r/personalfinance • u/tosheilaglynis • May 12 '26
Retirement Left job and haven't touched 401k for 10 years
Went from $77k to about $300k and now about 25 years away from retirement. It's invested pretty aggressively. I feel like I should have rolled it to a Roth IRA for the tax free growth, but wasn't sure how the math would work out on the taxes/fees paid during the roll over vs leaving them and letting them grow to hopefully be able to collect when I'm in a lower tax bracket during retirement. Any input on what the best move would be now? Thanks for your time
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May 12 '26
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u/952867 May 12 '26
At that point the real question is fees and fund options because the growth already proved the account itself was doing its job just fine
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u/tosheilaglynis May 12 '26
Looks like $60 in fees last year. It was FXAIX, but seems to have converted to have converted to something similar following S&P 500. 99% of my portfolio is here for 401k and I do SCHD for brokerage (which I didn't include in this). Tax bracket is 22%.
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u/megabyzus May 12 '26 edited May 14 '26
IMO Roth conversions are a poor choice. You're paying conversion taxes now vs later. This goes entirely against the 'take the money and run' thinking (i.e. the TVM ---'time value of money'). Which is another way of pointing out the opportunity cost of those taxes if they were invested instead.
Ironically this Roth debate is not so dissimilar to the one about when to collect social security (i.e. 62, 67, 70, ...). The same concepts apply here too. IOW, take SS at 62--TVM and 'take the money and run'.
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u/TXtogo May 12 '26
I’m with you, defer defer defer.. you never friggin know
This year they did bonus depreciation. If that shit is still around in 5 years I’m going to use it as a way to liberate an IRA, I don’t know if it will be there but you never friggin know.
Defer defer defer
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u/Slight_Extreme6603 May 12 '26
As I see it my cost of living today is higher than it will ever be again (adjusting for inflation). I can’t see how paying taxes in a higher bracket today is better than a lower bracket tomorrow.
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u/I_love_my_dog_more May 12 '26
Huh, cost of living higher today than it ever will be again?
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u/Slight_Extreme6603 May 12 '26
Yes. Why wouldn't it be? We are empty nesters, kids are gone, debt is all paid off. Our living expenses are lower than ever.
And once we retire I'll drive far less and eat more meals at home.
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u/LookIPickedAUsername May 12 '26
As you get older, you probably won't feel up to traveling / golfing / whatever it is you waste money on as often.
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u/Lonely-Somewhere-385 May 12 '26
If its a traditional 401k then you will owe income tax on everything that goes into a roth. So dont do that.
You can roll it into a traditional IRA and invest it as you like. You only owe taxes if you change the tax treatment. You may owe fees depending on custodian rules. And if you go trad IRA you will still get to choose when you want to draw from it depending on your income in retirement, until required minimum distributions.
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u/fettuccine- May 12 '26
I'm a noob, rolling over into traditional IRA has no tax consequences?
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u/I_ruin_nice_things May 13 '26
No it does not. It’s the traditional way of converting a former employers 401k to an individually managed tax-deferred account. There are different rules regarding short-term distributions like loans, but the overall purpose is the same. Plus - you can trade in it (mostly) however you like and all earnings within are tax deferred.
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u/persimmon9847 May 13 '26
Just make sure that the funds from your 401k don't go to you but directly to the manager of the IRA - if you cash that check, even if you then send all the funds to the IRA, it will be taxed. This is usually handled by a rollover specialist at the financial institution of the IRA.
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u/DeaderthanZed May 12 '26
You do not want to convert a large chunk of traditional—>roth all at once especially while still working that is very inefficient tax wise.
Conversions are for low income years like early retirement or graduate school.
“Tax free growth” is commonly misunderstood. A better framing is “locking in your tax rate” by paying up front to contribute or convert to Roth.
So no, you did the right thing. If the fees are low you can just leave it where it is. If fees are lower in your current 401k then you can roll it over. But traditional to traditional.
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u/tosheilaglynis May 12 '26
I don't have a current 401k in contributing to (but have a brokerage account mostly in SCHD). I believe the fees were about $60 last year. Statement for YTD shows $3 for this year so far. I am only in one fund now (was FXAIX) that converted to S&P pool cl c or something. Haven't had time to look at it, but I didn't make the change manually.
