Author Topic: Rolling over 401K into Traditional IRA  (Read 6201 times)

Sebastian

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Rolling over 401K into Traditional IRA
« on: May 28, 2014, 08:34:35 AM »
Ok so I did do a search before I posted this just because I didn't want redundencys in the forums. I only was able to find rolling a IRA into a 401k. I think I'm trying to do the opposite though....

I'm quitting my job next week (once I become vested with the company). I "think" I'd like to roll that 401K over into a Vanguard Trad. IRA asap so I can start benefitting from lower fees and such.

How would I go about doing this? Is it relatively easy, and/or is it the right thing to do? If you need additional deets to assess the situation let me know.

Thanks!

matchewed

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Re: Rolling over 401K into Traditional IRA
« Reply #1 on: May 28, 2014, 08:40:18 AM »
So easy.

Go to Vanguard and you can initiate it from there.

Basically they will have you open an IRA. Fill out some paperwork which will include the account information, approximate balances in the 401k, and financial institution it is with. Wait a few weeks (at mostish) and voila. IRA.

Frankies Girl

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Re: Rolling over 401K into Traditional IRA
« Reply #2 on: May 28, 2014, 08:43:20 AM »
From my research, it seems like that is a good idea.

If you leave it as a 401k, then it stays under the company's umbrella of restrictions and with whatever investment group they had it through. Rolling it to a traditional IRA means you can move it to where you'd like (Vanguard) and invest in whatever you'd like.

As far as moving it/converting it, it should be a pretty simple matter. You would need to call up Vanguard and ask for the paperwork to fill out (it's probably on their website, but they can also direct you), get all of that filled out and then send it to them, and they handle the transfer and conversion.

Good post to check out specific to rollover IRAs (from Fid to Vanguard)
http://www.wealthinformatics.com/2013/02/04/procrastination-cost-my-retirement-2500-the-complete-guide-to-rolling-over-your-old-401k-to-an-ira/
Quote
At first, I called the general Vanguard customer service number. I was on hold for more than 15 minutes before I hung up. This happened twice. I almost gave up and thought about going with Fidelity (whose customer service I really like). I decided to call them one last time, this time instead of the main customer service number I called the Vanguard concierge (1-800-750-1520). I was connected immediately. After that everything went very smoothly.

Sebastian

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Re: Rolling over 401K into Traditional IRA
« Reply #3 on: May 28, 2014, 09:04:35 AM »
Great thank you both!

rugorak

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Re: Rolling over 401K into Traditional IRA
« Reply #4 on: May 28, 2014, 01:17:09 PM »
I did this a few months ago after changing jobs. It was insanely easy. I already had my Roth and some taxable stuff with Vanguard which made it even easier. The only annoying thing for me is that my old account was with Fidelity and they had to send the check to me, which I had to then send on to Vanguard. But the check was made out to Vanguard. Don't ask me why, it makes no sense. But other than that it couldn't be easier.

wtjbatman

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Re: Rolling over 401K into Traditional IRA
« Reply #5 on: May 28, 2014, 02:50:14 PM »
But the check was made out to Vanguard. Don't ask me why, it makes no sense. But other than that it couldn't be easier.

I believe that's so they don't have to take out the 20% (tax) + 10% (penalty) = 30% that gets taken out for non-eligible withdrawals.

Don't quote me on that though, I've never rolled over a 401k. In my pre-mustachian days I always cashed it out! Doh!

hodedofome

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Re: Rolling over 401K into Traditional IRA
« Reply #6 on: May 28, 2014, 03:12:50 PM »
It all depends on how much of a pain your 401k folks want to be, and how prompt they are. They will be the reason for how easy or difficult it is to roll it over. But it's worth it in the end.

Eric

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Re: Rolling over 401K into Traditional IRA
« Reply #7 on: May 28, 2014, 03:17:07 PM »
But the check was made out to Vanguard. Don't ask me why, it makes no sense. But other than that it couldn't be easier.

I believe that's so they don't have to take out the 20% (tax) + 10% (penalty) = 30% that gets taken out for non-eligible withdrawals.

Don't quote me on that though, I've never rolled over a 401k. In my pre-mustachian days I always cashed it out! Doh!

I believe the question was not "Why was it made out to Vanguard?", but rather "Why can't they just mail the damn thing directly to Vanguard?"

Joel

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Re: Rolling over 401K into Traditional IRA
« Reply #8 on: May 28, 2014, 04:27:14 PM »
Just make sure that you are benefitting by doing so. My current employer offers the same funds as vanguard but has lower expense ratios. In my case, it's best to put all my money in my 401k instead of my IRA!

rugorak

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Re: Rolling over 401K into Traditional IRA
« Reply #9 on: June 03, 2014, 12:10:18 PM »
I believe the question was not "Why was it made out to Vanguard?", but rather "Why can't they just mail the damn thing directly to Vanguard?"

