The short of it is that my employer-sponsored 401(k) plan just isn’t performing well. As in, it claims a 1.54% return. I think that stinks.

I have a separate pair of IRAs (one traditional, one Roth) outside that plan, and those are earning much better returns.

First question: Is it possible to roll some (most) of the funds from my employer-sponsored plan into my external accounts? Can I do that with some regularity — say, annually?

Second: I’m contributing x% of my salary directly into the employer-sponsored plan. Is there a way to send those funds to an external plan instead, without nasty tax implications? (Doing so would avoid the periodic rolls mentioned in the previous paragraph.)

I know the answers are not simple, as the research I’ve done over the last couple of days hasn’t brought me *clear* answers.

Regarding the first question, most of the information I’ve veen able to find refers to rolling funds after leaving a particular employer… and that’s not the course of action I’m after.

Regarding the second one, I’ve found exactly *zero* good answers so far.

Who’s got the knowledge? Thanks, all.

Maybe and the method I know is the same answer to Q1 and Q2. Some employers (e.g. mine) allow employees to contribute after tax and still get the company match. This allows people to transfer their after tax money to brokerage firm to chase better returns, and the employer match would remain in the employers tax advantaged 401k account. If you just transfer to an after tax brokerage account you're missing out on tax advantage accounts, but you do have to option to simultaneously do a ROTH conversion. Google "backdoor ROTH conversion" and "megabackdoor ROTH conversion" for more info.

I believe everything else is considered an early withdrawal, and there are gov't limited circumstances for early withdrawal. My read is I don't see your case listed so that is why I answered the way I did in 1st paragraph.Here is an article on early withdrawal.

My employer only has 7 options in the 401k, and I'm 25 to 37 months from retirement which means I'm conservatively 60% stock / 40% bond which has limited me to a 12.19% YTD return. Here are my 7 options:

employer stock

S&P 500 - over 16% YTD

Dow Jones U.S. Completion Total Stock Market Index (i.e. the 3600 companies not in S&P 500) - nearly 11% YTD

MSCI World Excluding U.S. Investable Market Index - a little over 29% YTD

Bloomberg U.S. Aggregate Bond Index - a little over 4% YTD

Blend of 4 mutual funds above

Money Market - a little over 3% YTD

Your 1.54% is worse than the Money Market. What have you selected?

Don't you have several choices that yield a greater return then 1.54%? That really is not acceptable and whoever the company has hired should do a damn sight better than that. How could they stay in business?

I would say under normal circumstances or traditional ones the answer is no and no. But do not take my word on it. You situation might be unique, but I doubt it. You should (maybe) have choices how it is invested though. Check with the administrator.

You want to see if your plan offers in-service rollovers. If you are 59 1/2 and they allow such rollovers, you can take your money out without penalty and transfer it to another IRA account.

I just did this myself last year. My 401(k) sent a check directly to my stock brokerage IRA account. I can do this as often as I’d like, yearly is my plan.

I think there are company 401k plans that stink, but most have at least a handful of investment options. Are you sure you don’t have better options with the plan at work?

Some 401k plans(mine) allow you to get into ‘outside investments’ but there are hoops to jump through.

Yeah, some company plans include abusive fees. I’d look into your plan first, see if there are better options.

With 10+ years to go, even a stock index fund of some flavor(diversified) is likely a better choice.

You’ll need to look at your company plan. If your company is big enough to have an HR department, someone there could answer your question or forward your question to the plan administrator.

Off the top of my head, I don’t think companies would allow you to put in money into the 401k, get any matching contributions, then move the money out to an outside IRA account for several reasons:

1) to get favorable tax benefits to the company, the 401k has to have a minimum ratio of contributions from “highly compensated employees” meaning executive officers and department heads mixed with money from the peons like myself.


2) the company administering the 401k earns money based on the percentage of money in the company account. If you were them, would you allow money to walk out the door that easily?

