401k rollover during rally

[Kimm]

Maybe I'm over thinking it. I recently changed employers after 10 years and have ~220,000 in my 401k. With ridiculous high fees 1.3 to 1.6%. I am having a hard time rolling it over to my vanguard acct. I would have to sell and feel like I would be losing money in the end since I would have to sell funds and buy funds at inflated prices. Do I just need to do it and forgot about?

[SeattleCPA]

I don't understand.

But to keep the analysis easy, if you have $220K in the Vanguard total stock market index fund in your 401(k) plan and you direct transfer that money to Vanguard so you have $220K in the Vanguard total stock market index fund in your IRA... how have you changed your portfolio risk? You haven't, have you?

Maybe what you're thinking is that your high-cost collection of funds inside your 401(k) is somehow less risky than what you'll put money into in Vanguard? But why would that be? Really, it'll be less risky probably to pay less in fees.

BTW, a few weeks ago, after re-reading some David Swensen stuff, I did  a blog post about tactics I see in Swensen's writing that represent practical ways to dial down our portfolio risk given the lofty valuations. Here's the link:

http://evergreensmallbusiness.com/bear-market-survival-tactics/

But to summarize, we want to have a smart asset allocation, rebalance to avoid drift, run simulations using tools like cfiresim, and then not panic when the evitable market downturn occurs.

[NoStacheOhio]

The difference between the value today and the value when you repurchase shares of funds with much lower fees is unlikely to be hugely different. The market fluctuates, it's just a fact of life.

If you can transfer in-kind, then you can do a sell-to-buy once the transfer is complete, eliminating the cash holding period.

[MrGreen]

The simple process of selling and buying won't cost you anything. It would be like selling a dollar and then buying a dollar. The market could fluctuate a little in the time you money is on the sidelines, usually not more than a couple days, but that could go either way. The market could go down a little and you buy back in slightly lower, or vice versa. Either way it's inconsequential in the long run. As other's have mentioned, the difference in fees is huge. You could sell, see the market rise a percent, then buy back in, and just a 1% lower fee offsets that action entirely, plus you then have the advantage of lower fees for the rest of your life.

[letthelightin]

The difference between the value today and the value when you repurchase shares of funds with much lower fees is unlikely to be hugely different. The market fluctuates, it's just a fact of life.

If you can transfer in-kind, then you can do a sell-to-buy once the transfer is complete, eliminating the cash holding period.

Just as a heads up on this- if you transfer in-kind, you might be charged a fee to sell those funds once they're in your Vanguard account (depending on what funds you are transferring in), so you should check into that first.

I learned this the hard way when I transferred funds in-kind to Vanguard from my financial adviser. It wasn't until after the transfer was complete that I realized there was a $35 fee to sell each fund we had, and between our multiple IRA accounts, we had nearly 30 different funds that our financial adviser had us invested in. That $1,000 mistake was hard to swallow.   

[MrGreen]

It wasn't until after the transfer was complete that I realized there was a $35 fee to sell each fund we had, and between our multiple IRA accounts, we had nearly 30 different funds that our financial adviser had us invested in.

Holy crap! 30 funds?! Glad you got outta there!

[letthelightin]

It wasn't until after the transfer was complete that I realized there was a $35 fee to sell each fund we had, and between our multiple IRA accounts, we had nearly 30 different funds that our financial adviser had us invested in.

Holy crap! 30 funds?! Glad you got outta there!

Thanks! Me too! Using, and subsequently leaving, our financial adviser was an expensive but valuable lesson that I can manage our finances just as well as a "professional" can, as long as I am careful to do my research before making any big changes. I consider it the cost of education. :)

OP, I hope you've gotten the help you were looking for. I don't have much to add, except to say that I agree with the others. Yes, you might be buying into your Vanguard account at an "inflated" price, but you are also selling off your 401k at an "inflated" price. You're taking 220K from your 401k bucket and moving it to your Vanguard bucket. It sounds like the fluctuation that could happen in the market between selling & buying would pretty easily be balanced out by the amount you are going to save in fees.

Good luck!

[Kimm]

Thanks for the responses. I think the analogies of a dollar is a dollar and 401k is also over inflated helped me gain perspective again. Just over thinking and being a little greedy. Just need to move it to my Vanguard account.