In Kind 401k rollover to IRA

[Camas Lilly]

In an effort to cut costs, my employer has indefinitely discontinued the 401k match. The amount of quarterly fees taken by the custodian doesn't set well with me, so I thought I would roll over the 401k to my IRA at Vanguard to consolidate funds.

My question is, Vanguard said to do a rollover "in kind" from my 401k, and I am wondering how does that work? The 401k has some Vanguard funds and some not. To do an "in kind" rollover, do you have to roll over into the same fund? Would I need to move my 401k elections into all Vanguard funds prior to doing this rollover? Or will Vanguard let me keep the funds and just not make any more contributions to the fund?

I have one fund I wanted to keep and if I can't get that into my Vanguard IRA, I figured I would just leave that fund alone in the 401k. I asked Vanguard about the fund and this is what they said: Our records show that while Nationwide Geneva Small Cap Growth Fund Class R6 (NWKCX) can be transferred to Vanguard, it is not available for purchase.

I don't think I quite understand the process. Can someone explain a little how this works?

Thanks,

[Dash man]

You need to check with your 401k plan administrator to make sure you can do what you want. Some plans don’t allow rollovers until you terminate employment. Some institutional funds cannot be rolled over in kind. Some funds don’t allow partial rollovers and others require a full rollover once you’ve reached a certain level of funds. Check with the administrator and see what you can do.

[38Chevy454]

What Dash Man said. You need to talk to your plan administrator, should be someone in HR dept that can give you information, or provide the contact info you can talk to.

[jazz4cash]

I don’t see how an “in-kind” rollover would have any benefit going from 401k to IRA unless you have some cost basis, somehow. Even if the funds were the same, 401k usually has different class of shares so I’m not sure how that would work. Ask the person at Vanguard for more details, pros and cons.

[Camas Lilly]

I first spoke with the representative of the 401k and told them what I wanted to do. They said I could do a partial or "split" rollover, just make note on the form what special instructions I had. They also told me that even if I roll over all of the funds, the account stays open as long as I am employed.

Vanguard just told me to go to the 401k and ask for the proper forms for the roll over. No problems.

Then on a second response from Vanguard, when I asked specifically about the small cap fund I wanted to stay in, they told me: Our records show that while Nationwide Geneva Small Cap Growth Fund Class R6 (NWKCX) can be transferred to Vanguard, it is not available for purchase.

So I am not quite sure exactly what that means.

[OldShooter]

Quote:

Originally Posted by Camas Lilly I first spoke with the representative of the 401k and told them what I wanted to do. They said I could do a partial or "split" rollover, just make note on the form what special instructions I had. They also told me that even if I roll over all of the funds, the account stays open as long as I am employed. Vanguard just told me to go to the 401k and ask for the proper forms for the roll over. No problems. Then on a second response from Vanguard, when I asked specifically about the small cap fund I wanted to stay in, they told me: Our records show that while Nationwide Geneva Small Cap Growth Fund Class R6 (NWKCX) can be transferred to Vanguard, it is not available for purchase. So I am not quite sure exactly what that means.

You transfer in kind if the investments are something you want to hold going forward. You also transfer in kind if there are fees for selling before transfer and it is cheaper to sell at the receiving broker. If there's no selling cost difference, I'd sell before the transfer but it really doesn't matter.

Re "not available for purchase" that is quite clear. They will hold the asset just like any other but you cannot buy more. Probably this precludes dividend reinvestment but ask.

IIRC Schwab has the same deal with DFA funds. They can hold the assets but DFA does not permit Schwab customers to buy DFA through Schwab. Their deal is that they only sell through selected FAs.

[Camas Lilly]

Ok, well that answers my question about the Non-Vangaurd fund. I didn't know they would do that.

Thanks

[PaunchyPirate]

Quote:

Originally Posted by Camas Lilly Ok, well that answers my question about the Non-Vangaurd fund. I didn't know they would do that. Thanks

Yes. Vanguard is now a full-function broker. You can buy and sell all (most?) individual company stocks at Vanguard. You can also buy and sell many, many mutual funds and ETFs that are not part of the Vanguard family. And, of course, you can buy and sell Vanguard funds and ETFs. There may be different fees charged by Vanguard for these various options.

