Rolling a 401k into an IRA questions

[always_learning]

This is related to, but different enough from, my thread on 401Ks & NUA and company stock so I thought I would start a new thread.

Link to my questions about NUA:
https://www.early-retirement.org/fo...ity-investment-center-102384.html#post2380200

So, when one rolls a 401k into an IRA, what does that look like when all is said and done?

For instance, if the 401k is held at Fido and the employee wishes to keep the investments at Fido, does everything roll into something like a generic settlement fund (separating out before tax & after tax in to those respective settlement funds), or do you choose which funds to invest in at the time of the execution?

Does it matter if the former employee wishes to use, say Schwab, for the rollover investments as opposed to keeping things at Fido? You would just initiate a rollover at Schwab and begin anew with investments?

How difficult/dangerous (with regards to potential screw ups) is it to move from one brokerage to another, say, if one keeps the money where the 401k is held and then a few years later wants to move all or some to another brokerage?

The most complex thing I have ever done is a full Trad-to-Roth conversion and that was all at the same brokerage firm, so I'm curious and a bit nervous as to how all of this will shake out.

 

[Sunset]

I've done it a few times, it's really pretty easy.

I phoned the place I wanted the IRA to be located (many will give you a bonus for moving the money there so ask). I talked to a Rep to confirm the bonus amount, etc.

You will need a rollover IRA account for the 401K contents.

They can transfer the stocks/funds "IN KIND" so they are not bought or sold for most things, along with the cash. The actual transfer can take about a week to show up.

I would log into my new account every couple of days to watch for it to show up.

If some fund cannot be moved, you will need to sell it and move the cash. For a regular account I kept a screen shot of all the investments, and compared it to the new account (ex 233 shares of VTI, 300 shares of BND) and noticed a missing item.
I logged into the old account and there it was, as it could not be moved, so I sold it, and days later had it moved over as cash.

It doesn't really matter too much if the brokerage is different, except you will qualify for a bonus. (example $600 for moving $100K).

 

[pb4uski]

In my experience it was pretty easy. I filled out a form and submitted it to the 401k custodian. I then received a check in the mail from the 401k custodian made out to "Vanguard Brokerage Services FBO pb4uski" (or something like that... where FBO means for the benefit of)... I then mailed the check to Vanguard along with a form on what account and funds to deposit the money and a short while later it was credited to my account. A number of years ago, but going from memory.

It was a bit annoying that they couldn't simply transfer funds direct to Vanguard but that is the way they did it. I did my 401k first. Then a few years later I did my DC plan. Same custodian and same process both times.

 

[scrabbler1]

Similar to pb4uski's experience, when I did my 401k liquidation in 2008 (including NUA from company stock, as I wrote in your other thread), I had the 401k plan admin (not Fidelity) mail me a check for that portion of the total 401k. The check was made out to Fidelity but with my name somewhere on it along with the IRA's account number I had obtained a few days earlier from my Fido AE when he opened up the shell account.


A few days after I got the check in the mail, I went to my local Fido office and met with my AE. I allocated the lump sum amount into the two funds I wished to split it into. The two funds were similar to the two funds I had in the 401k. However, I had forgotten to record the separate amounts in each fund in the 401k before it got liquidated, so I had to make a best guess for my starting AA in the IRA. (It was very close, I discovered later.)


I don't know if it was available in 2008, but in the last 8 years I helped my friend do several electronic asset transfers from other brokerage firms into Fidelity. Three were brokerages, one was an inherited IRA, and one was a Roth IRA. With those, there was nearly no liquidation because Fidelity accepted all the non-Fidelity mutual funds, individual stocks, bonds, and CDs as is with nearly no problems (some fractional shares could not be transferred, they had to be liquidated).

 

[kgtest]

Depending on if I quit or was let go, the first thing I do is login and complete that 401k rollover before I ever leave the parking lot...

Well just kidding, I wait until that last 401k contribution and paycheck clears, THEN I immediately rollover in my case to a VG Rollover IRA.

If I was fired, well then the first phone call is to the Unemployment Insurance office


Something that bugs me about all these financial articles... The average 401k is such and such, and there are X # of 401k millionaires. BUT, what about all of those that rollover the IRA immediately? A terrible stat. Nobody can ever say how many americans have X in 401k AND x in IRA within the same article...and I won't even get into broker. WHAT IF WE HAVE TAXABLE! We aren't all doom and gloom just because the average american has 200k in there 401k but literally every single article regarding 401k balances paints that picture without including or mentioning IRAs.

 

[SumDay]

I rolled my former Megacorp 401(k) at Transamerica to Vanguard in 2019, shortly after I retired.

As PB4uski said, they mailed me the checks (only option available) - 1 check for my Roth portion and 1 for the regular 401(k). I then sent then overnight to VG with forms I had printed out, and it took ~5 days until it showed up in my VG settlement fund. They walked me through creating an IRA and a Roth account so the $$ would have a home when they got the checks. Then I moved it into the Index and ETF funds I wanted in each account. You'd think in this day & age the actual move from TA to VG could be done electronically, but it's all pretty manual.

