convenient way to save on the taxes now. I hope we combine some of our investments when we get married because my retirement accounts make up 90% of my portfolio and his is 90% taxable, so together we have a good balance and separately, we are both off kilter.

    • How fantastic that you have a fee-free 401(k) at work! Ours are technically “free” in the sense of no management fees, but then of course each fund has “expense ratios” (fees) that are larger than Vanguard’s. And I think Roth conversions make total sense in your case! And you know we’re big fans of combined finances — know you have more boundaries about that stuff, but doing some combo to benefit you both makes tons of sense. :-)

  15. I’m but a fledgling on the path to FI, much less RE, myself. In the past year or so I’ve been conducting research, and trodding along the FI road, I’ve never come across liability discussions. You may be on to a “new hot topic!”

    Y’all said, “how you convert your funds out of a 401(k) actually matters a lot in terms of whether someone could get their hands on that money in the future.” I’m wondering if this is the same for all conversion tactics (72T, etc.)?

    Awesome post!


    • We certainly didn’t discover the liability issue, but we think it’s important to get people talking about it! Who knew that something as simple as keeping accounts separate could offer so much protection?! As for 72T… no idea! But if you do the research on that and post about it, let me know and I’ll link over!

  16. “Shorter answer: We might want to be ballers again in our 70s.”

    I love it! There’s no shame in that.

    I’ve never been allowed to put much in my 401(k), I’m roughly 40% retirement accounts 60% taxable. Even though we don’t know the scale of the graph, seeing the difference between your mortgage and 401(k) is jaw dropping.

    • And my 40% retirement includes the IRA. The IRA is actually bigger than the 401k because I’m allowed to contribute more to it.

      • That makes sense. Once you’re funemployed, you could always do a solo/self-employed 401K and start socking more money into tax-advantaged funds, if you were so inclined. ;-)

      • Whether it comes from profit or you just make a choice to move some money over from taxable accounts to tax-advantaged, it all helps your 401(k)! (And, actually, to move money from one to the other and get the tax break, you might actually need earned income. So don’t listen to me.) ;-)

      • You definitely need the earned income in order to do that. But the silver lining if there isn’t earned income is that can convert my existing pre-tax contributions to ROTH status while in a lower tax bracket.

    • Ha, yeah no shame at all. We’re happy to travel like kids for a bit longer, but we don’t want to do that forever. :-) I know frugality brings some people happiness, but going out and doing stuff and not worrying what it costs makes us happy.

      I think 40% retirement/60% taxable is a great mix! We’re definitely working longer than we could if we just went by a simple number and the 4% rule, but we want to be sure we have enough in taxable without tapping retirement, which means… working longer. And yeah, the difference in between the mortgage balance (actually that’s both our house and the rental) and our 401k combined total is pretty awesome. It would look even more rad if we took the rental mortgage out of there. ;-)

  17. When Neil changed companies, we chose to leave his 401k intact with that company. They have lower fees and more index fund options. My previous employer’s retirement account is also separate. I had no idea about the laws regarding liability so thanks for the info! And I’m now glad we didn’t roll these into IRAs. We may use the conversion ladder one day, but at least we still have our options open. Thanks so much for this information!

    • Glad it’s helpful! Yeah, I think people have no idea that it could make a difference not just whether you roll something over but how you do it. It seems so natural to want to combine accounts, so it’s good to know that has downsides!

  18. Fortunately my last employer had their 401k through Vanguard, yeah! So when I left, it just stayed in my name, and the accounts I already put it in. No big fees or anything ridiculous. My current employer also had everything in Vanguard, until just a few months ago when they rolled it all into Voya, a newer(?) retirement brokerage house.

    I think it occurred because of a few different things. Maybe being newer, they got a pretty good deal for putting that much coin into the company’s coffers (theory 1). Someone found some cost cutting measure that would help the company out overall by moving funds from one company to another (theory 2). It’s all a big conspiracy money shell game right before they pull an Enron and we lose everything…(weakest theory 3). :)

    Bcak to your post though, I plan to either leave it in Voya since their rates and fees seem comparable to Vanguard and they have a similar mix of funds to choose from or rollit into Vanguard. I’ll have to watch out for keeping it separate though for the liability status, because I’d never known about that before – great knowledge share!

    As for the rest of our 401k plans we are going the same route as you and not touching them until 60, and then maybe up our game and get to be ballers again in our empty nester phase! Yeah, stimulate the economy!!

