Moving a 401(k) & 403(b) to Vanguard IRA

[jpeter1093]

We've been talking to Vanguard to take advantage of their Personal Advisor services. I'm retiring in March, 2019 at 63. My DW next month at 60. I was told by our Vanguard rep that our funds would be transferred in kind. To me, that meant, if I had Fund A in my 401(k); they would just transfer ownership to Fund A in Vanguard. However, when my rep transferred me to a transfer specialist at Vanguard, he said, my 401(k) would be liquidated, a check sent to Vanguard and Vanguard would buy new funds on their side.

So, since I apparently misunderstood the definition of 'transfer in kind'; I put the process on hold until Monday and came here. My concern is taking a haircut - not only on commissions on both sides (401k sale and Vanguard buy) but in the time it takes for the liquidation of the 401(k) and the check to be sent to Vanguard, the market may go up and now I'm buying less shares than I sold.

What are your experiences with this type of issue? Am I overthinking? Are my worries overblown?

Thanks!

 

[Alan]

I have been through this with transferring my 401k to Vanguard and my wife when transferring her 401k to Fidelity. In both cases the 401k was liquidated and transferred to a money market fund from which we then bought the funds we wanted so in our case there was a delay of a few days when the money was vulnerable to wild market swings.

 

[jpeter1093]

I have been through this with transferring my 401k to Vanguard and my wife when transferring her 401k to Fidelity. In both cases the 401k was liquidated and transferred to a money market fund from which we then bought the funds we wanted so in our case there was a delay of a few days when the money was vulnerable to wild market swings.

Do you have a sense of how much money you may have lost (or gained, for that matter if the market went down in those few days). Did you lose sleep during those few days? I guess my bottom line question is if it's worth it or does it make sense to leave it where it is?

 

[OldShooter]

We've transferred at least four or five accounts over the years, always in kind, and it has worked fine. The only reason I can see for doing the sell/buy dance would be if one didn't like the assets being transferred and wanted to switch. At that point it simply becomes a question of minimizing commission costs, if any.

Rules of your 401K custodian may govern, however. Or your 401K may hold some proprietary assets that the new custodian cannot accept.

Edit: Re market, just be sure you sell one day prior to the market going down, then buy one day before it goes back up. If it doesn't go up, don't buy.

 

[Walt34]

About five years ago (I'd have to look it up) I transferred a 457 account from Fidelity to Vanguard because the 457 plan had higher fees. Because I cheeped out and declined to have the check overnighted for Fidelity's outrageous fee it took an unreasonably long time to get the check, I want to say it was almost two weeks. And yes during that time the funds were subject to swings of the market but fortunately there was little change in that time.

IIRC the check was made out to "Vanguard FBO (for benefit of) Walt34". That way it wasn't a withdrawal, merely a transfer from one institution to another. I did later get a 1099 from Fidelity showing the transfer but there were no taxes due on it.

 

[jpeter1093]

We've transferred at least four or five accounts over the years, always in kind, and it has worked fine. The only reason I can see for doing the sell/buy dance would be if one didn't like the assets being transferred and wanted to switch. At that point it simply becomes a question of minimizing commission costs, if any.

Rules of your 401K custodian may govern, however. Or your 401K may hold some proprietary assets that the new custodian cannot accept.

Edit: Re market, just be sure you sell one day prior to the market going down, then buy one day before it goes back up. If it doesn't go up, don't buy.

So, it sounds like your transferring went how I THOUGHT it would, Vanguard is the one saying my 401(k) would sell and they would buy. It sounds like your experience was an actual transfer of assets.

Re Market and selling one day prior to the market going down. That's tongue in cheek, I presume?

 

[jpeter1093]

About five years ago (I'd have to look it up) I transferred a 457 account from Fidelity to Vanguard because the 457 plan had higher fees. Because I cheeped out and declined to have the check overnighted for Fidelity's outrageous fee it took an unreasonably long time to get the check, I want to say it was almost two weeks. And yes during that time the funds were subject to swings of the market but fortunately there was little change in that time.

