What to do with 401(k) once you leave a company

Investing
#1

I had a very generous Vanguard 401k plan from a tech company I used to work with. I am no longer with the company but still have a sizeable amount in there that’s seeing returns. Do you recommend leaving it there, or rolling it over to another account? I’ve tried to make sense of the current fees, but all I can suss out so far is a $60 annual admin fee.

If I should take this money and move it elsewhere, would you recommend an IRA, or a target date index fund? Or something else?

Thank you so much - I am new to investing and this site has been so helpful.

#2

Hey @Jeremy_K!

Great name!

Normally, I always suggest immediately rolling over former employer 401ks to a Rollover IRA as soon as you leave the company (then make sure you buy and hold index funds inside that IRA). Since it’s with Vanguard, I would suspect the fees are low and the investment options are good, so it’s not as critical of an issue, but I still think it’s valuable to cut ties with former employers and simplify your life with fewer loose ends.

The one exception to that rule is if you see yourself doing a lot of backdoor Roth IRAs in the upcoming years… in that case it can be helpful to have all “pre tax” money out of IRAs and safely protected from the pro-rata rule in a 401k. If that’s the case, I might leave it in that old 401k, or roll it to your current employer’s 401k (if they offer similarly low fees and good investment options).

BUT, I’m simple man and I’m a fan of simplicity. So I’d probably just roll it right over to a Rollover IRA with Vanguard, throw it in some low fee index funds and carry on with my life.