    Like all the black magic and voodoo predictions of the future though, who knows how it will all really shake out. But for now, those are the plans. :)

    • Wow, so awesome you have had Vanguard 401(k)s in the past! We work for great companies who take care of us in many ways, but we’ve definitely always had the usual suspects holding our 401(k) assets. Especially Mr. ONL, who has Merrill Lynch, with its profusion of high “expense ratio” Black Rock funds. Can’t wait to get out of those! At least I have the Spartan S&P fund at Fidelity!

      Glad you guys are in the late-in-life-ballers club. Maybe we’ll throw some extravagant joint shindig in 20 years on a yacht or something. ;-)

      • Yeah, an extravagant yacht party sounds great! Now, where to host said party… Full baller style and go mediteranean or French Riviera or Medium baller and go Lake Powell (if it’s not empty in 20 more years), CA coast, or other large pretty US lake? I guess there’s still plenty of time to plan. :)

      • Okay, how about big yacht party in the Gulf off New Orleans, and then we disembark and throw a big jazz funeral for our careers, second line and all? ;-) (Kidding, not kidding.)

      • Ohhh… You know, the City of new Orleans will help plan your second line parade route, and the permit is only $300 and they’ll supply 1-2 officers to come along for “crowd control.” Plus, we can frugal it up and bring our own booze for the Jazz Funeral Second Line instead of having to quickly duck into the overpriced bars during the Second Line (since it’s all open container everywhere in LA). :) Love the idea! However – geographically, it’s about a 1-2 hr drive to get to the Gulf from NO. We could Yacht Party in lake Pontchartrain and be that much closer, plus once you get in the middle, it looks like the Gulf anyway… Hahahaha

        So would this be in a few years then since we would be mourning our careers? I’m down with that especially because we could really plan for that financially and in other ways. :) Let’s do it!!

  19. Wow, really impressive analysis. You’re certainly taking everything under consideration. I still can’t believe how close you are . . . you’re smart to make sure you get everything figured out well in advance.

    We still have a ways to go, but thanks for alerting me to the fact that we need to check out what happens with respect to fees on my 401K after retiring. We, like you, don’t want to touch that money for as long as possible. However, my semi-retirement plans might keep me connected with my present employer on a part-time consultant basis, so that could help with the fee issue.

    As the debt decreases, we’re doing more research into the use of assets. Thanks for pointing us in the right direction and doing some of the leg work :)

    • Thanks, Harmony! I’m sure there are still some things we haven’t considered, but we’re trying to leave no stone unturned. ;-) It’s definitely good to figure out your 401k fee situation after you leave your job… or IF you leave it. And glad this stuff is useful to you in your planning! :-)

  20. Interesting post! Someone advised that we look into the tax implications of leaving all our 401(k) and IRA funds in those accounts during early retirement because when the RMD’s kick in they could bump us into an undesirable higher tax bracket (especially if there are actually some SS payments that kick in too … you never know). One suggestion was to roll some of the funds into Roth IRA’s during low income years or maybe even consider setting up 72(t) distributions from some of the accounts in later early retirement (e.g., mid-50’s), which could be beneficial – at least from a tax standpoint, if not the liability standpoint you bring up. I’m afraid we may have to employ some graphing for that analysis! :-P

    • That is a whole other topic! Since we’ll be retiring around age 40, we know we’ll have some time to figure out what to actually do with our tax-deferred assets. But you raise some good and important points and possibilities! We’ll add all of this to our list of things to investigate. ;-) If you do all the homework and graphing, please share!

  21. Hey ONL!

    As a non-American I can’t really give you praise, criticism or advice. I’m sure you’ve worked out what the best thing to do is and you’re doing it :) It does sound like the right thing to move your investments away from your employer.

    Good luck ONL :)


  22. Wrote my typical 8 page response and it said could not be posted….


    Anyways – note that there is such thing as reverse rollover (check with your plan) to put money back to 401k (pre tax money). Also people accumulating also ensure you check:

    1. Vesting rules – how long you need to work for your match to be vested
    2. if you have a 15 year and 50 year catch or 3 year catch up rule (certain plans, differs 401ks, 401a, 457, 403b) – ability to put even more money after certain age or rules)
    3. True ups – make sure if you are on your last year you dont miss out on match by maxing early expecting a true up the following year (check with employer if they would still provide you if not employed then).

