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I have three 401K's (two from past employers and one from my current). They are all in 500 index funds totaling only about $6000. Should I combine all three or does it matter? (Or can I combine all three?)
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I have three 401K's (two from past employers and one from my current). They are all in 500 index funds totaling only about $6000. Should I combine all three or does it matter? (Or can I combine all three?)

While you could combine all 3 by rolling the first two into your current employer's 401k, I don't recommend it since doing so would limit your investment choices to just those available in your current employer's 401k.

Also, since you primarily invest in the S&P500, which typically has a 0.18% expense ratio, there is no cost advantage to combining all 3.

Keep reading TMF and learning. Eventually you'll feel comfortable enough to invest beyond the S&P500 and not merging your 401k will give you available funds to do so.

Good Luck.
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I agree with studentinvestor. Leave them where they are unless you have a good reason to move them.

You do have the option of transferring the two at previous employers to a rollover IRA. This might similify the paperwork a bit. But you would probably pay fees for the IRA that are paid for you by the companies in the 401K. So do this only if you have a good reason, such as you decide some other investment option is more appropriate. Or you want a self directed IRA so you can do Foolish Four.
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<<I have three 401K's (two from past employers and one from my current). They are all in 500 index funds totaling only about $6000. Should I combine all three or does it matter? (Or can I combine all three?) >>

Considering your balance, I'm surprised your former employer's haven't forced you to take a distribution or rollover. Keeping you on the books is costing them money. If not hard dollars, at least the cost of tracking your current address.

If any of the following has an answer of "no", you may want to consider moving your old dollars either into your current employer's plan or into an IRA. If you are worried about IRA fees, then a rollover into your current employer's plan will avoid that problem:
-1- Are you comfortable with your former employers being able to locate you? (different companies have different levels of competence)
-2- Are you comfortable with your former employers not going out of business and terminating the plan anyway?
-3- Do you like the investments in your 2 old plans?
-4- Do the 2 older plans have an outside Trustee?
-5- Do you get timely statements from the 2 older plans?
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I just transferred my old 401K (~$5000) to my current employer's plan for several reasons:
1.) my former plan didn't have an index fund
2.) my former company was somewhat shady and I just didn't trust their business practices
3.) my former company sent me the quarterly statements but never in a timely fashion
4.) my former company's benefits coordinator position turned over on average 2x a year!
5.) I wanted all my 401K money in one place in order to simplify my life a little

Obviously, this is a really personal decision, but I'm incredibly happy with my choice and am sleeping better at night because of it.

Keep in mind, I believe that if you rollover a pretax retirement fund like a 401K into an IRA, you won't be able to add any post-tax contributions to it. I think they call that "comingling" funds and the tax consequences can get pretty messy. At least that is what one financial advisor told me once. It might be bogus - anyone else know?
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Leslidio writes (in part):

Keep in mind, I believe that if you rollover a pretax retirement fund like a 401K into an IRA, you won't be able to add any post-tax contributions to it. I think they call that "comingling" funds and the tax consequences can get pretty messy. At least that is what one financial advisor told me once. It might be bogus - anyone else know?

I reply:

I admire your skepticism; in my view, it's quite Foolish. The tax consequences of commingling are simple and straightforward. You are allowed to commingle new contributions with money transferred or rolled over from a 401(k) or other qualified plan. If you do so, however, you "taint" the money and forever lose the ability to place it in a new employer's plan. Most Fools don't care about this consequence, but it can matter to some, especially those who plan to retire at precisely age 54 or 55. Maintaining the account separately, however, merely costs some additional transaction costs (often quite minor) and paperwork (personal preference). --Bob
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The original message asked whether he/she should combine 3 separate 401(k)'s from different employers into 1 place.

pauleckler writes:
I agree with studentinvestor. Leave them where they are unless you have a good reason to move them.

You do have the option of transferring the two at previous employers to a rollover IRA. This might similify the paperwork a bit. But you would probably pay fees for the IRA that are paid for you by the companies in the 401K. So do this only if you have a good reason, such as you decide some other investment option is more appropriate. Or you want a self directed IRA so you can do Foolish Four.


I would argue otherwise. Since you have an index fund with your current employer, I would roll the money from previous employers into a self-directed IRA with an account at a place like Waterhouse. Then you can undertake the FF or RP strategy and beat your index funds or be really daring a try the PEG strategy.

It is working for me. This year I am up 27% with a combo PEG and RP strategy compared to 8% for the S&P since February.

Wait, of course, until you are comfortable to do so, but I would always take the option of controlling your own money if you are a Fool. Your previous employers can change your plan at anytime without notifying you.

Another reason to roll out of previous plans is to save you or your significant others (in the case of your death) the burden of doing so and keeping track of them down the road.

mcadoo11
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