The only ways I’ve rolled money out of a 401k was by changing jobs.

My question to you is: how long have you been contributing to the 401k and do you know the different choices you can direct your money in? Because the low percentage you’re saying makes me think your money has been going to a default money market account.

401ks are set up to put the responsibility on the employee for their choices. Normally, there are different funds offered: S&P funds, international funds, targeted retirement funds, bond funds, etc. The worker has to elect how much percent of each contribution goes to which fund and they can also rebalance / move money among the different accounts. This puts the risk/reward squarely on the employee’s shoulders. Once the company has given their matching contributions, they’re done as far as your returns are concerned. And once the plan administrator directed your money to the funds you told them, they’re done also as far as your returns.

It doesn’t make sense to me that a 401k would be set up to give the same returns for everyone in the company. It doesn’t fit the definition of a “self-directed retirement plan” which is what a 401k is.

Thank you all for the advice so far. I'll try to address the things you've offered here, roughly in the same order as your responses, and add a bit more info that may be relevant.

It looks to me like the plan has stuck me into one of the target-date funds, and a very conservative one at that (thus the low returns). There's a place on the web site where an employee can change investment elections, but that section has been marked "Unavailable" for a month or more. It's on my calendar to call tomorrow and learn more about that. Can't be employee-directed when the employee is blocked from making changes, right?

6guns: you're right -- this 1.54% thing is not acceptable.

Patriot: I like the idea of an in-service rollover; I'm not yet old enough for that, though.

Rey: Thank you for your input, too. I didn't know about the company getting tax benefits from the employees' contributions. To answer your specific question: I've been contributing for about 32 months, the entirety of my employment here. There are different choices, but as mentioned earlier, we seem to be blocked from choosing them. That'll be the focus of my call tomorrow -- I can't self-direct, when the option to make changes is not available. Ugh.

- - - - - -

Tell me if I'm not looking at this correctly, please.

Grinding some numbers this morning I see that 91% of the account's value growth (Jan 1 - yesterday) is from money I and my employer put into it. (EE+ER)/(yesterday - Jan 1) = 91%

So given that, then the actual "market growth" (maybe that's not the right term) is 4-5%, depending on the calculation. (MG/Jan1) = 5.4% ; (MG/(yesterday - Jan 1)) = 4.1%.

Maybe it's not as bad as what I thought? Those numbers are better than what's stated on the fund's home page when I log in: "Rate of return 1.54% Last 12 months, as of 9/1/2025"

The Q3 statement shows only a 2.49% personal rate of return for the quarter. (Statements for Q1 and Q2 show -3.25% and 3.72%, respectively.)


Here's the math that causes me to want to move money from my work plan to my external plan:
1. (growth YTD / Jan1 balance) = 21%
2. (growth YTD / (AVG(Jan1 + Nov29))) = 19%
3. All growth in that account is "organic" -- I didn't contribute to it directly. (That fund was rolled over from my previous employer.)

If I can't move money from the one to the other, then I'd for sure rather be be putting my dollars directly into my external fund than into my work-sponsored fund. I'd still contribute enough to the work fund to get the company match, but dollars put into the external fund could add up far better.

That you can’t choose which funds your money goes to is eff’ed up. 1) it’s not like this 401k election thing is just rolling out. 2) who’s the company doing the administration that they can’t put out a working website? 3) I can’t believe you’re the only one affected and nobody else has complained?

Im not an expert either, but your answers are no and no. The govt protects 401 savings(for now) and heavily regulate and penalize early withdrawals and prevent you from using 401(k) money outside the program.

Number 1 would be to get off the target date and into more aggressive funds inside the 401.

Number 2 would be to talk with HR and ask if they can get some more aggressive funds into the program or at least review you choices with you and help you select better paying funds. Their job is to help you facilitate your 401.