Very glad I did it. My Megacorp plan would have made me do this anyway at age 70 (they don't want to deal with RMD's) so I decided to do it while I still had a few more functioning brain cells.

Good luck to you!

 

[Clone]

I recently rolled a 403b from TIAA/CREF to Fido. Had to do the forms and send to TIAA, but it was all electronic transfer and just showed up at FIDO. No check through me. I started on-line at FIDO, but if there was a nearby office that would probably have been my first choice. I did have to make a call to Fido, and they basically stepped me through the discussion with TIAA.
It is really nice having all of the accounts at Fido such that the summary reports have all of the accounts.

 

[Octogirl]

I am in the process of rolling a IRA account from Wells Fargo to a non ACAT account. Had to do the forms and sent to new brokerage. We had a 3 way call to approve it. No check through me tho, it will be sent to new brokerage.

 

[jazz4cash]

I’ve rolled 401k funds from Fidelity to a Fido IRA but also to credit union IRAs. Very easy at Fido. I call them up and tell them what I want. No forms. The funds go into whatever specific securities you specify. 401ks have unique funds and I don’t think there’s any benefit to an in-kind transaction. Pre-tax and afternoon tax stay separated. In doing direct transfers to credit union IRAs I have them send me the check made payable to the credit union. I did that for Ally also. Otherwise I would initiate the xfer at Vanguard, Schwab, or similar.

 

[pb4uski]

I've had similiar expereince as others with IRA to IRA transfers without having to deal with a check.... but for my employer 401k to IRA and employer DC plan to IRA I was mailed a check and then mailed it to Vanguard.

 

[always_learning]

Thank you all so much for sharing your stories.

It sounds somewhat intimidating, but not scary, so that's good.

I guess we will just have to wait and see how Dh's megacorp handles distributions as to whether we can do everything electronically (my hope!) or via check (stone age method).

I'm thinking that since Dh has a mix of pre-tax, after tax, Roth, and company stock in his 401k, we would be better off just rolling everything to Fido accounts at first (the holder of the 401k) and then moving things at a later date to other brokerages. It seems that there would be less room for error that way.

Thanks again to everyone who replied!

 

[scrabbler1]

Thank you all so much for sharing your stories.

It sounds somewhat intimidating, but not scary, so that's good.

I guess we will just have to wait and see how Dh's megacorp handles distributions as to whether we can do everything electronically (my hope!) or via check (stone age method).

I'm thinking that since Dh has a mix of pre-tax, after tax, Roth, and company stock in his 401k, we would be better off just rolling everything to Fido accounts at first (the holder of the 401k) and then moving things at a later date to other brokerages. It seems that there would be less room for error that way.

Thanks again to everyone who replied!

The friend I was talking about in post #4 had received a large inheritance after his remaining parent (his mom) passed away in 2012. The executor at her brokerage company split up the holdings to him and his sister, also taking the RMD which his mom hadn't done yet, and creating brokerage accounts for the two beneficiaries.

Once that was all done, my friend and I were free to do what we wanted with his new brokerage accounts. He didn't want them with his mom's brokerage company (Morgan-Stanley), so I helped him open an account with Fidelity. He has the same AE as I do, too, so the three of us met a few times to help set everything up.

This was in late 2012, so Hurricane Sandy delayed things a month before everything got transferred. But I paid close attention to how the electronic asset transfer feature works. Having all the account frameworks set up already made everything work more efficiently with subsequent transfers, both in 2012 and in 2018 when we further consolidated his remaining two accounts (not part of the inheritance).

 

[Hermit]

Did mine same as pb4uski into Vanguard. Made the move a couple of years ago specifically so I could start doing QCDs at 70.5 which is later this year. No hiccups so far.

 

[Whisper66]

"So, when one rolls a 401k into an IRA, what does that look like when all is said and done? " -- I ended up with 401k account distributed to three Vanguard accounts. All my funds were invested in company stock and were moved "in-kind" to Vanguard accounts. So nothing was sold or changed in anyway....just moved to Vanguard accounts. The 401k Roth funds went into a VG Roth account. The stock that I chose to follow NUA rules on went into my brokerage account (I owe taxes on that money). The remaining stock was rolled over into a VG IRA account.


"Does it matter if the former employee wishes to use, say Schwab, for the rollover investments as opposed to keeping things at Fido? You would just initiate a rollover at Schwab and begin anew with investments?" -- I got a Vanguard specialist with experience in 401k rollovers from my company to assist. We conference called my company 401k department specialist to do everything. I gave permission for the VG rep to lead discussion on my end so I just answered specific questions. Was very helpful in getting things right.


"How difficult/dangerous (with regards to potential screw ups) is it to move from one brokerage to another, say, if one keeps the money where the 401k is held and then a few years later wants to move all or some to another brokerage? " -- Not difficult at all in my experience. I rolled over my 401k after 4 yrs of retirement.