Rolling over from Mega Corp to Vanguard et al

[stephenson]

Hi All,

Still working allocations for moving mega corp 401K to Vanguard – I tend to get busy at work and life – pardon if I am repeating something from an earlier thread …

Am over 59 ½ so I can rollover 100% of my 401K. I am assuming the next transfer from my pay and mega corps matching will start at the allocations I have on record. Then I can repeat the process as funds build back up - maybe even use as a reallocation tool?

My 401K allocation at mega corp is (have been doing some reallocation so I am a bit heavier in stable value and bond than usual):
- Stable Value 15%
- Bond 16%
- Large US Equity 39%
- Small US Equity 12%
- Emerging Markets 18%

I rolled over IRA funds from several managers to Vanguard about a year ago – it did simplify the management aspects a bit and the fees are way lower.

The fees on my mega corp 401K are pretty comparable with Vanguard – just not much selection – an index fund for small, large, international, emerging markets and retirement years.

Since the transfer of funds isn’t “timeable” should I roll over to like funds, or just into a liquid position and then allocate on market dips (just one strategy)?

Wife and I are 60 – good health – kids gone and don’t need help – have pension from mega-corp and military pension – and have some regular savings - so we can tolerate a bit of risk. I know allocation is a big topic and I have read zillions of threads with very valuable advice and food for thought – given our circumstances how much risk is reasonable inside the 401K? I’m not talking about going 100% REIT or Emerging Markets or anything like that, but do want to tailor for our situation.

Mega corp also has some of my compensation in a non-qualified savings excess plan account. Should I be allocating it differently than the 401K? I can’t take it out of company till I leave. Currently, it is allocated:
- Bond 33%
(also been doing some adjusting on dips - higher than it should be)
- Large US Equity 35%
- Small US Equity 11%
- Emerging Markets Equity 14%
- International Equity 7%

Please take a look and feel comfortable whacking me … I really appreciate the thoughts and comments from you all!

 

[rodi]

Make sure your plan allows this. Many mega corps preclude rolling out while still employed, even if you're over 59.5.

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[stephenson]

My plan does allow it ...they were pretty helpful.


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[INTJ10]

Suggest you open a Vanguard iRA. Then just roll them over to Vanguard. Sell them (it will cost $7/fund). Then just buy equivalent VG funds. Easy peasy....


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[stephenson]

INTJ10,

We have IRAs already at Vanguard ...I can't quite tell from your comment whether you support idea of rolling over into money fund first, then into funds in desired allocation, or, rolling fund type to fund type ...sorry ...


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[2B]

I rolled over my 401k while still employed. I had a couple hundred K in it when I turned 59 1/2. I started moving it in $50k chunks so that I wouldn't go too far to cash during the nominal 2 weeks it took. My 401k didn't support electronic transfer so I had to physically receive a check and then mail it to Vanguard. The checks were all made out to Vanguard so it was still a direct transfer. I never physically had the money (although I did have the checks).

 

[stephenson]

Interesting idea ...it would also provide a sort of dollar cost averaging effect ....


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[INTJ10]

Sorry it wasn't clear. You can do it either way. I was saying that if they come into your Vanguard IRA "in kind" that is as the fund in your 401k it will cost you $7 to sell them from your Vanguard fund. Once you have them sold and the money in a cash account you just buy the appropriate VG fund. You could also sell them in your 401k and just rollover the cash into your VG IRA.


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[INTJ10]

I tried to roll over all of my funds from one IRA to another "in kind". Turned out that Vanguard couldn't accept some funds (they never really explained why) so I had to liquidate those funds and transfer cash.


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[stephenson]

I think I got it, thanks.

Would there be advantage to selling to cash in the 401k prior to transfer ....except that I could time it a bit ...2B's suggestion of smaller chunks, then might work to allow the timing while retaining the dollar cost averaging effect ...hmmm, sell to cash/stable value on high days, then transfer only from this fund to the Vanguard cash position fund?


