Hello All,

I’m new here…. I have a question regarding transferring a 401(k) from a former employer to a newly formed Self Employed 401(k)

I left my former employer about a year ago and went out onmy own as a consultant. I created a Self Employed 401(k) Account for myself and my wife. I was wondering if it made sense to migrate the funds from my former employer to the Self 401(k) account. The brokerage house that the Self 401(k) account said that I am able to do this.

Obvioulsy one large advantage to doing this would be to have access to a wider range of investment vehicles.

A potential downside of doing this transfer might be lesser creditor protection. I have always heard that 401(k) accounts offer better protection than IRA accounts. A recent Internet search yielded the article below which includes quotes from Jeffrey Levine, an IRA technical consultant with Ed Slott & Co. offers some advice. The article states that:

“…leaving your money in a 401(k) gives you—possibly—better protection against creditors. “ERISA plans, a 401(k) for example, are protected under federal law but IRAs are protected under state law which can vary state to state,” “Your 401(k) is generally much safer from creditors than your IRA,the only exception is a solo practitioner small business owner where it doesn’t make much difference.”

Am I interpreting that as indicating that (from a creditor protection point of view) it would be safer to leave the funds in my former employer’s 401(k) rather than migrating the funds to a Self Employed 401(k). Would you agree with that interpretation?

Fast Lane

http://www.marketwatch.com/story/11-reasons-to-leave-your-401k-behind-2012-08-16?pagenumber=2

Better creditor protection

According to Picker, leaving your money in a 401(k) gives you—possibly—better protection against creditors. “ERISA plans, a 401(k) for example, are protected under federal law but IRAs are protected under state law which can vary state to state,” Picker said.

Choate agreed. “Your 401(k) is generally much safer from creditors than your IRA,” she said. “The only exception is a solo practitioner small business owner where it doesn’t make much difference.”

Levine said it’s worth checking the creditor protection your IRA has in your state. “In some states, that protection is virtually as strong as the creditor protection afforded by ERISA, while in other states, it may be much weaker,” Levine said. “People should make sure to know the rules in the state where they live.”

Levine also offered this reason for keeping money in a former employer’s 401(k) plan. “Sometimes, when I meet with doctors, lawyers, contractors or other professionals who face a higher-than-average risk of being sued, they are particularly concerned about the creditor protection of their retirement savings,” he said. “If this is a big concern for them, then it may pay to keep their money inside a 401(k) instead of rolling it over to an IRA.”