And you can transfer many non-Vanguard funds/ETFs/Stocks to Vanguard as part of an in-kind account transfer. For some of those, you may not be permitted to purchase any more. But you will be able to sell the holdings when you want. I also am not sure if the inability to purchase more means you cannot re-invest dividends or not. You'd need to check on that, if it's important to you.

There are also some assets that Vanguard will not accept. They just don't deal with them in any way.

When desiring to transfer in-kind from an outside source, you should call Vanguard and ask them one-by-one if they will accept or not accept each of your holdings. They will tell you if they can and if there are any restrictions on the future things you can do if you proceed with the transfer

[Camas Lilly]

Quote:

Originally Posted by PaunchyPirate Yes. Vanguard is now a full-function broker. You can buy and sell all (most?) individual company stocks at Vanguard. You can also buy and sell many, many mutual funds and ETFs that are not part of the Vanguard family. And, of course, you can buy and sell Vanguard funds and ETFs. There may be different fees charged by Vanguard for these various options. And you can transfer many non-Vanguard funds/ETFs/Stocks to Vanguard as part of an in-kind account transfer. For some of those, you may not be permitted to purchase any more. But you will be able to sell the holdings when you want. I also am not sure if the inability to purchase more means you cannot re-invest dividends or not. You'd need to check on that, if it's important to you. There are also some assets that Vanguard will not accept. They just don't deal with them in any way. When desiring to transfer in-kind from an outside source, you should call Vanguard and ask them one-by-one if they will accept or not accept each of your holdings. They will tell you if they can and if there are any restrictions on the future things you can do if you proceed with the transfer

Thank you for explaining that so well. I am not so concerned about the other funds since they are bonds, total market, etc. I just couldn't find a small cap at Vanguard that I liked. In fact I was surprised to find their Small Cap Growth Fund, VSGAX, is actually 70% Mid Caps.

[Montecfo]

I prefer to do these types of rollovers in kind, just to stay invested. Also avoid round trip fees/commissions, if applicable.

[donheff]

Quote:

Originally Posted by Montecfo I prefer to do these types of rollovers in kind, just to stay invested. Also avoid round trip fees/commissions, if applicable.

+1 DW has a large 401K with a PITA administrator. The funds are eligible for rollover on the receiving end at Vanguard or Schwab but the plan only supports liquidate and roll as a cash sum. I hate to go all cash and then miss an unexpected boom in the week(s) it takes to get the money transferred and reinvested. It's a crap shoot - you could also miss a crash but you know how that always seems to go.

[Gotadimple]

Quote:

Originally Posted by donheff I hate to go all cash and then miss an unexpected boom in the week(s) it takes to get the money transferred and reinvested. It's a crap shoot - you could also miss a crash but you know how that always seems to go.

Maybe you could get a sense of how long it takes the PITA administrator to release funds? And on the Vangard/Schwab side? I can speak for Schwab - they are pretty speedy in my experience. As soon as the funds clear ACH they are available.

Rita

[Al in Ohio]

Quote:

Originally Posted by Camas Lilly I first spoke with the representative of the 401k and told them what I wanted to do. They said I could do a partial or "split" rollover, just make note on the form what special instructions I had. They also told me that even if I roll over all of the funds, the account stays open as long as I am employed. Vanguard just told me to go to the 401k and ask for the proper forms for the roll over. No problems. Then on a second response from Vanguard, when I asked specifically about the small cap fund I wanted to stay in, they told me: Our records show that while Nationwide Geneva Small Cap Growth Fund Class R6 (NWKCX) can be transferred to Vanguard, it is not available for purchase. So I am not quite sure exactly what that means.

That means your portfolio in the Vanguard account will hold and show the number of shares that you previously had from the rolled over 401k account, but you cannot buy any more shares in the future.