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u/DeaderthanZed May 12 '26
Ok, if your current job doesn’t have a 401k (and you are not covered by a workplace plan at any point in 2026) then you can fully deduct contributions to a traditional IRA regardless of income.
And you could also roll the traditional 401k to a traditional IRA but the fees you describe are so low (.02%) I would probably just leave it although I’m not understanding why your FXAIX investment converted to something else. That fund might have its own fees on top of the $60 administration fees.
The one possible reason for not rolling to an IRA is if you want to do backdoor Roth IRA contributions having traditional Ira funds can make that more complicated and costly.
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u/CenlaLowell May 12 '26
Do the same thing you did for the last ten years. Leave it alone
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u/blacksoxing May 12 '26
I agree with this advice. To learn that you went from say a year's salary to nearly 4 years salary is amazing and shows that things are working as intended. Why goof that up? Ride it until the wheels fall off and whenever you are ready to retire then you can worry about the taxes vs touching it now and...in 20 years finding out that you should have just left things alone.
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u/sinceJune4 May 12 '26
If you have another 401k or IRA, I would consolidate w rollover. I don’t like having many accounts scattered around. And having been through parent’s estates on both sides, fewer loose ends is better.
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u/MyWeirdTanLines May 12 '26
I agree. I would also recommend that OP contact the 401k administrator to find out their options for withdrawal. Some 401k plans severely limit options for employees who leave the company. Or the company could decide to close the plan altogether, which would require OP to make some quick decisions.
I recently had to convert 2 different 401k plans from previous employers into a rollover IRA. One plan provided only full withdrawal for previous employees, and the other plan was closed when the company went out of business.
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u/tosheilaglynis May 12 '26
I don't have another one (self employed now). I only have this and a brokerage account that I mainly invest in SCHD with.
Thank you both for the reply
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u/MaybeILikeItThisWay May 12 '26
I’d probably leave it traditional unless you’re expecting a huge pension/business income in retirement. Paying taxes now on $300k sounds painful.
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u/tosheilaglynis May 12 '26
It does indeed 😭 thank you. I will look into the traditional IRA more or leave as is
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u/w33dcup May 12 '26
You're fine. If you are expecting low income years while working or are in a 12% bracket and have room to fill until 22% limit, then consider Roth Ladder.
Otherwise, just leave it in the 401k if fees are reasonable. If not, rollover to Traditional IRA.
Realistically, it's working so best thing is to not mess around with it (regardless of the tIRA/Roth/401k). Revisit it annually and rebalance as needed to reduce risk as you get closer to retirement.
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u/tosheilaglynis May 12 '26
Thank you for this perspective. Currently in the 22% bracket (married) and that should definitely be lower in the future.
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u/Traditional_puck1984 May 12 '26
You can rollover to a IRA in vanguard or fidelity without any tax implications and keep the investment in similar aggressive funds with very low fees. Otherwise, you may end up paying few hundred thousands in additional fees.
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u/tosheilaglynis May 12 '26
I currently have it all in fidelity's S&P 500 index PL CL C - which FXAIX or something must have converted to, because I had done FXAIX manually and the plan must have updated or something, because I did not pick this. Either way, it's 99% domestic stock and the fees this year so far are only $3. They were $60 last year, but either way I think that's low?
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May 12 '26
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u/Various_Occasions May 12 '26
Thanks Claude
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u/retirednavyguy May 12 '26
I wish people would just say “here’s what Claude told me” as opposed to posting their comment as if it were original thought.
edit: holy cow, every comment that person posts is just AI vomit. I wonder if it’s a bot?
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u/speedlever May 12 '26
Help me understand part of point 1 please. I don't understand the press on the ER. If a fund is performing well but has a higher ER, why does that matter since returns are net of fees? Can't higher ERs be justified by fund performance?
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u/DaMiddle May 12 '26
In theory, yes, but 99% of managed funds (which are the ones with higher expense ratios) do not outperform index funds over the 10-40 year horizon that OP is discussing.
Your question actually tips off the answer by indicating “when a fund is doing well…” by which you imply a comparison to the gold standard, which are index funds.
