Comments on: Clever 401(k) Rollover “Strategy”

By: Cory Aldrich

Cory Aldrich — Mon, 11 Sep 2006 13:40:51 +0000

Yeah… this is fishy. And odds are the custodian isn’t actually placing the trades until after the “cancel by” date. I can’t imagine the system has a built in way to game it.

Also, and this may go without says, remember the mutual funds are only valued once a day after the market closes and the underlying assets have been valued.

By: wanzman

wanzman — Mon, 11 Sep 2006 02:04:12 +0000

Look at it this way, if you had not changed employers, then you would not have had to do a trustee to trustee rollover in the first place, follow? If you had not changed employers then your 401k would suffer that loss or gain no matter what, and you probably would not have cared, because after all it is a long term investment, right? So when rolling over with the new trustee, you will either incur a (most lilely small) loss or gain based on what the market does that day, but does it really matter, because if you were not rolling over the account would have been subject to the fluctuation anyways.

The only case I could see this even being worth an afterthought is if you were going to miss out on a day when the market had a historic gain. But I would want to check and be sure as to what time the account balance would be calculated on, whether it be at the end of day one, or the end of day two.

Or another option is to pray the market stays relatively flat while you complete the rollover so you do not have to worry the rest of your life about what might have been!

By: fivecentnickel.com

fivecentnickel.com — Sun, 10 Sep 2006 21:50:57 +0000

Oh wait, I think I get it… You’re assuming that the transfer amount will be calculate at close on Day 1, and then you can cancel on Day 2. So you’d miss out on the Day 2 increase if you went ahead with it. Is that right? But if they give you until Day 2 to cancel, then I’d be willing to bet that the transaction amount is figured on Day 2.

By: fivecentnickel.com

fivecentnickel.com — Sun, 10 Sep 2006 21:47:40 +0000

Maybe I’m being thick, but I don’t see the point of doing this. If you were converting a traditional IRA to a Roth IRA instead of doing a trustee-to-trustee 401(k) transfer, then I could see tha advantage — after all, a trad/Roth conversion is a taxable event, so you’d probably rather do it on a down day. But why is it helpful in this case?

By: Pete

Pete — Sun, 10 Sep 2006 18:39:53 +0000

Sounds a little bit fishy. Some mutual funds just got in trouble for something similar done by traders.

I would ask your friend when the balance would have been calculated without the cancelation. My belief is that it was the end of the next day at 4:00 anyways (up or down). As with some mutual funds, you need to get your order in by a certain time to make it effective. Thus, if he called and was told that the transaction would happen at 4:00 the next day, of course he could cancel it up until the order is placed. However, he would also gain or loss based on what the market does before then (cancel or not). In other words, his balance he trasnfers is based on the 4:00 market price the next day.

By: jim

jim — Sun, 10 Sep 2006 17:53:26 +0000

Sure, but don’t you think every little edge counts? Why do people clip coupons or look to save a few bucks on an airline flight?

By: Get Real

Get Real — Sun, 10 Sep 2006 16:46:53 +0000

401(k) /IRA is a long term investment.
Ofcourse you can game the system to get advantage for a day or two , but the account has a lifetime of 20-30 years.

Kind of pointless , dont you think ?