IIRC the check was made out to "Vanguard FBO (for benefit of) Walt34". That way it wasn't a withdrawal, merely a transfer from one institution to another. I did later get a 1099 from Fidelity showing the transfer but there were no taxes due on it.

Would you do it again having had that experience? Didn't you have to pay commissions on both sides?

 

[Alan]

Do you have a sense of how much money you may have lost (or gained, for that matter if the market went down in those few days). Did you lose sleep during those few days? I guess my bottom line question is if it's worth it or does it make sense to leave it where it is?

Never looked, never cared. If I won I won, if I lost I lost and I wasn’t going going to torture myself over it. In both cases the 401k fees and fund options were much worse than what Fidelity or Vanguard offered. My wife did her transfer in 2004 when she semi retired, and I did mine in 2011, a year after I had fully retired and in neither case did I make any attempt to time the market other than pay for overnight delivery of the check to shorten the transfer time.

 

[Walt34]

Would you do it again having had that experience? Didn't you have to pay commissions on both sides?

The only thing I'd do differently is pay for having the check overnighted. Fidelity did charge something, but it was minor, and I don't think there were any charges on Vanguard's side since I put it all in their index funds, in a "couch potato portfolio". In any event, I figured that whatever charges there were would be more than compensated for by Vanguard's lower fees.

Recent history has proven that right, it is doing quite well. For now anyway....

 

[HI Bill]

When I transferred nearly $500K from a 401(k) to Vanguard, Wells Fargo mailed a check to Vanguard. I probably missed out on some $20K in gains during the several days my $ were floating around with the USPS. I didn't have to pay fees to sell or buy, but that would depend on the funds you're transferring from.

In subsequent transfers, markets fell when my money was out of the market, and I was accidentally protected from losses, so maybe it's a wash. I really don't get why they don't do electronic fund transfers, other than their ability to hold onto the $ for a few extra days.

 

[target2019]

We've been talking to Vanguard to take advantage of their Personal Advisor services. I'm retiring in March, 2019 at 63. My DW next month at 60. I was told by our Vanguard rep that our funds would be transferred in kind. To me, that meant, if I had Fund A in my 401(k); they would just transfer ownership to Fund A in Vanguard. However, when my rep transferred me to a transfer specialist at Vanguard, he said, my 401(k) would be liquidated, a check sent to Vanguard and Vanguard would buy new funds on their side.

So, since I apparently misunderstood the definition of 'transfer in kind'; I put the process on hold until Monday and came here. My concern is taking a haircut - not only on commissions on both sides (401k sale and Vanguard buy) but in the time it takes for the liquidation of the 401(k) and the check to be sent to Vanguard, the market may go up and now I'm buying less shares than I sold.

What are your experiences with this type of issue? Am I overthinking? Are my worries overblown?

Thanks!

It sounds like Vanguard does not want to hold the funds, or can't hold the funds. If you come up with a ticker for the funds, you'll get better advice. Might also want to shop your question to other institutions before March 2019.

I know that my 401k funds in megacorp account cannot transfer in kind. They are institutional funds, but I have a good idea of what the Vanguard | Fidelity | Schawb equivalents are. What I will probably do in 2019, is decide if I should sell all and put in a MMF in the 401k. I would do this if I expect some major problems ahead. Then I will fill out papers in local Schwab office, and let them pursue.

 

[HI Bill]

Transfer in Kind just means that Vanguard will take the money you had in fund xyz with the other company, and invest it in fund xyz through Vanguard. I transferred money from Oppenheimer this year, and they moved the assets into the same exact Oppenheimer funds but through Vanguard.

If they are in tax-deferred accounts, the only risk is market risk when the funds are out of the market for a few days. The market may also go down while the funds are in transit, and you may end up with more shares than you started with.

 

[stephenson]

Perhaps the transfer can’t truly be in kind because your 401k funds are in funds that are not transferable because the company runs the funds or the investment company runs them?