401K Roll over question

  • Thread starter skinnyboywolfie
  • Start date

S

skinnyboywolfie

I went to my bank to have them help me consolidate my old 401K and
roll them over to an IRA. The guy told me that they will not send the
check directly into my IRA account, but I have to request the check
directly from the companies and have the check sent to me, and then i
bring the check to the bank. This seems scary because i'm worried sick
that I'll forget and have to pay 50% tax!!

Also, what other things I should be worried about in terms of fees
when I invest these funds in my IRA? i've never dealt with a bank for
mutual funds or IRA before, but since i tend to forget about them and
just leave them there, I figure I should have someone give me a little
advice?

Should I make him help me select no load funds? Is he gonna take a %
of my investment gain as commision??
 
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E

Elizabeth Richardson

I went to my bank to have them help me consolidate my old 401K and
roll them over to an IRA. The guy told me that they will not send the
check directly into my IRA account, but I have to request the check
directly from the companies and have the check sent to me
If that's the way your bank operates, I would find another company to handle
your IRA. It would appear they don't have the knowledge or expertise to do
this. I have rolled over a 401k from two different employers, and in either
case they were quite willing to forward the funds directly to the IRA. Try
one of the big mutual fund companies: Vanguard, Fidelity, or TR Price.

Elizabeth Richardson
 
D

dornachu

If that's the way your bank operates, I would find another company to handle
your IRA. It would appear they don't have the knowledge or expertise to do
this. I have rolled over a 401k from two different employers, and in either
case they were quite willing to forward the funds directly to the IRA. Try
one of the big mutual fund companies: Vanguard, Fidelity, or TR Price.

Elizabeth Richardson
Wow, i'm really surprised with them then... maybe i'll just do it with
vanguard.
But i do like it when there is a person to help me out... too bad
then.
 
W

waphylz

If that's the way your bank operates, I would find another company to handle
your IRA. It would appear they don't have the knowledge or expertise to do
this. I have rolled over a 401k from two different employers, and in either
case they were quite willing to forward the funds directly to the IRA. Try
one of the big mutual fund companies: Vanguard, Fidelity, or TR Price.

Elizabeth Richardson
Having recently done the same thing 3 times over the past 3 years, I
can tell you that many companies will not do direct roll-overs.
However, it's not that difficult to handle. The sending 401K company
will ask you how the check should be made out. Your IRA bank/mutual
fund company can help you on exactly how they'd like to see the check
addressed. This information should be the name of your IRA bank,
mutual fund company, etc; name on IRA (presumably yours); and your
account #. Then your 401K company sends you the check..

For example: if you are transferring from your company's 401K to a
Vanguard IRA, you first have to open the Vanguard IRA, which will give
you an account #. Then you tell your company to make the check
payable to Vanguard Fiduciary Trust Co, For Benefit of (YOU), Vanguard
acct. # XXXXX, and your address. Then you just take the check and via
a simple transmittal letter, forward the check to Vanguard for deposit
in your account. No taxes will be withheld because the check is not
made out to you, but to your IRA (rollover) account. You do have to
remember to send the check to Vanguard (or whomever), but hopefully
that's something that will be a priority when you receive the check
from your 401k company...
 
E

Elle

Ditto what E. Richardson posted. I also recommend either
Vanguard, Fidelity, or TR Price. Have them put all the money
into a money market account yielding upwards of 4.5% (at
this time). Then lurk here, ask questions, learn about
buying mutual funds and asset allocation. Do not buy any
funds with loads; you're right there. Vanguard and Fidelity,
to name two, have plenty of fine mutual funds without loads
and with reasonable expenses otherwise.
 
P

PeterL

I went to my bank to have them help me consolidate my old 401K and
roll them over to an IRA. The guy told me that they will not send the
check directly into my IRA account, but I have to request the check
directly from the companies and have the check sent to me, and then i
bring the check to the bank. This seems scary because i'm worried sick
that I'll forget and have to pay 50% tax!!
Slowly back away, turn, and run, like the wind, away from this bank.

Go over to either Schwab or Fidelity and they'll help you open a
rollover IRA account. Vanguard and a number of mutual fund companies
can do it too, but you have the advantage of talking to a real person,
not on the phone, with either Fidelity or Schwab.

Also, what other things I should be worried about in terms of fees
when I invest these funds in my IRA? i've never dealt with a bank for
mutual funds or IRA before, but since i tend to forget about them and
just leave them there, I figure I should have someone give me a little
advice?