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[Mulligan]

I rolled over my 401k while still employed. I had a couple hundred K in it when I turned 59 1/2. I started moving it in $50k chunks so that I wouldn't go too far to cash during the nominal 2 weeks it took. My 401k didn't support electronic transfer so I had to physically receive a check and then mail it to Vanguard. The checks were all made out to Vanguard so it was still a direct transfer. I never physically had the money (although I did have the checks).

The following may apply to 401k's but I learned first hand this week it definitely applies to Roths. Seems the IRS just ruled last year that they will not let you touch a check physically on a transfer but only once a year (365 calendar days) or you will get slapped with penalties. This caught me this week when I was going to have the Bank write the check out to Vanguard in care of me. I did this last summer at another institution and rolled it over via the check. Vanguard told me it had to be a direct transfer not the indirect way since I had already done this once the past 365.
It was too late to get it transferred directly before the maturity window expired so I just rolled it over to a pitiful 1 yr. CD and will then get a check cut for me next year and mail it in. Yes I could have still done the direct and took the penalty for breaking CD, but all those forms I had to fill out were too much of a PIA for me, so I will just wait and send them a check w/out all the paperwork.


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[stephenson]

Sorry ...you can only rollover once per year from 401 to a financial company?


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[Mulligan]

Sorry ...you can only rollover once per year from 401 to a financial company?


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Once per 365 via the indirect method. Meaning you physically receive the check. Even if it is not in your name you get only one time. I am fairly sure to can have direct transfers from company to company as often as you want. Keep in mind I directly researched this for Roths, but I imagine 401k and IRA are in the same pot.
I thought the Vanguard guy was crazy when he told me this last week and really didn't understand what I was doing, but I researched it and he was correct. I should have known it was true because he said Vanguard has told all operators to tell the clients this before making an "indirect" transfer.This was an IRS ruling implemented last year. They waived it this past 2014 year, but were enforcing it this year.


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[stephenson]

Got it ...so should be able to transfer portions out of 401k to Vanguard multiple times ....but must be electronic transfer.

I need to check with megacorp to make sure I can designate which fund the money comes from each time ...other am back to square one.


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[Mulligan]

Got it ...so should be able to transfer portions out of 401k to Vanguard multiple times ....but must be electronic transfer.

I need to check with megacorp to make sure I can designate which fund the money comes from each time ...other am back to square one.


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That is the way I understand it. And Vanguard will send you electronically a bunch of forms for you to sign and then mail back. Then they will coordinate the transfers.... Lord I hate paperwork. That is half the reason I just put it in the one year CD. The indirect way so easy. I just had it written on check from bank to vanguard and slapped a sticky note on the check telling them what account to assign the money to. Yes, I am lazy...But I'm retired and that is what I am supposed to be in retirement![emoji1]


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[INTJ10]

Would there be advantage to selling to cash in the 401k prior to transfer ....except that I could time it a bit ...2B's suggestion of smaller chunks, then might work to allow the timing while retaining the dollar cost averaging effect ...hmmm, sell to cash/stable value on high days, then transfer only from this fund to the Vanguard cash position fund?


I ran into some unexpected hiccups in the roll over process. I wouldn't want to add complexity by adding market timing into the process. It was already painful enough.


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[pb4uski]

Whoa... don't you lose access to stable value once you transfer it to an IRA? If your 401k stable value fund pays a decent interest rate, you're unlikely to find a better alternative with as little interest rate risk.

Also, if you are sued, 401k funds are treated differently than IRAs in some states.

I wouldn't sweat the market timing thing if your overall AA will stay the same.

 

[Ticker]

Whoa... don't you lose access to stable value once you transfer it to an IRA? If your 401k stable value fund pays a decent interest rate, you're unlikely to find a better alternative with as little interest rate risk.

That's my issue. got cash sitting in VG's retirement trust, only available in 401-k's as a vehicle for "short term" money. It currently pays 1.8%, so I'm using it to replace my short term bond allocation. That's the only thing keeping me from rolling into an IRA.