Exactly right. It makes perfect sense that the check was made out to them. It just doesn't make much sense that they had to mail it to me first. I guess the only reason might be as an extra verification step that I am who I say I am. But it seems ridiculous to me since both sides have to verify my identity for legal reasons anyway. And I had to go through identification procedures anyway and there is a paper trail as well.


Sebastian

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Re: Rolling over 401K into Traditional IRA
« Reply #10 on: June 03, 2014, 12:46:33 PM »
Well the account is currently with Charles Schwab and I believe the fees are a little bit higher, but yeah as soon as I'm done with my job I'll make the switch asap! I should be able to get the admiral version too as I have a little over 14k in my 401k :)!

Cheddar Stacker

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Re: Rolling over 401K into Traditional IRA
« Reply #11 on: June 03, 2014, 01:16:58 PM »
This should be obvious but I'm going to say it anyway. DON'T cash/deposit a check if they send it to you. DO send it wherever it needs to go immediately.

I think you have 90 days (not sure, but something like this) from the time of issuance to get the check deposited into a new tax deferred account, or it becomes a taxable and penalty-able (is that a word?) withdrawal. I've had many clients accidentally cash out their 401K because they were going to "deal with it later" and forgot.

Sebastian

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Re: Rolling over 401K into Traditional IRA
« Reply #12 on: June 04, 2014, 10:25:28 AM »
This should be obvious but I'm going to say it anyway. DON'T cash/deposit a check if they send it to you. DO send it wherever it needs to go immediately.

I think you have 90 days (not sure, but something like this) from the time of issuance to get the check deposited into a new tax deferred account, or it becomes a taxable and penalty-able (is that a word?) withdrawal. I've had many clients accidentally cash out their 401K because they were going to "deal with it later" and forgot.

good tip. thanks for that!

Dollarbill49

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Re: Rolling over 401K into Traditional IRA
« Reply #13 on: June 04, 2014, 04:09:33 PM »
It's 60 days for the rollover.

ANy time you can take advantage of a trustee to trustee rollover, which in your case sounds applicable, you should.  That ususally means the funds get transferred directly from the old account to the new, without send you a check.


Steve Ainslie

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Re: Rolling over 401K into Traditional IRA
« Reply #14 on: June 05, 2014, 04:33:31 AM »
Quick question -

I did the fidelity 401k to Vanguard Ira rollover when I left my previous employer in Feb.   It went exactly as the previous poster mentioned.

Then, surprisingly I received a small end of quarter bonus check from my previous employer and had an additional deposit made into my 401k at fidelity which I had assumed was closed since I'd done the rollover a month earlier.

Can I do another rollover for the final balance without incurring any tax penalties? 

Believe it or not I've been unable to Google an answer on this not get clear direction from Vanguard. 

I cannot determine if I can only do one rollover a year penalty free.

Cheddar Stacker

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Re: Rolling over 401K into Traditional IRA
« Reply #15 on: June 05, 2014, 05:56:55 AM »
If the plan has a safe harbor match, or if your ex-employer decides to increase their matching rate, you could receive a contribution anytime up until 9/15/15. If you are eligible according to ERISA they will comply, so they have no reason to "close" your account even with a zero balance.

If it's a small balance I think you should just leave it and setup a reminder to roll it over next fall. However, I'm not aware of any rule preventing you from doing 2 rollovers in 1 year.

rugorak

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Re: Rolling over 401K into Traditional IRA
« Reply #16 on: June 05, 2014, 01:09:53 PM »
Quick question -

I did the fidelity 401k to Vanguard Ira rollover when I left my previous employer in Feb.   It went exactly as the previous poster mentioned.

Then, surprisingly I received a small end of quarter bonus check from my previous employer and had an additional deposit made into my 401k at fidelity which I had assumed was closed since I'd done the rollover a month earlier.

Can I do another rollover for the final balance without incurring any tax penalties? 

Believe it or not I've been unable to Google an answer on this not get clear direction from Vanguard. 

I cannot determine if I can only do one rollover a year penalty free.

Actually this happened to me as well. My previous employer was doing their post year end books and found that they missed a payment to me when I left. So they put it in to balance their books. Basically I had to do a repeat of the same process all over again but otherwise no issues. Easy and a bit less worrying on my part as the second check was much smaller than the first.

El Marinero

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Re: Rolling over 401K into Traditional IRA
« Reply #17 on: June 06, 2014, 01:40:47 PM »
I did this recently, rolling a 401K directly into an IRA at Vanguard.

Vanguard has a department that specializes in this.  Call them up, tell the person on the phone that you want help rolling over a 401K.  He/she  will connect you to the right place. 

Vanguard initiated a conference call with the 401K custodian, and provided some information to the other firm.   I listened, and provided my consent to the transaction.  That part took about 15 minutes.  It took about 5 days for the funds to show up.

I didn't have to do anything else. This isn't the only way to go, but it was pretty painless.