Setting up new Vanguard account

[Coachdavo]

Hello everyone. I am on here learning everyday so thanks for sharing your ideas and experiences. I am 51 and have a main IRA with a FA consisting of money transferred a few years ago from my Amerprise account when I realized the fees I was charged by Ameriprise. Unfortunately I did not discover this page before I set up my current account but I am learning.

So yesterday I was let go at my employer and need to rollover a pretty decent size 401k. I want to open a Vanguard account that I can manage. I will then move the money away from my FA to this new account as well.

Opening an account is fairly simple; they have a rollover form right on the site. Is there anything I should know about different types of VG accounts before I go ahead and open an account? It looks like the only option to avoid penalty or tax is the Vanguard IRA. I do not have any Roth savings to date. Is that an option for rollover?

Thank you

 

[ShokWaveRider]

Best to call them this morning. When I first set up an account recently I called and they were very helpful. I have an IRA and a Brokerage Account for CDs. I hope it is OK to leave their Phone number here for you. (800-528-4999)

 

[cooch96]

If you have a traditional 401k, I believe your best and simplest solution is to roll it into a traditional IRA.

Once it is in there and the dust has settled a month or so, you’ll be more familiar with the Vanguard platform. Then I would consider converting $5500 to the Roth for the year.

But I’m not an expert and respectfully defer to other, wiser investors who might give alternate advice.

 

[catotx]

Who is your 401(k) custodian? A 401(k) rollover to an IRA will typically require you to liquidate everything, perform the transfer in cash and re-purchase everything. I am not a fan of this process but if you stay with the same firm, you might be able to avoid this process.

For example, I know for a fact that you can do an in-kind (without going to cash) rollover with Schwab.

 

[MRG]

Who is your 401(k) custodian? A 401(k) rollover to an IRA will typically require you to liquidate everything, perform the transfer in cash and re-purchase everything. I am not a fan of this process but if you stay with the same firm, you might be able to avoid this process.

For example, I know for a fact that you can do an in-kind (without going to cash) rollover with Schwab.

That's not how both of mine were done. You do a transfer in kind and then adjust. The only time that does not work is with proprietary fund, or the firm doesn' use the required software, it's a service from Megacorp. I moved two accounts from BMO one to Fidelity, one to Vanguard. Yes there was one fund that had to be redeemed but it was a private fund with no equilivent.

When I did it Vanguard's rollover department was very helpful.

 

[Independent]

Who is your 401(k) custodian? A 401(k) rollover to an IRA will typically require you to liquidate everything, perform the transfer in cash and re-purchase everything. I am not a fan of this process but if you stay with the same firm, you might be able to avoid this process.

For example, I know for a fact that you can do an in-kind (without going to cash) rollover with Schwab.

Why? My 401(k) custodian sent a check to Vanguard. That was fine with me.

 

[ERD50]

Do you need to rollover the 401K, or do you want to?

There are pros/cons to a rollover. In some states, you have protections in a 401K that you don't get in an IRA. But some 401K plans are not all that attractive (high fees, limited choices).

Just an FYI to consider.

-ERD50

 

[Coachdavo]

Thanks for all of the FB. This 401k is through American Funds, I want to get rolling on Vanguard and start managing things myself. I like the idea of the Roth conversions as well

Cheers

 

[kgtest]

Thanks for all of the FB. This 401k is through American Funds, I want to get rolling on Vanguard and start managing things myself. I like the idea of the Roth conversions as well

Cheers

You can do this. I started with zero knowledge coming off years of bouncing checks. Then I taught my neighbor the ropes, he never owned a computer until I keyed him into investing. Now he manages himself.


Vanguard has great phone support for new investors. They will tell you click for click what to do if you need them to.


I would immediately do a transfer from your employers 401k to a Rollover IRA.


I would then do a transfer from your FA to Vanguard Rollover IRA.


Then, I would open a Roth IRA and make your first contribution immediately. That will start the 5 year timer you might need later.



I would also position to make catch-up contributions to that Roth IRA at 55.


Make sure your beneficiaries are added to each of the accounts to avoid probate.

 

[Coachdavo]

You can do this. I started with zero knowledge coming off years of bouncing checks. Then I taught my neighbor the ropes, he never owned a computer until I keyed him into investing. Now he manages himself.


Vanguard has great phone support for new investors. They will tell you click for click what to do if you need them to.


I would immediately do a transfer from your employers 401k to a Rollover IRA.


I would then do a transfer from your FA to Vanguard Rollover IRA.


Then, I would open a Roth IRA and make your first contribution immediately. That will start the 5 year timer you might need later.



I would also position to make catch-up contributions to that Roth IRA at 55.


Make sure your beneficiaries are added to each of the accounts to avoid probate.

Thanks for the detail. I will do some research on the Roth 5 year timer, that is a new one for me.

 

[SumDay]

Thanks for all of the FB. This 401k is through American Funds, I want to get rolling on Vanguard and start managing things myself. I like the idea of the Roth conversions as well

Cheers

American Funds generally have high fees (from what I've seen). You'll save a ton moving it to Vanguard, particularly if you use the ETF's.

We did this a couple of years ago with DH's 401(k). It took a while, and I was pretty impatient at the time, but no one died and it all worked out fine.

Good luck!

 

[MRG]

American Funds generally have high fees (from what I've seen). You'll save a ton moving it to Vanguard, particularly if you use the ETF's.

We did this a couple of years ago with DH's 401(k). It took a while, and I was pretty impatient at the time, but no one died and it all worked out fine.

Good luck!

They're about the industry average, however that ~10X of Vanguard. They also hit you with a 5.75% FE load, that's generally waived for 401k.

What will be interesting to hear is the OP's perception of Vanguard's customer service as opposed to AFS, assuming they've had any. AFS really thinks they cater to and hold their customers hands. Personally I think much of what they do is 1980s.

 

[Bryan Barnfellow]

With the layoff are you planning then to retire or continue to work?

-BB

 

[Coachdavo]

With the layoff are you planning then to retire or continue to work?

-BB

I am punching out of Corporate America for a little bit. I am 51 and the plan was to go to a partial retirement (25% work) at 55. I never had a Summer off so I am going to try it out this year!

 

[HI Bill]

Consider whether you might retire for good (or want to access these funds) between ages 55-59.5. If so, you may want to either leave the 401(k) as-is, or move the funds to your next employer's 401(k). That way, you can make distributions between those ages without the 10% penalty; not so for an IRA, the exclusion does not apply.

 

[Texas Proud]

Why? My 401(k) custodian sent a check to Vanguard. That was fine with me.

Mine required the check to come to ME and I send it on to Vanguard...


To me it just adds steps in the process that are manual and can cause problems... remember, if there is a problem in the number of days to get transferred the IRS does not care who caused that delay... you lose...


I read about a case where the broker left the check uncashed on somebody's desk and when they found out about the problem the required days had passed... had to pay taxes on 100% of the money...

 

[jazz4cash]

Rather than a rollover, I would request a trustee to trustee transfer to the Vanguard IRA. These are sometimes called rollovers but it's a bit different (less restrictive). The transfer could be in kind or the current funds may need to be liquidated. If they send you a check, it will be made payable to your new custodian (Vanguard). The 60 day limit for rollovers does not apply. Vanguard can advise you on the details.