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Presently have 401(k) and 457(b). Moving to a new job, would like to consolidate

Presently have 401(k) and 457(b). Moving to a new job, would like to consolidate

Old Sep 25th 2020, 12:31 am
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Default Presently have 401(k) and 457(b). Moving to a new job, would like to consolidate

Apologies if this comes across as a dumb question, I'm not familiar with the mechanics of these programs:

I presently have a 401k (80% of retirement savings), and a 457(b) (20% of retirement savings) through my current job. I'll be starting a new job with a traditional defined-benefit pension shortly, and they also offer 457(b) and 403(b) programs (no 401k).

Am I able to consolidate my present 401(k) and 457(b) into a single 457(b) or 403(b) with no penalties? I'd ideally like to have one single account to maximize amount/compound.

Hope this makes sense!
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Old Sep 25th 2020, 1:20 am
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Default Re: Presently have 401(k) and 457(b). Moving to a new job, would like to consoli

Originally Posted by username.exe View Post
Apologies if this comes across as a dumb question, I'm not familiar with the mechanics of these programs:

I presently have a 401k (80% of retirement savings), and a 457(b) (20% of retirement savings) through my current job. I'll be starting a new job with a traditional defined-benefit pension shortly, and they also offer 457(b) and 403(b) programs (no 401k).

Am I able to consolidate my present 401(k) and 457(b) into a single 457(b) or 403(b) with no penalties? I'd ideally like to have one single account to maximize amount/compound.

Hope this makes sense!
unless you have some fixed admin fee I don’t see how 2 accounts of say 50 would compound less than 1 of 100. Assuming it’s a % fee it should be the same... the only slight difference would be in terms of if your cash balance in 2 was only enough to buy a last ETF/unit/share if combined in 1 account, and the counter to that his you are concentrating your counter-party risk putting all your “eggs in 1 basket”...
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Old Sep 25th 2020, 2:18 am
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Default Re: Presently have 401(k) and 457(b). Moving to a new job, would like to consoli

I think your math logic is flawed if you think that merging two accounts into one will either "maximize" the total amount or the "compound" (investment returns?).

If you have two accounts one with $100 and the other with $200, then if you merge them you will have one account with $300.

With the same two accounts, if the market rises by 10% then one account will have $110 in it, and the other will have $220. If you had merged the two accounts then the $300 would become $330, which is the same as if you had two accounts with $110 and $220.

That said if your retirment savings are currently only split between two accounts then I would argue, strongly, that you will benefit from keeping them separate as it will provide an addtitional layer of diversification, between different funds and fund managers. Your idea of merging accounts might have some validity if you had ended up with pension investments in say ten accounts, then merging some of the smaller ones into some of the larger accounts might make sense for ease of tracking and administration, but I would still recommend maintaining several accounts, perhaps up to five or so, to avoid having all your eggs in one basket.

As per Tht, I would expect any difference in fees and charges to be minimal, as most fees are charged as a percentage, so as per above you will pay about the same to one pension manager as you would in aggegate to two separate managers.
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Old Sep 25th 2020, 3:39 am
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Default Re: Presently have 401(k) and 457(b). Moving to a new job, would like to consoli

Thanks guys, yeah my math was duff there, that does make sense.
As I'm reading your responses it makes sense to keep them separate. I believe I read previously that an early withdrawal on a 457 is allowed without penalty (I think it's 10% on a 401), which is another argument for keeping a hold of the 457(b), as well as diversification.
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Old Sep 25th 2020, 10:52 am
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Default Re: Presently have 401(k) and 457(b). Moving to a new job, would like to consoli

Originally Posted by username.exe View Post
Thanks guys, yeah my math was duff there, that does make sense.
As I'm reading your responses it makes sense to keep them separate. I believe I read previously that an early withdrawal on a 457 is allowed without penalty (I think it's 10% on a 401), which is another argument for keeping a hold of the 457(b), as well as diversification.
Another option would be to roll them over, tax and penalty free, to an IRA at another brokerage such as Vanguard, Schwab, Fidelity etc, if they have a better selection of funds available and/or lower fees. My wife and I did this after retiring and before leaving the USA as our company 401k providers were not so easy to deal with as overseas clients.
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Old Sep 25th 2020, 3:17 pm
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Default Re: Presently have 401(k) and 457(b). Moving to a new job, would like to consoli

Originally Posted by durham_lad View Post
Another option would be to roll them over, tax and penalty free, to an IRA at another brokerage such as Vanguard, Schwab, Fidelity etc, if they have a better selection of funds available and/or lower fees. My wife and I did this after retiring and before leaving the USA as our company 401k providers were not so easy to deal with as overseas clients.
Good idea - I'll take a look at the fees schedule and options before making a call. I've got a couple of weeks to figure it out.
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Old Sep 26th 2020, 12:22 am
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Default Re: Presently have 401(k) and 457(b). Moving to a new job, would like to consoli

There'll be fees on the actual funds themselves, but there may also be account fees for having the 401(k) open. Most online brokerages won't charge an account fee.
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