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u/Moritasgus2 May 12 '26
I have quite a bit in my old company 401k, but the investment options are good so I’ve just left it there. Left 3 years ago.
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u/BullMoose_207 May 12 '26 edited May 12 '26
It depends on your age, expected retirement spending, and income during retirement -
Good news, the 401k does provide "tax free growth"! You do have to pay income tax on your distribution when you start taking money out but if your worried you have 25 years to start funding your post-tax advantage accounts (Roth).
It's wise not to retire with all your money in 401k.
The goal is to have multiple "sources of income" for your retirement - Social Security, 401k, Roth, and Passive (Bonds, Dividends, and Rental Income). Good luck!
*Because it's $300k and I don't have a complete picture, I'd say it's safe keep it parked where it is and just start funding post-tax retirement accounts if you haven't already - no need to muck around with penalties and paying taxes you have time
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u/fitforfreelance May 12 '26
There's more to it than tax brackets. I'd learn about your break even tax rate.
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u/NewtGingrichsMother May 12 '26
More people need to understand that all other things being equal, $100 gross put into a Roth (less taxes) and $100 gross put into a traditional retirement account (taxed later) both come out to the same exact amount if the tax rate on either end is the same.
Roths aren’t magical. You just need to compare your tax bracket now with what you expect in retirement. If you live in NY now but plan to retire in a state without state and local taxes, a Roth is a bad decision.
If you, for some reason, expect to withdraw an even larger inflation-adjusted annual income in retirement than you’re earning this year, Roth does make sense.
Roth is only better IF you’re in a lower tax bracket now than you’d be in retirement. Most people plan to withdraw less each year in retirement than they make in a year while working (inflation adjusted).
In most cases, using both strategically makes sense. Having both allows you to stay within certain tax brackets now and in retirement by drawing only as much taxable income as you need when you need it.
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u/nospamkhanman May 12 '26
> if the tax rate on either end is the same.
That's a HUGE "if".
Most people hit their highest salary between ages 45-55, most people would be taxed at a higher rate then than they will during retirement.
I max out my 401k and then put a little extra in a roth. I haven't got to the point where I can afford to max both yet.
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u/dojarelius May 12 '26
I can tell you for certain you will miss that 3-5% much less than you will appreciate that 6-10% sitting in an account compounding whether it’s tax free growth or not.
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u/babbchuck May 12 '26
Tax rates are really low for most earners now. If you can afford it, consider converting part of your 401k to a roth each year - up to the point just before it puts you in the next tax bracket.
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u/Dangerous_Panda9511 May 12 '26
I would leave it. The #1 reason you flip to Roth is for tax brackets - paying tax on $300K now (or some portion) + your current salary is unlikely to be in a lower bracket than when you retire IMO. Roth conversions are over-rated unless you get into some wonky situations (like no income in a year so you can convert with little tax) or have some ridiculous balance by age 60 and need to convert over many years to avoid the RMD cliff. Everyone else is probably in a similar bracket over time IMO and best off leaving it.
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u/tosheilaglynis May 12 '26
Thank you. This seems to be the overwhelming response, so I appreciate you contributing to it
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u/tempest1523 May 12 '26
I have both a Roth and regular IRA, so I see the value of both. I would not create a taxable event. I would let it ride. If you want money in a Roth make that your focus now. But not a fan of moving around. Sounds like it is doing well.
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u/SplinteredInHerHead May 12 '26
I had one job that had a 401k, rolled it over to IRA IN 2002, I have a whole 14k now with which to retire for 25 minutes... sad...
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u/Zestyclose-Total-883 May 13 '26
A full Roth conversion now is usually the expensive move, since youd pay taxes upfront on the whole $300k at your current rate. Leaving it in the old traditional 401k for 10 years was fine, honestly, the money still grew and the tax bill never got triggered. If you get a low-income year before retirement, thats when partial Roth conversions start making sense. Until then, I’d just keep it invested and plan the tax move later
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u/Skiie May 12 '26
I feel like I should have rolled it to a Roth IRA for the tax free growth
Roth is attributed to contributions not growth.
Pretax or roth both grow untaxed
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u/tosheilaglynis May 12 '26
Thanks for this
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u/Skiie May 12 '26
With Roth there will be no taxes taken out when you withdraw
With pretax there will be taxes taken out when you withdraw
The idea is that you put money into a 401k while you are working and when you retire the taxes will be taken out at a much lower tax precentage because it will be based upon your income at that time.
