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401(k) Rollover to Vanguard IRA

by retirebyforty on April 2, 2012 · 28 comments

in early retirement, investing

rollover 401k to Vanguard IRA

The following is a guest post from my brother, Nik. I have been hounding him to rollover his various 401(k) accounts from previous employers into a single IRA for over 5 years. He finally moved one account to Vanguard this year and the following is his experience. 

My Experience Rolling over to Vanguard

Like many, I have been with several employers since I finished school and started in the workforce.  And because I have always been pretty good about contributing to my retirement accounts, at one point I had a Roth IRA, two 401k’s, a 457b and my own individual stock account.  Trying to manage so many accounts was daunting, so I ended up doing what a lot of us do – ignoring them and just letting things sit.  While this isn’t terrible (I figured at least I had some retirement funds gaining money) it goes against the idea of rebalancing and diversifying your portfolio.  So, after reading my brother’s blog for the last year, I was finally motivated to try to consolidate the accounts so I could take a (slightly) more active role in managing my portfolio.

I chose Vanguard basically because I had heard a lot of good things about their no/low load funds and good performance.  I started by calling the number on their Personal Investors website, quickly got through to a live person and explained that I wanted to rollover my IRA from a former employer to Vanguard.  I was transferred to a “concierge” transfer specialist who then walked me through the process of creating an account online, which took about 5 minutes.  He also verified that I wanted to do a rollover IRA and asked what type of investments I wanted to place the money in once it reached Vanguard.  I opted for a money market holding fund until I could do more research on their offerings.

Then he asked for the contact number for my former employer’s IRA people and I was placed on hold while he contacted them to explain the situation.  After a few minutes, the Vanguard agent came back on the line with the other agent conferenced in and we quickly verified my identity and intent.  The Vanguard agent was also good enough to ask questions that I didn’t think of, such as what papers I needed to sign and where to send them when I was done.

After hanging up, I received an email confirming creation of my Vanguard account as well as a couple of documents to sign, which I sent back right away.  A week later I got a packet in the mail from my former employer, so I filled that out and sent it in and a few days after that an email confirmed that my funds had been transferred over.  All in all, it was a very easy process and Vanguard was very helpful in expediting what could be a confusing process (though I suppose when you’re giving someone money, it makes sense for them to make it as easy as possible for you.)

As for the details of the account itself… My account is a Rollover IRA account and allows me to trade for any of Vanguard’s mutual funds (they have about 100 of them) without a transaction fee, though some of them have a time limit redemption fee (1% if redeemed in < 1 year, etc.)  They do not allow trading in specific stocks, ETF’s unless you have a “brokerage” account.  You can open a brokerage acct under the umbrella of your IRA acct and that costs $20/year and there is a transaction fee for trades ($7 per trade for the first 20 trades in a calendar year then $20 per trade thereafter).  If you have more than $50,000 combined in your Vanguard holdings, you are considered a “Voyager” member then the $20 fee is waived and the transaction fee becomes $7 for all trades.

At the moment, I’ve decided to split up my IRA into health care, emerging markets and energy mutual funds to balance out my portfolio in my other accounts.  I still have a couple of other 401k’s that could be transferred but want to wait a bit and see how my experience at Vanguard goes before doing that.  Hopefully, this will help me consolidate my portfolio a bit and allow me to manage things more appropriately.  I’ll write back and let you all know how it goes!

retirebyforty> Thanks for sharing your experience! I’m glad you did it. I would rollover my 401(k) as soon as I can when I leave a job. That way you can have full control of your money. Companies change their 401(k) plans occasionally and if you don’t pay close attention, you won’t know what they are doing with your money.

There is a great new website to help you manage your investments – Personal Capital. You can keep track of your income, expenses, and investments, all in one place. Personal Capital is geared for investors and have many great tools. See my review of Personal Capital and how they helped me reduce what I’m paying in investment fees.