Number 3 is to follow the Dave Ramsey Method of 401. 401(k) Match beats Roth Beats traditional beats Roth IRA beats Ira.
In this method you put money in starting on the left up to your return percentage. If you get a company match, and it's not good, you put just enough money in to get the company match. Then you stop. If you have a non matching roth 401 you put your next bit of money into the roth. You next best choice is the traditional 401. If you don't get a match, have no roth 401 and a crummy traditional, then you invest outside the company in a roth IRA. If you don't have a roth option then you invest outside your 401 in trad IRA.

Bottom line, if your 401 is not giving you the returns you need, your best option is after tax, outside the company in your IRA. Trying to get the money out before 59.5 is gonna cost you a bundle. I know dave ramsey is a polarizing guy, but his thoughts on this exact scenario are pretty good.

quote:

Originally posted by jeffxjet:
Trying to get the money out before 59.5 is gonna cost you a bundle. I know dave ramsey is a polarizing guy, but his thoughts on this exact scenario are pretty good.

That can be true, but if the OP is over 55 and if his plan allows it, he may be able to make early withdrawals without additional penalty under the IRS Rule of 55. He will still need to pay income tax, same as a post-59.5 401K withdrawal.

Another point in addition to the excellent comments by Rey HRH is that, depending on how long you’ve been with your employer you may or may not to be fully vested and that may have an impact on your ability to move your money around.

On my wife’s 401K which I’ve managed for the last 30+ years, we have consistently averaged over 10% return so your portfolio choices need to be adjusted asap. You don’t really have to get into an aggressive fund to get a decent rate of return.

Also, carefully check what the management fees are for the funds available to you. Typically an index fund will offer good returns and have some of the lowest management fees.

quote:

Originally posted by Rey HRH:
That you can’t choose which funds your money goes to is eff’ed up. 1) it’s not like this 401k election thing is just rolling out. 2) who’s the company doing the administration that they can’t put out a working website? 3) I can’t believe you’re the only one affected and nobody else has complained?

1) Yessir, it is. And that will be the primary subject of tomorrow's phone call.
2) Not to name names, but it's Insperity.
3) I'm not sure if or why I'm the only one questioning this. It's a crummy situation.

quote:

Originally posted by jeffxjet:
Im not an expert either, but your answers are no and no. The govt protects 401 savings(for now) and heavily regulate and penalize early withdrawals and prevent you from using 401(k) money outside the program.

Understood. I'm not trying to withdraw early, specifically. Though I can see that it might be considered a withdrawal if I took it out of one type of plan (401k) to put it into another type (IRA).

quote:

Originally posted by jeffxjet:
Number 1 would be to get off the target date and into more aggressive funds inside the 401.

Workin' on it!

quote:

Originally posted by jeffxjet:
Number 2 would be to talk with HR and ask if they can get some more aggressive funds into the program or at least review you choices with you and help you select better paying funds. Their job is to help you facilitate your 401.

Understood. Our HR function is, ahem, "somewhat limited," thus the necessity of tackling this myself.

quote:

Originally posted by jeffxjet:
Number 3 is to follow the Dave Ramsey Method of 401. 401(k) Match beats Roth Beats traditional beats Roth IRA beats Ira.
In this method you put money in starting on the left up to your return percentage. If you get a company match, and it's not good, you put just enough money in to get the company match. Then you stop. If you have a non matching roth 401 you put your next bit of money into the roth. You next best choice is the traditional 401. If you don't get a match, have no roth 401 and a crummy traditional, then you invest outside the company in a roth IRA. If you don't have a roth option then you invest outside your 401 in trad IRA.

I appreciate that. I didn't know that's Dave's method, but I'm already doing part of that. It looks like my next steps include figuring out how to get into an external Roth.

quote:

Originally posted by jeffxjet:
Bottom line, if your 401 is not giving you the returns you need, your best option is after tax, outside the company in your IRA. Trying to get the money out before 59.5 is gonna cost you a bundle. I know dave ramsey is a polarizing guy, but his thoughts on this exact scenario are pretty good.

