I have a 401K of over $10K (so I can let it sit there until retirement) earned while working at my former job. Now I'm considering transferring these funds to my Vanguard IRA. I've done this a few times as I've changed jobs over the years and each time the previous employer's 401k administrator has worked with Vanguard to make that transfer happen directly (trustee-to-trustee) without sending me a check that I would need to send in to Vanguard myself. Now with my last job, they are telling me that they don't do in-kind distributions and that I would need to sell my shares and buy them back. They're telling me they'll send me the check. Now I'm asking them why they can't work with Vanguard to just make that transfer happen (transferring the money and repurchasing shares) and they keep just repeating that they don't do in-kind distributions. I am a little green but I don't understand why not being able to do in-kind distributions goes hand-in-hand with having to mail me a check. Am I missing something?
Perhaps there is some confusion between you and your former employer.An "in-kind" transfer refers to transfering the exact investments from one account to another. What you are trying to do is a rollover from a 401k plan to a traditional IRA at Vanguard. If the investments in your 401k cannot be held by Vanguard then they must be sold and rolled over as cash. The important thing is that they stay within a tax advantaged account so you are not subject to taxes and penalties. Some plan administrators do have a problem with sending a check to another institution. As an alternate they can send a check to you payable to "Vanguard FBO (for benefit of) meowmixx". This will accomplish what you want to do except you will then have to pass the check on to Vanguard. I might be better if you worked this from Vanaguard so they can "pull" the money rather than from your 401k so they have to "push" the money. Contact Vanguard, tell them what you want to do, and they can help with what ever forms need to be filled out and they will take it from there.Bob
As an example, I had a Fidelity 401k and a Fidelity Traditional IRA. Last month I rolled over the 401k into the TIRA but of the 4 funds in which I was invested, one was closed to new investors so I had to liquidate that position and transfer the cash. The other funds transferred in kind.FuskieWho notes in-kind roll overs usually only happen when using the same brokerage, but whether rollovers can be performed electronically or have to be done through a printed check (you have a 60 day window to deposit the check into the TIRA) depends on the two brokerages involved...
Got it - my situation seems pretty straightforward. I'm going to be moving Vanguard funds administered by my former employer into an IRA administered by Vanguard so it's not like there will be any difference of funds available. On that note, is it a losing proposition for me to liquidate and then repurchase shares (within the 60 day window)?I personally feel more comfortable having my retirement funds in one place but I'm debating in this situation if it just makes sense to leave it where it is (again, since the funds are the same). What do you think?
If the funds are the same (and you intend not to make any changes anytime soon) then look at the share classes of the respective funds. In the IRA, you will be paying retail prices for the funds. If the plan is big enough, it may be getting institutional pricing - saving you a few bucks in expenses (which flows directly to the bottom line).While many people gripe about the expenses of investments in their plan, in many cases they actually pay lower fees than they could get in an IRA.
On that note, is it a losing proposition for me to liquidate and then repurchase shares (within the 60 day window)?Probably not, but, you should look for any transaction costs and fees for buying, selling, transferring, and closing accounts.Just another reminder, however, that if you cash out your 401k plan and have a check payable to your sent your former employer may have to withhold 20% taxes.Bob
If the funds are the same (and you intend not to make any changes anytime soon) then look at the share classes of the respective funds. In the IRA, you will be paying retail prices for the funds. If the plan is big enough, it may be getting institutional pricing - saving you a few bucks in expenses (which flows directly to the bottom line).Thanks, I've spent some time looking into it and yes, you're right - keeping it in the 401K will save me money vs. the IRA. There is also a web interface so I will be able to view and control the allocation of funds going forward so I think I will keep it where it is. They are legally responsible for letting me know if the website closes/the company gets bought/etc. etc., right? That is my big fear - losing contact/control of my 401k in the coming years and then not getting the distribution when I do reach retirement.
On that note, is it a losing proposition for me to liquidate and then repurchase shares (within the 60 day window)?This should be fine, and is basically what I've done each time on my 401k rollovers, about four times now in my life. You want to make sure to liquidate inside the 401k, have the cash transfer over to Vanguard, then buy again inside Vanguard. Done correctly, this isn't a taxable event, since the sell and buy each happen inside tax-sheltered accounts. You do risk missing a jump in market prices during the interval, but of course you could also miss an equally sized market drop, so that washes out.- Erik
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