 

{ 26 comments… read them below or add one }

Sara April 2, 2012 at 10:38 am

Does vanguard sync well with Mint.com?

That is one of my criteria before i do a roll over

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retirebyforty April 2, 2012 at 10:49 pm

Maybe you can email Mint or Vanguard for an answer?

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GSP August 19, 2012 at 4:42 pm

Vanguard seems to sync very well with Mint.com, at least in the accounts I have with them. Certainly far better than the employer-specific 401ks!

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Frugal Portland April 2, 2012 at 12:43 pm

Sara, I’m sure it does — they advertise on mint! Fidelity syncs really well.

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krantcents April 2, 2012 at 3:12 pm

I just converted or rolled over a 403B with Fidelity. I have Vanguard too, but chose to stay with Fidelity because of the investment choices. The fees are almost the same as Vanguard.

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retirebyforty April 2, 2012 at 10:50 pm

I have my 401(k) with Fidelity, but I like Vanguard funds more so I probably would pick Vanguard when I roll over.

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Ryan May 15, 2012 at 10:37 am

I just did this last week. IRA rollover from Fidelity to Vanguard.

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ShortRoadTo April 2, 2012 at 4:09 pm

A rollover is a very smart choice. Less restrictions. Please check out my post on rebalancing your investments once per year. Doing so will shave a year off your working years.
http://shortroadtoretirement.com/2012/04/rebalance-your-portfolio-retire-earlier.html

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Brent Pittman April 2, 2012 at 8:28 pm

I’ve just done a rollover to Vanguard also. It was very easy to figure out online and the money was there in less than a week. Yes! to low fees. Make sure to sign up for email delivery for statements to avoid the $20 yearly fee.

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retirebyforty April 2, 2012 at 10:51 pm

That’s a good tip about email delivery. Thanks.

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Broke Professionals April 3, 2012 at 4:03 am

I have heard so many good things about Vanguard! My dad, like you with your brother, has been hounding ME to make the switch. I think I’m just being ornery by not following his (and your) advice.

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retirebyforty April 3, 2012 at 3:22 pm

You should go ahead and do it. It is painless. :)

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Ray April 3, 2012 at 5:55 am

I rolled over my 401k to Vanguard after I switched jobs.

I had a similar experience and since my 401k was over $100k (it might be different now), I was given the lower rates for trading mutual funds and ETFs of Vanguard. Everything was done over the phone and just like the OP said, they contacted my previous 401k provider and initiated everything over the phone.

As far as Mint goes, I have not had any issues with my Vanguard account. It has been about 1 1/2 years since the rollever and my account has never had one single sync issue.

The only negative thing I’ll say about Vanguard is that their tools are limited. I use Etrade for most of my active trading and analysis because Vanguard is more what I would call “old fashion”. I guess that’s how they keep their costs down on their funds. They also do not allow you to trade OTC/Pinks. Which really hurts, especially when some pinks are multi-billion dollar companies that are foreign and don’t trade on the major US exchanges.

All in all it’s a no nonsense website that does things the old fashion way. If you want some if not the lowest mutual fund fees in the industry, then Vanguard is your place. They introduced them and they have them perfected.

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Bichon Frise April 3, 2012 at 8:00 am

I wouldn’t say Vanguard is “old fashioned,” just that your active trading goes against their fundamental philosophy of passive index investing.

If you are able to get into admiral shares ($10k min investment for index funds and $50k for active) you can receive paper statements and the fee is waived.

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retirebyforty April 3, 2012 at 3:24 pm

Thanks for your input. I’ll probably buy Vanguard funds/ETF in the Vanguard account and use another account for active trading as well.

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Ray April 4, 2012 at 5:22 am

That’s what I would do if you like to analyze data, charts, news etc.
Vanguard just doesn’t have those abilities.

Don’t get me wrong, Vanguard is good if you want the lowest fees in the industry for their funds, but for normal trading of stocks there are better options out there.