That's where I fear I'm headed -- taking the tax hit now in order to invest outside the company plan. Again, I'm not trying to liquidate it at all, just trying to get a better return. Dave? Polarizing? Heck, yeah! I've been trying to get the 26-year-old on my crew to run through the Ramsey course. I warn her that he's got good advice, but he's such a pompous jerk.

vt, regardless of what you find out with your company, open a personal Roth IRA if you haven't already and max it out every year...if you're able. It's one of the best things available to us.

quote:

Originally posted by smlsig:
Another point in addition to the excellent comments by Rey HRH is that, depending on how long you’ve been with your employer you may or may not to be fully vested and that may have an impact on your ability to move your money around.

On my wife’s 401K which I’ve managed for the last 30+ years, we have consistently averaged over 10% return so your portfolio choices need to be adjusted asap. You don’t really have to get into an aggressive fund to get a decent rate of return.

Also, carefully check what the management fees are for the funds available to you. Typically an index fund will offer good returns and have some of the lowest management fees.

Thank you, smlsig. I am fully vested, so that's a plus. And 10% is more in line with what I think I ought to be getting in this market.

- - - - -

6guns (and others): Can a person have more than one Roth?

I'm maxing out the Roth plan in the work plan; can I have an external Roth, too?

To put a bit more specificity on things, my contribution rate is set at 23% right now. That 23% is divided up to max the internal Roth ($8k/year, right?) and the rest goes to the traditional 401k.

quote:

Originally posted by vthoky:
6guns (and others): Can a person have more than one Roth?

I'm maxing out the Roth plan in the work plan; can I have an external Roth, too?

To put a bit more specificity on things, my contribution rate is set at 23% right now. That 23% is divided up to max the internal Roth ($8k/year, right?) and the rest goes to the traditional 401k.

Well, there are two different types of Roth accounts: Roth IRA and Roth 401k.

Which type of account is the "Roth plan" you have through your work?


If it's a Roth 401k, you can have your own personal Roth IRA in addition to that Roth 401k. And if it's a Roth 401k, the contribution limit is more than $8k that it would be for a Roth IRA... It'd be $23,500, plus another $7500 if you're 50+.

But keep in mind that since you have a traditional 401k in addition to potentially a Roth 401k, that total 401k annual contribution limit applies across all of your 401ks put together.


Or, if it's a Roth IRA and you're talking about having two Roth IRAs specifically, while you technically could have two Roth IRAs at two different brokerages, or both a Traditional and a Roth IRA at the same or different brokerage, your total annual IRA contribution cap of $7k if under 50 or $8k if 50+ would remain the same, regardless of the number of IRA accounts it's split between.


So there's not much reason to have two Roth IRAs.

But there are good reasons why one might have both a Roth 401k and a Roth IRA.

quote:

Originally posted by RogueJSK:
And while you could have two Roth IRA accounts at different brokerages, or both a Traditional and a Roth IRA at the same or different brokerage, your total annual IRA contribution cap of $7k if under 50 or $8k if 50+ would remain the same.

Well, that takes care of that. I'm set to put the $8k into the work Roth already.

And you're sure the "work Roth" is a Roth IRA, not a Roth 401k?

Just a thought...if it is a work Roth and you're not very happy with your company's administration of the plan, maybe think about having your own personal Roth outside the company. Your investment choices will be virtually unlimited.

I'm feeling leery about your 401k administrator...and HR Dept.

ETA, when I worked my last job, I too had a pretty incompetent HR Dept. I feel your pain.

quote:

Originally posted by RogueJSK:
And you're sure the "work Roth" is a Roth IRA, not a Roth 401k?

Actually... I'm not sure.
The Q3 statement doesn't make that particularly clear. I'm thinking now that it's a Roth 401k, but I'm trying now to verify that.

- - - - -

ETA: Looks like it's a Roth 401k.