Should I make him help me select no load funds? Is he gonna take a %
of my investment gain as commision??
Both Fidelity or Schwab has web based mutual funds allocation advice.
It's all free.
 
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B

BreadWithSpam

I went to my bank to have them help me consolidate my old 401K and
roll them over to an IRA. The guy told me that they will not send the
check directly into my IRA account, but I have to request the check
directly from the companies and have the check sent to me, and then i
bring the check to the bank. This seems scary because i'm worried sick
that I'll forget and have to pay 50% tax!!
You'll have to submit a form of some sort to your old
employer (or the custodian of their 401k). That form
should have several choices about how you want the
distribution - in particular, you want to make sure
that they write a check made out to the new custodian
of your IRA. You need to talk to the new IRA custodian
*first*, establish the account there, get an account
number, etc. The old custodian will send you the check -
it may take weeks! - you personally bring that check
to the new custodian. No big deal, but do make sure
that it's got the right numbers - both quantity and
account number.

Just read and fill out that form carefully. It should
be pretty obvious which choice you want. If it isn't,
the post the list of choices here and we'll help you
make sure to choose the right one.
Also, what other things I should be worried about in terms of fees
when I invest these funds in my IRA? i've never dealt with a bank for
mutual funds or IRA before, but since i tend to forget about them and
just leave them there, I figure I should have someone give me a little
advice?
To be quite honest, I've got mine in a brokerage account
rather than a bank. I had another which was a pure mutual
fund account, but I like the flexibility of the brokerage
account a lot better - many more investment choices and
depending on the mutual fund company, full online access
may or may not be available.

I don't see much reason to open an IRA at a bank. If you
are looking at CDs, there are other fixed-income alternatives
which are worth looking into, an brokerage accounts often
offer access to CDs, too. Non-CD cash in one's IRA might
as well be in a decent money-market fund (very few banks
offer MMFs which are any good) or even a short-term bond
fund.

(I just looked - my brokerage account has access to over
50 different CDs of different terms sold by some 15
different banks, all FDIC insured).
Should I make him help me select no load funds? Is he gonna take a %
of my investment gain as commision??
If you have no idea what you are doing, there's no reason
not to pay someone for help. But make sure it's the kind
of help you need.

(a) I highly recommend at least a moderate
self education - even if you aren't going to manage your
accounts much, do some reading. Try either Mutual Fund
for Dummies or Personal Finance for Dummies, both by
Eric Tyson. The $15 you spend on either of those books,
and the three hours or so you'll need to read them, will
be one of the most astoundingly profitable investments you
can make.

(b) Until you know what to do with the money,
there's nothing wrong with parking it in cash or a cash-
equivalent (ie. a Money Market Mutual Fund or even a CD).
The "parking it" option is *not* a long-term option - it's
short term - just long enough to figure out what you're
doing. Long long term, it'll be hard to grow your retirement
stash large enough for actual retirement by leaving it
sitting in cash. Several very very good mutual fund companies
have excellent money-market funds and will be very happy to
establish an IRA account for you to roll that cash into.

(c) if you're going to pay an advisor, don't go in blind -
again, do some reading before. The word "advisor" can mean
about a zillion things, some of them verygood and some
of them rather unfortunate. Many "advisors" are actually
just salespeople who focus on a particular product regardless
of how suitable that product really is. Bank "IRA Advisors"
often steer folks into the bank-branded mutual funds which
carry very high loads and may be very mediocre in performance.
Insurance company "advisors" may really just be pushers of
VAs (which are almost entirely inappropriate for your IRA).
There are some excellent articles out there on selecting
an advisor, and if you go with one, make sure that the
advisor is, in fact, not just a product salesman, that you
do *not* buy anything you don't understand - and especially
understand what the costs are and how they are paid and what
it'll cost to get out of should you find that it's an
innapropriate investment. Again, I'll point out Personal
Finance for Dummies - it's got a great chapter at the end
about selecting and hiring a professional financial planner
(with warnings about some of the pitfalls and points about
what good they can do you) - and if nothing else, at least
it'll help you understand what it is that an advisor is
telling you to do.

Here's a nice little article about finding a financial planner:

http://news.morningstar.com/article/pfarticle.asp?id=189563

Many or most IRAs have an annual fee of some sort if the
balance is below some minimum (ie. Vanguard charges a $10
annual custodial fee for IRA in a fund with less than $5000,
Fidelity brokerage IRAs need at least $2500 to not have an
annual fee, ETrade charges no fees at all on IRAs though
if you have less than $25000, they will charge a fee if
you want paper statements and such - online access is free
regardless).