    For us we are hoping to live 20 years (50-70) with post tax money, then during that time do roth conversions slowly to (and then use pretax/ HSA):

    1. Potentially use that money for college should 529s not be enough
    2. Tax reduction and if we do leave inheritance leave it tax prepaid ;)
    3. Avoid RMD

    Yes gets tricky with college for aid, but we will likely wont qualify so we dont care, we rather have money. And yes we are aware of potential risk in case of lawsuit…lets just hope that does not happen.

    • I wonder if the WordPress comment bot has a word limit? You’re the first to test this! :-) Lots of good suggestions here — we didn’t discuss vesting just because it’s mostly irrelevant in terms of whether you stay or leave your employer’s plan (it’s tied to term of employment instead), but always a good consideration for folks when thinking about the timing of quitting!

      Your strategy and timeline make a ton of sense, especially if you expect to build up a sizable HSA (we’ve never had access to one!). And thinking about avoidance of RMDs is something we haven’t thought through yet (more focused on near-term decisions!), but we’re adding it to the longer-term decisions list.

  23. A link on the reverse rollover, some other benefits: “If you leave your employer in or after the year you turn 55, you can take withdrawals from your 401(k) prior to age 59.5 without the 10% early withdrawal penalty,” says Ed Snyder, a Certified Financial Planner in Carmel, Ind. “If you are in a situation where you are retiring early, have a large IRA from a previous rollover and will need income from your investments, it makes sense to move the IRA to the 401(k) so that you can take penalty-free withdrawals.”

  24. I had no idea about the protections from non-related judgments for employee-sponsored 401ks. I don’t have one anyway and most likely never will, but this is still great information to know.

  25. I had never considered what to do about my 401k once I reach the elusive FIRE status. Thank you for the analysis! Now I know that I should do a ton more research onto this because I don’t want to find out 20 years down the road that the money that I put in could be bad. I’m happy with the plan that I have currently with my company so I might just leave it with them and not worry about it until I’m 59.5.

    • You’re welcome! Glad it’s helpful. :-) And if you’re happy with the company plan, there’s no reason not to keep it with your company. Just make sure you’re read all the small print first. ;-)

  26. We also have plans to leave the 401K alone until 59.5 but along the way plan to use the Roth conversion ladder to save in taxes along the way as our tax return sees fit. The liability concern is certainly a back of the mind topic, especially as it relates to real estate for us. We will be making a couple moves to reduce our liability in 2017.

    My 401k is dominated by Vanguard which is great, but Mrs. ESM has some higher fee related funds that I would just assume move asap. While I do like the option of my company stock, I’m fine with purchasing this on the open market/taxable account. Even though I have a 401K dominated by Vanguard there are a couple options in index funds that I would prefer to have such as a Total Stock fund for example, so I will still end up rolling after I do my research of course.

    Interesting convo to have and as time moves on I look forward to thoughts in our 15 month discussion, like yourself, rather than our 44 months as currently projected.

    • We may also do a few small backdoor conversions along the way, for tax reasons like you plan to do, but those will be decisions made at year-end when we know how the rest of our earnings have netted out.

      How fantastic that you guys have access to Vg funds in your 401ks now! Wish we had that. But I still see why you’re leaning rollover. And in the scheme of things, your 44 month timeline is still super short! ;-)

  27. This year I think will be the first year I’ll actually max out my 401k! Pretty exciting stuff. In the past we thought we were ok by contributing up to the employer match and that’s it. But great blogs like yours have inspired me to push harder and see how much I can actually put into it :).

  28. Hi. The link to things to do to prepare for retirement (can’t remember exactly, had to scroll way down to comment) links to a different post I think.

  29. Hi, great information, thanks. If still monitoring comments thread, please note the URL in the hyperlink pointing to the USNews article about when rolling to an IRA may not make sense accidentally starts with “ney.usnews” instead of “www.usnews”.

    Thanks again.

  30. The protection element is FASCINATING. Thank you!! I’ve rolled 2 previous 401k funds into 1 IRA in the past and intended to eventually add my current 403b to the same fund for simplicity’s sake. All the funds in there are/ would be employment funds. Do you think it’s best to actually have separate IRAs for each 401k or just keep employment rollovers seperate from personal contributions? Obvs recognizing the answer is for entertainment purposes only! :)