Comments on: Why I’m Rolling Over My 401(k)

By: Colin

Colin — Sat, 10 Mar 2007 15:31:09 +0000

perhaps the services of a qualified investment professional might help….our average time from initiation of rollover paperwork to transfer of assets is three weeks…

By: MoneyMan

MoneyMan — Wed, 07 Mar 2007 23:49:57 +0000

I’m in the process of doing a direct rollover of a former employer’s 410(k) into my present employer’s 401(k). It has taken me over a month sofar. The two plans do not work together. You have to do all the work for them. I had to fill out two 10 page applications (one for each plan), send all kinds of paperwork, endure the loss of paperwork, etc…

For tax reasons, I think this is the best way to do a rollover, since you never take control of the money and the old plan pays out 100% to the new plan.

The logistics of it is a killer, though. You would think you wouldn’t have to jump through hoops to move money from one of your accounts to another… but trust me, you do. Maybe I’ve just had a bad experience, but this is my opinion. I have done a few blog entries on my rollover saga if anyone is interested in more detail as to how it has been going.

Peace!

By: Foobarista

Foobarista — Wed, 17 Jan 2007 19:12:00 +0000

Again, other than laziness, why would anyone roll a 401K over from one employer to the next? No 401K plan, no matter how wonderful, will beat the investment choices you’ve got in the open market. Even if a 401K plan has good choices, all you have to do is find out the ticker symbol of the investment options you like and invest your self-directed rollover IRA in them.

All you’re doing by rolling a 401K into a new 401K is making your new employer’s plan provider a bunch of money in fees, since they typically charge their fees as a percentage of money in the aggregate 401K plan.

By: jim

jim — Wed, 17 Jan 2007 15:02:47 +0000

Anonymous – That is an excellent point! Where else can a “business” treat its customers like crap and get away with it? When the customers can’t leave!

By: Anonymous

Anonymous — Wed, 17 Jan 2007 14:40:16 +0000

You hit most of the important reasons for rolling over a 401(k). But there is one that you missed that absolutely is worth discussing.

Most of the “customers” with a 401(k) provider can’t threaten to pull their money out. The money is in the plan as long as they are working for that employer. So customer service on 401(k) plans is bad. If I have a problem with an IRA, I have the option of moving my money elsewhere. And if the problem is bad enough, I can blog about it and other customers may follow my lead.

By: Jessica

Jessica — Wed, 17 Jan 2007 01:23:59 +0000

I wonder if lots of companies are adding life cycle funds because of the fed rules change that makes them automatically enroll people in the 401k. Possibly to avoid law suits for putting people in a poor investment for their age bracket or whatever… My company just recently added them as well.

By: jim

jim — Tue, 16 Jan 2007 21:26:24 +0000

dcpi: good point, I opened up a separate Rollover IRA (it’s a different radio button) and will supply that account number to my old 401k provider. Thanks!

By: dcpi

dcpi — Tue, 16 Jan 2007 20:30:30 +0000

Make sure that you roll over into a new IRA (tell Vanguard it is a rollover). Don’t transfer it to the SEP-IRA. If you keep them separate you will be able to move it into a future 401(k) plan. That could be useful down the road with another employer that offers a better plan than your current one.

By: Foobarista

Foobarista — Tue, 16 Jan 2007 06:30:55 +0000

Given the vast number of options available for a self-directed IRA versus an employer-picked menu of 401K investment options, this seems to be a no-brainer: go for the IRA.

The only reason I can think of for rolling a 401K over to a new 401K is if someone wants to use the 401K for a loan, which can’t be done with an IRA – and is a bad idea in general.

By: Matt

Matt — Tue, 16 Jan 2007 05:05:25 +0000

Why _aren’t_ you on the Vanguard payroll, since you’re a PF blogger who likes them so much and spends time talking them up?

By: jim

jim — Tue, 16 Jan 2007 03:13:29 +0000

Yeah, if you have a stock trading account the fees are much higher than the discount brokerage firms, that’s why I have my Roth at TD Waterhouse, which charges much lower fees (still not the lowest, but those $5 a pop shops came up after I signed up with TD).

By: Lynn

Lynn — Tue, 16 Jan 2007 00:33:15 +0000

I too have accounts with Vanguard but recently closed my Brocker account with them as they charge one of highest trading rates in the industry–even in your retirement account.

By: samerwriter

samerwriter — Mon, 15 Jan 2007 20:19:11 +0000

I’ve not rolled over a 401k to an IRA, but just wanted to echo your comments regarding Vanguard.

I’ve never understood the appeal of the internet banks that offer temporary teaser interest rates, when people could be putting money into the Vanguard Prime Money Market fund and getting a very competitive return from an established company without the internet bank gimmick rates.

And to have easy access to what is widely considered the best index mutual funds in the industry is a bonus. Most of us have tax deferred accounts (IRAs or 401ks), but using Vanguard for one’s taxable savings is a nice gentle introduction to the world of taxable savings.

Sure, Vanguard won’t give you a $5 referral fee or a free iPod when you sign up, but I’m always hesitant to trust my money to people who have to offer such perks to get business.

We have two Roth IRAs, a SEP-IRA, an inherited IRA, a taxable account, and a profit sharing account all with Vanguard. Having these accounts at one institution greatly simplifies making sure that the right assets are in the right accounts (tax deferred accounts are bond-weighted, taxable accounts are stock-weighted)