The Money Mustache Community

Learning, Sharing, and Teaching => Investor Alley => Topic started by: Monkey stache on September 25, 2016, 11:43:33 PM

Title: Rolling over a 401k under $800
Post by: Monkey stache on September 25, 2016, 11:43:33 PM
I have a friend who has $800 in her 401k that she needs to rollover since she left that employer. She's asking for recommendations but I have a few questions.

1. In this scenario, rolling it into an IRA is tax free and penalty free since she's no longer with the employer, correct?
2. Do Vanguard minimums apply if the money is from a 401k?
3. If she can't open a Vanguard account due to the minimums, what do you recommend?

Unfortunately she does not have the extra $200 to put her at $1,000 for certain Vanguard accounts. Also the 401k will be automatically cashed out if she doesn't take action.
Title: Re: Rolling over a 401k under $800
Post by: gimp on September 26, 2016, 12:24:39 AM
1. Yes
2. I don't know... probably? She might be able to put it into the money market account till she can save more.
3. Maybe someone like Schwab?
Title: Re: Rolling over a 401k under $800
Post by: Proud Foot on September 26, 2016, 11:35:21 AM
1) Yes it is still tax free as long as it is rolled into an IRA
2) I do not know if Vanguard has minimums to open an account, just to invest in specific funds.  She could invest in ETF's which do not have a minimum other then the cost of 1 share.
3) A discount brokerage would be good.  Find one that offers commission free ETFs.
Title: Re: Rolling over a 401k under $800
Post by: Mother Fussbudget on September 27, 2016, 10:44:05 AM
1. Correct, as long as it's done within 30 days of rolling 'out' of the 401K, and into a rollover-IRA.
2. If you're speaking of investment minimums to purchase a fund (i.e. $10K minimum purchase of VTSAX), then:  YES.
However, if you're thinking specifically of VTSAX (Vanguard Total Stock Market Index - Admiral Shares), you can always invest in VTI (Vanguard Total Stock Market ETF) which has no minimum purchase requirements.  Continue adding to your rollover-IRA in coming years.  Once you invest over $3,000 in VTI, Vanguard will automatically convert VTI shares to VTSMX (Vanguard Total Stock Market Index Fund Investor Shares).  Once you hold > $10K in VTSMX, these will be converted automagically to VTSAX.
3. Read thru JHCollin's Stock Series (http://jlcollinsnh.com/stock-series/).  He is an unapologetic Vanguard fan, so you'll probably end up at Vanguard afterward.  But it's great recommended reading.  I have accounts at Vanguard (taxable & Roth), Fidelity (taxable & rollover-IRA), and TD-Ameritrade (HSA).
Title: Re: Rolling over a 401k under $800
Post by: Monkey stache on September 27, 2016, 11:26:53 AM
Very helpful. Thanks everyone! I'll recommend the ETF funds to her. I have my money in VTSMX but didn't realize it had an ETF option with no minimum.
Title: Re: Rolling over a 401k under $800
Post by: Mother Fussbudget on September 27, 2016, 03:52:24 PM
In another thread, i was corrected - VYSMX will convert to VTSAX, BUT... VTI does NOT automatically convert to VTSMX.  It *IS* the same fund, but doesn't convert.  Apologies for any confusion (mostly *my* confusion)