Should I combine retirement accounts

Should I combine retirement accounts
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#1

I have a 15 year old account with Vanguard, started while at a former employer. The account has garnished me a 13% growth over the past 10 years. During the same 10 years I have been with another employer who uses ML. I now have decent funds in both accounts. Vanguard recently notified me of a pending $250 charge since I am no longer making deposits to that account. Does it make sense to move the funds from Vanguard to ML to avoid the fee? In essence, putting all in one brokerage account.


#2

Hi @donaldxcampbell. Thanks for the question!

It can make sense to consolidate accounts if you can, especially if you’re being charged a fee like that. However, I’d take a look at the investment options within your current account, as well as the fees there — for those investments, the account administration, etc. Vanguard is known for low fees, and I wouldn’t move before making a complete comparison of costs. That $250 sounds pricey but if the investment options at Vanguard are significantly cheaper, you might still come out on top by staying put.

Also note that not every employer plan allows incoming rollovers — transfers from an old plan into the current one — so you’ll need to check about that with your employer or plan administrator.


#3

Great feedback. While my plan does allow for rolling over from a previous plan, I have not looked at the fees and options/performance. Worse than doing your taxes :slight_smile:

TY


#4

Hey, @donaldxcampbell, could you give us more details about that $250 fee? I haven’t heard of Vanguard charging anything like that before.


#5

“Effective 5/1/19, an annual plan recordkeeping $220 will be charged to each plan participant who is no longer employed by the plan sponsor…automatically deducted from your account”. Guess since I am no longer with that organization, I am being treated differently as an investor. I would think my money speaks for itself.

Admittedly, I have not been monitoring and comparing fees between Vanguard and ML; both were the brokerage firm connected to the employer. I am a little lost in what to look for in the minutia of details.


#6

Thanks for that info, @donaldxcampbell. Pretty sure that’s a plan thing, rather than a Vanguard thing…so basically instead of absorbing the cost, your old employer is passing it along to you.

As @aoshea mentioned, Vanguard’s pretty much the low-price leader, so I’d be surprised if your options in that plan weren’t cheaper, and perhaps a lot cheaper, than anything ML offers. Whether the difference is worth $220 might depend on how much you have invested. But you could dodge the fee altogether just by rolling that 401(k) account into an IRA. Vanguard’s retail options, the ones you have access to in an IRA, are slightly more expensive than its institutional ones offered in many 401(k)s, but probably not enough to worry about.


#7

Thank you and what you offered makes sense. There are rules from the provider and there are rules layered on by the plan.

When I first encountered this site, I was hesitant (for no specific reason other than my typical cautiousness). This brief exchange has proved to be very valuable to my understanding and growth. I thank you @lweston and @aoshea for your assistance. Nerdwallet, who would’ve thought it was this great of a forum…


#8

Yep, that’s how it generally works — and there are often a few layers of fees, from the investments, the plan and potentially also the provider, though as @lweston said, this $220 fee sounds like it is coming from your plan, not Vanguard.

I’m glad we could help you! One last thing: I realize it’s confusing to sort through these fees, and I totally understand why you’re lost. I wanted to give you some resources to help.

The first is this post, which covers all the fees you might encounter when investing and how to find them. The 401(K) section is at the end:

And then this post gets into more detail about 401(k) fees specifically, and what to do if you find they’re too high:

I hope that helps!


#9

Awww, thanks, @donaldxcampbell. We’re pleased we could help.