Rolling Over My 401(k) To Vanguard

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Today, I severed one of my last ties to my old job, my 401(k) plan. The process for rolling over my 401k to a Rollover IRA at Vanguard was fairly painless but there are several areas that you need to keep an eye out.

First, talk to the benefits department of your former employer to see if they have a specific process you have to follow. At my old employer, I really only had one option – get a check for the value of my assets sent to me (but made out to the IRA company, not to me; otherwise it would be subject to 20% withholding). But before I could get that check, I would have to setup a Rollover IRA account because you are required by law to deposit the rollover check within 60 days and I didn’t want any hiccups messing everything up.

This meant that I needed to have opened a Rollover IRA account at Vanguard first. So, going to the Vanguard website, opening one up was easy until I reached Step 3 where I was presented with this question:

Check with either your former employer’s benefits office, or the financial institution currently holding your assets, to find out which option best describes what you need Vanguard to do.

  • Send my financial institution a written request. The financial institution holding the assets from my employer-sponsored plan requires a written request from Vanguard to initiate the rollover.
  • Provide an account number only. I completed (or am in the process of completing) my termination paperwork (paperwork for the financial institution currently holding my assets) and instructed (or will instruct) the financial institution to send my assets to Vanguard. Before the financial institution will send these assets, I need to provide the account number for my new Vanguard IRA®.
  • Complete and return my paperwork. My financial institution requires Vanguard to complete its termination paperwork, provide an account number, and return the termination paperwork per the instructions provided.

Based on what I know from my former employer’s benefits office, I really just need to select option 2 – Vanguard does nothing, I just present the account number to my former employer to finish the process. (as an aside, I had to liquidate my self-direct investment option with Charles Schwab and transfer it into my core funds before I could initiate a rollover, so I sold 84 shares of Fortune Brands for $84.84 for a gain of 6.66%… how creepy is that?)

Anyway, now I wait for my check from my old 401k plan…

{ 7 comments, please add your thoughts now! }

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7 Responses to “Rolling Over My 401(k) To Vanguard”

  1. nelson says:

    Hey Jim!

    I just got back into my rss reader and saw your site…completely forgot about it. Looks like it’s going well.

    As a fellow quitter, I rolled over my 401(k), but did it all from our previous company’s website and I had the check sent to an E*trade rollover IRA account (I know people love Vanguard, but I’ve had funds there for a while so I get some breaks). I was a little anxious while my check was in the mail, but it made it to my account one day later than I anticipated it would and that put me at ease. ETrade even gave me a call to let me know it was received. Now I just need to decide where to put my money.

    Can’t wait for you to write up a nice post about turning a traditional IRA into a Roth IRA….and the tax implications to that process.

  2. Tinyhands says:

    For those of you trying to decide how to invest your retirement funds, I’ll throw out this little reminder: Consider your retirement portfolio as a whole. If you have $10k in your current 401k and $10k in a rollover IRA, you have a $20k portfolio and should diversify (and rebalance) it appropriately.

    Since your current 401k election options (assuming you’re with an employer who offers a 401k) are probably limited to a few simple choices [index, growth, balanced, etc] you should probably be investing your rollover IRA in such a manner that diversifies your 401k election(s).

  3. EMF says:

    I went through the rollover process recently. Had a bit of trouble understanding how the process was to work. But basically I first created the rollover account at Vanguard, unfunded to begin with. I then asked the 401k administrator to cut a check made out to Vanguard as my IRA custodian as per Vanguard’s instructions.

    The check was mailed to me. I then mailed it to Vanguard along with a filled-out form that I downloaded from Vanguard’s website. Vanguard was prompt at crediting my account with the funds. The 401 administrator was not quite as prompt at mailing the check to me.

    I then did a conversion on part of my rollover account to my Roth IRA.

  4. roman says:

    this is a very important topic. many people get taxed out of their minds because they did not know the proper procedure.

  5. aua868s says:

    with some of the lowest expense ratio, vanguard is the way to go to 401k rollovers

  6. Joel M Miller says:

    Well, I got burned earlier this year by following instructions carelessly given to me by my personal Vanguard Advisor regarding transfer to Vanguard of my retirement account. The transfer commingled pre- and after-tax monies, costing me an estimated $15,000.

    Surprisingly, Vanguard’s Business Development Group declined to stand behind the advice they had given. A supervisor told me Vanguard does not give tax advice (but admitted that my Advisor had done so, in fact, had to do so to process the transfer), asserted their representative had asked me the required questions (but admitted that he pressed ahead even though I didn’t know the answer to a critical question), said she had reviewed voice recordings of my conversations with the Advisor (but refused to make them available to me), and flatly asserted that regardless of what had been said, Vanguard had no responsibility.

    This is not the first time a Vanguard Advisor has made careless errors with my accounts, but it is the first time (and I think, the last) that I have seen that their investment instructions are given as a “you get what you pay for” freebie.

  7. joejoe says:

    I am now self employed and transfered my 401k into a rollover IRA at Vanguard. The agent had me actually talk with him on the phone with the John Hancock agent after I had fully set up my rollover IRA account with Vanguard.

    I had to fill out a form with my old employer to let them know about the transfer. John Hancock sent the balance of the 401k to my former employer HR director and she sent me the check that was made out to Vanguard.

    This took about three weeks and went as planned, but it does need to be done correctly or you will get an early withdrawal penalty or may have to pay taxes.

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