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At my previous job, lets says say I invested my $10,000 in shares worth 85$/share for a total of 116 units.

I've started at a new company and am opening a new 401k account with their investor.

If I move over my previous 401k, is it going to keep that same 85$/share price, or will this change to the new market value? The investment was into the S&P 500.

Would it be better to keep this account open and not contribute and start over with a new 401k, or move the total amount over and continue contributing?

Chris W. Rea
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Luke
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  • There is no such thing as investing in the S&P 500; you can invest only in S&P 500 index funds and S&P 500 index funds run by different companies can have different prices per share. For example, the share price of Schwab's 500 index fund is $35.49 today compared to the $209.82 share price of Vanguard's 500 index fund. So, if you roll over your current 401k investment into a new 40kk plan, how many shares you will have in the new S&P index fund will depend on which index fund you are getting. The money will be the same, the share price different. – Dilip Sarwate Dec 15 '16 at 23:48
  • As to the last question above, read the answers to this question. – Dilip Sarwate Dec 15 '16 at 23:51

2 Answers2

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When you initiate the rollover of your 401(k) from your previous employer, they will sell your shares at the current market price (at the end of whichever day the order is processed).

Whether it is better to leave the account open with the prior employer or roll it in to an account with a new employer would depend on what the expense ratio and other fees are associated with the old account vs. the new account. Generally, the larger the company you work for, the lower the expense ratios will be because the have a much larger pool of funds invested with the 401(k) provider. Be careful though, this isn't always the case, only a close look at all the investment options, expenses, and fees be enough to determine the best option.

Another option if you don't have good investment options at your new employer is to roll it into an IRA with a company like Vanguard or Fidelity.

NL - Apologize to Monica
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If I move over my previous 401k, is it going to keep that same 85$/share price, or will this change to the new market value?

Your shares are always worth their market value, it doesn't matter what you paid for them in the past. You have 116 shares. If they become worth $200 each you could sell them for $23200, but if they go down to $50 each you could only sell them for $5800. The fact that you paid an average of $85/share is irrelevant to any future buyer.

A transfer would involve the old plan's management company selling your 116 shares at market value and then sending the balance, minus a transfer fee (usually in the $50 - $250), to your new plan, which would then buy shares, likely of different funds, according to the allocation rules it uses or you have set for it.

Would it be better to keep this account open and not contribute and start over with a new 401k, or move the total amount over and continue contributing?

That depends on details of the old and new accounts, how much fees the management companies charge and what the fees are like on the funds they invest your money in. That should be the main factor in deciding whether to transfer the plan to your new one or not. However, there is another option you may want to consider.

Employer plans are not usually very good, except for the employer matching if they offer any (which more than makes up for a bad plan), so you're more likely better off starting a new plan from scratch (and only if you have employer matching) and transferring your old plan to a discount broker to invest it in an ETF like SCHB which tracks the S&P500 with an expense ratio of just 0.03% (compared to the 1-2% you often pay in employer plans).

Paul
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