What I have done numerous times is simply do my research through say ETrade and then go and buy the stock I’m looking at through Vanguard.

The inability to trade OTC/Pinks also don’t help Vanguard out.

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Ray April 3, 2012 at 8:13 am

I would call them “old fashioned”. I don’t day trade, but I do like the tools that companies such as ETrade has. If you look at the tools Vanguard has to analyze a stock, mutual fund or ETF they are ancient compared to Etrade.

Since when is having more tools at your disposal a bad thing?

Like I said I use Vanguard for my 401k and they have pretty much the lowest fees available for their funds.
I do think people should understand that Vanguard doesn’t have the same type of tools you might find from other trading companies. That is all I was getting at.
I gave both the pros and cons of Vanguard.

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Bichon Frise April 4, 2012 at 10:45 am

You seem to not fully understand the Vanguard philosophy. That is all I am getting at.

There are theories, and most of which I subscribe to, which state the more “tools” at your disposal is a bad thing. Mainly because it is believed that people can “out think” their investments by using these “Tools,” and that generally leads to below average returns (e.g. past performance doesn’t guarantee future results). Of course, a lot of this is the Vanguard philosophy and why they don’t offer these “tools.”

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Ray April 4, 2012 at 11:12 am

No, I’m not saying I don’t understand the philosophy. I do understand the philosophy, but maybe others don’t know that Vanguard doesn’t have tools or additional resources that they are accustomed to seeing at their discount broker.

I’m not knocking Vanguard, but I am weight the pros and cons of what they offer. I thought that was the point of this whole discussion.

I’ve already stated if you want the lowest funds in the industry to come to Vanguard. Do you not want me to state the cons of their business strategy?

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MoneySmartGuides April 3, 2012 at 11:12 am

My sister is in the exact same position as your brother. I’ve been trying to get her to mover her old accounts as well but have not been successful. I think it comes down to fear of the unknown. many people don’t know what they are doing and are OK leaving things as they stand. But if you always stay in your comfort zone, you will never grow.

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retirebyforty April 3, 2012 at 3:29 pm

I think people are just resistant to any kind of change. It is just easier to leave it.

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Ray April 4, 2012 at 5:25 am

Agree…The hardest part for me was deciding who I wanted to rollover my money too.

What people don’t understand is you can roll it over to say Vanguard and if you don’t like them, then roll it over to Etrade and if you don’t like them, roll it over to Schwab etc.

Usually from start to finish it’s no more than 7-10 business days if you do it right. I just wanted to option to trade stocks or funds or ETFs that I could not access before through my previous 401k provider.

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Bichon Frise April 4, 2012 at 10:40 am

One caveat about IRA to IRA rollovers just because you “don’t like them” (or whatever reason you want to rollover), and I would read IRS pub 590 before taking Ray’s or my advice, is that you must wait 12 months between Rollovers. Here is a link to Pub 590, and to save you a bunch of reading, you can see under the big bold letters spelling out, “Waiting period between rollovers” on pg 23 which states the 1 year waiting period from when the distribution occurs. http://www.irs.gov/pub/irs-pdf/p590.pdf

Of course, the IRS doesn’t know exactly when the rollover occurs, just what a 1099R and 5498 tells them, which doesn’t include dates other than the year they are for. So, you may be able to get away with just doing different calendar years, but best is to wait at least 1 full year. I’d hate to see an auditor take someone to the mat on this issue and they get hit with taxes and penalties.

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Ray April 4, 2012 at 11:09 am

Good advice. I am not a tax attorney or a lawyer, so yes check the tax laws if you decide to rollover multiple times.

Christa April 3, 2012 at 11:37 am

Great info! I like the personal experience details — it helps to see how people have fared with different companies before making a rollover choice!

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gordonmsmith March 12, 2013 at 3:38 am

Rollover to Vanguard IRA is very informative website very helpful for us. i really like that thank you for this ….

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