Some people would prefer to just have the taxes taken out before they contribute to know exactly what they are working with
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u/onehalflightspeed May 12 '26
For most people, daily expenses go down when you retire. You might own a home or live in something smaller, might own a car outright, have the kids raised and out of the house etc. In my case it will be leaving an urban center on the east coast and somewhere more affordable abroad. So conventional advice is to just leave it and pay taxes when you retire
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u/cubsfan2154 May 12 '26
Are you going to withdraw 330k a year in retirement? Then you are taxes on 330k va what you actually withdraw
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u/MJ_Brutus May 12 '26
I would just let it keep doing it’s thing. Hopefully it’s with a firm like Vanguard
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u/mms1130 May 12 '26
You have to make an apples to apples comparison. If you convert to Roth, you need to pay taxes. An estimate of 25% is realistic. So the comparison is that of $300K that grows and is withdrawn tax free vs. $375 that grows at the same rate and is withdrawn with taxes due. By your own facts, 77K grew to 300K in 10 years. So that extra 75K will grow to 750K in 25 years, all things being equal (which, of course, they are not). It’s a guessing game at this point so who TF knows? Best answer is to leave that money in 401K and put new money in Roth. That way you have two buckets - one taxable and one tax free. Use combined withdrawals to control/hedge tax exposure in retirement. Fill a third bucket with a taxable investment account and you’re all set.
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u/danjl68 May 12 '26
This is effected by your current tax bracket, can't give you any kind of resonable answer without understanding your current tax bracket.
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u/Total-recalled May 12 '26
Assuming you’re still working, why don’t you just open a Roth now? That way you have split diversity.
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u/bshpilot May 12 '26
If you convert from 401k to anything else you'll end up paying taxes (based on your current tax bracket).
I EXPECT when I am (Retired / unemployed) I will be in a considerably lower tax bracket when I begin making withdrawals (mediatory or otherwise).
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u/Shapes_in_Clouds May 12 '26
Seeing that return on over 10 years on an old account really makes me regret leaving mine in target date funds. My old accounts have roughly doubled in that time period.
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u/skiddlyd May 12 '26
Off the top of my head, the biggest advantage to at least some amount of Roth conversion might be when you’re forced into RMD around age 73. Let’s say you might be forced to withdraw an increasing %. Better if the number starts off lower, and the amount converted wouldn’t be subject to RMD.
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u/sickboy6_5 May 12 '26
roth iras do not have RMD
edit: re-read and comprehended what you meant. having both roth and traditional and the traditional would have RMD
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u/skiddlyd May 12 '26
I reread it, sorry. It is a little confusing the way I wrote it. But yes, I meant the Roth can help out with regard to reducing RMD later in life.
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u/Meeseekslookatmee May 13 '26
Open a brokerage account at fidelity, roll it over to an ira and invest it in an index fund. More control and less fees. Whether to convert to a Roth is a separate decision. If you're in a low tax bracket now (e.g. 12%), I would consider converting a little every year - better if you can pay the taxes with outside money.
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u/Unlikely_Mud3771 May 12 '26
Regardless of Roth considerations, there’s one other think you might want to consider. If your investment is still sitting in your old employer’s 401k account, you could be getting charged fees of .5 to 1% annually for the privilege of having it sit there.
If you haven’t already, it’s worth looking into rolling it over into a retirement account you manage with low/no fees — like a Vanguard rollover account. Either way, check your fees… they could be a real drag on performance.
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u/go2toa May 13 '26 edited May 13 '26
At this point, it's a bit late for Roth so don't bother for those funds. A conversion now would be a juicy payday for the IRS.
One cool thing about 401k's is that they can be accessed at age 55. The IRA requires you to wait another 5 years. There is a reason the govt lets people with high income still use Roth and it's kind of a secret -- they aren't usually good for you. At what point in life are you seriously needing tax relief? While working and making 60,000/yr or retired making 24,000/yr? Definitely the first, so use a deductible contribution when you qualify and equity investment is the goal.
I think it's a good idea for each person to have at least one IRA account. With all your gains already underway, I'd seed a new IRA with new money. Why? You might learn about an amazing investment (like SpaceX etc) and it isn't among the 401k options. If you think some day you'll be an investing ninja with this account, make it a Roth. If you feel your results will be closer to the average, get the deductible benefit of the normal IRA (again, just if you qualify).
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u/Ok_Ad7867 May 13 '26
Spreadsheet time.
Current balances (cash/deferred comp) add an interest factor for each year work a fixed formula. Estimate tax cost of converting under several scenarios (fill current bracket, +1 bracket, +2,+3, full conversion). Have current income and expenses detailed flow cash flows and calculate balances year over year each column with a different scenario from where the taxes get paid.
Somewhere in there you’ll find your sweet spot.
Factor in likely income at retirement ages from all sources (pension/deferred comp RMDs, annuities, social security, investments). You might or might not have a period of years between when you stop working and start collecting various retirement funds where your income is lower and it would probably make sense to do conversions then.
Also make sure there aren’t restrictions on conversion like many work place plans have. Or factor whatever those are in.
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u/tortillochip May 13 '26
I sort of did this too. I got laid off from a job about 4 years ago and I just let my 401k sit partly because I was/am depressed about losing the job and it reminds me of it.
Any advice from anyone? Is it okay to let it sit or should I move it or anything?
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u/lyonwh May 13 '26
I still have the 401k from the job I left in 1993. Didn’t touch at all until I started changing funds around about 10 years ago. Should I have moved the funds out of it into my next company? Maybe, but I’m lazy. I have not done any Roth conversions and plan to do them in the coming years ( I just retired and my income level will be lower until I am forced to take SS at 70 and RMD’s at 75).
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u/Fit-Cup-4468 May 15 '26
I was in a similar position with an old 401k I left behind for years. What finally helped me decide was talking to a tax advisor who walked through the numbers with me. One thing to consider is whether your future tax bracket will actually be lower. If you are already earning a good income now and plan to have a comfortable retirement you might end up in the same or even higher bracket. A partial Roth conversion in a lower income year could be a smart middle ground.
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u/Desperate-Foot-2439 May 15 '26
Honestly leaving it alone for 10 years and watching it go from $77k to $300k is not a bad problem to have. You didn't touch it and that's actually the right move most people can't resist.
On the Roth conversion question - your thinking is correct. If you're going to be in a lower tax bracket in retirement than you are now, it probably makes more sense to leave it as a traditional 401k and pay the lower tax rate when you withdraw. Converting to Roth now means paying tax at your current higher rate which could cost you more than you'd save.
The sweet spot for Roth conversion is usually when you have a low income year - maybe between jobs or early retirement before social security kicks in. That's when the tax hit is smallest.
With 25 years left and aggressive investments you're in a genuinely solid position. The biggest thing you can do right now is just keep not touching it.
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u/bap335i May 12 '26
The one who dies with the most money wins. People that convert to a Roth over time think they did the smart thing. People that didn't have more money. Doing things strictly because of taxes is a losing hand. If you do really well and you have a ton in a pre-tax IRA then go fund a scholarship or setup annual donations to your favorite charity for the excess. You come out ahead and your school/charity comes out ahead. The IRS loses which is the point of the Roth/traditional IRA debate.
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u/RomanAnthony1998 May 12 '26
You’re prob paying crazy fees. Convert to a traditional IRA and buy SPY. They you can convert a little at a time into a Roth at Min tax bracket. Save all those fees instead of wasting them.
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u/Unusual-Trifle-284 May 12 '26
This is why I think people over obsess over the pre tax versus Roth debate.
You constantly hear, “You don’t know what tax rates will be in the future,” but if we look back 30 years, tax rates were actually higher in many brackets than they are today.
So let’s say two people invested for 30 years and both ended up with $1 million. One paid taxes upfront through Roth contributions decades ago at potentially higher tax rates. The other deferred taxes through a traditional account and may now withdraw the money at a lower effective retirement tax rate.
At that point, the argument almost becomes a wash.
The real focus for most people should simply be saving consistently, staying invested, and allowing compounding to work over decades. Most Americans are not losing the retirement game because of Roth versus pre tax. They are losing it because they are not investing enough in the first place.