If you have more than a small sum of money, you should't
be paying an IRA custodial or account fees. All mutual
funds have *expenses* - everyone pays those - which are
a percentage of the balance. Some mutual funds have
sales fees ("loads") which get paid to the person or
organization selling you the fund - which may be how
that person is compensated for helping you choose it.
If nobody helps you choose the fund, don't pay a load.
And if someone tells you a fund is "no-load" make sure
that it is - there are forms of loads which are rather
hidden (ie. class B shares).

Don't be overwhelmed. There are a lot of potential snags
on this road. Take a breath. It shouldn't be scary and
it doesn't have to be. Ask specific questions here.

And don't do anything you're not pretty certain of. Take
your time. Roll that money into a reasonable and safe
(and no cost to get out of!) alternative (ie. a money market
fund) until you have a better idea what to do with it.

Above all, ask questions. Ask the bank. Ask the advisor.
Ask here! For more specific suggestions, the more information
about your situation you can post, the better. If you're
not comfortable coming forward with your details here (this
is a public forum, after all), try to put the questions in
as much context as you can - things like risk tolerance,
how big a portion of your portfolio/assets you're talking
about, what the money's to be used for, how far away that
goal is, etc.

Whew. Sorry for being so long-winded.
 
M

Mark Bole

(e-mail address removed) wrote:

[...]
Having recently done the same thing 3 times over the past 3 years, I
can tell you that many companies will not do direct roll-overs.
Having done the same thing twice in the last five years, I can tell you
that many companies both large and small will do direct rollovers. (I
dunno, do three companies and two companies constitute "many"?) If your
company won't (via the custodian they have hired to handle the
accounts), then all the more reason why it's a good thing you're not
working there anymore!

There may be some requirements for a spousal sign-off on the rollover if
married. I'm not sure if this depends on state law or what.
For example: if you are transferring from your company's 401K to a
Vanguard IRA, you first have to open the Vanguard IRA, which will give
you an account #.
How do you open the IRA without putting any money into it?

-Mark Bole
 
R

Rich Carreiro

Mark Bole said:
How do you open the IRA without putting any money into it?
That's not hard. The broker/fundco opens the account with
a zero balance and tells you the account number. You can
then provide that account number where needed on any rollover
forms or whatever.

I also think some confusions has developed over exactly what
a "direct rollover" means. Tax-wide, a "direct rollover" simply
means that you, the individual, never get your grubby hands on
the money. I think some people in this thread are interpreting
"direct rollover" to mean the 401(k) wires/ACATs the funds directly
to the receiving IRA or sends a check directly to the receiving IRA.
I can definitely believe that some 401(k) plans won't support that.

However (as one person has mentioned), the 401(k) plan can send a
physical check to you, and as long as the check is made out something
like "The IRA Custodian, FBO John Doe" (you might also have them
list the account number if you know it), that still counts
as a direct rollover even though a paper check is sent to you
(because you can't deposit it). You then bring the check to
your IRA custodian and deposit it in your IRA coded as a rollover.
Done. I've done this many times because I am cynical (realistic? :)
about a check being sent from the 401(k) straight to the IRA
custodian getting lost somewhere.
 
J

joetaxpayer

Mark said:
Having done the same thing twice in the last five years, I can tell you
that many companies both large and small will do direct rollovers. (I
dunno, do three companies and two companies constitute "many"?)

There may be some requirements for a spousal sign-off on the rollover if
married. I'm not sure if this depends on state law or what.

How do you open the IRA without putting any money into it?
I think the law requires spousal unit signatures for any move out of a
401(k). My rollover was same as OPs, the company I was leaving had the
requirement of sending me the check made out something like "Pay to
Charles Schwab for further credit to the IRA #xxxx of JoeTaxpayer" or
something similar. It struck me as odd that they did it this way, but it
worked. Schwab was accommodating of the process, setting up a zero
balance IRA to accept the money. In hindsight, I could have put it in
the same IRA I had been making non-deductible deposits to, but I
preferred to track this money separately, and the family balance is
enough to avoid fees on whatever smaller accounts I might want.

I took the opportunity to warn co-workers in the same situation, so
they'd be less surprised at the process.

JOE
 
P

PeterL

(e-mail address removed) wrote:


How do you open the IRA without putting any money into it?

Go to the company, say to them you want to open a rollover IRA
account. That's it. No need to put any money into it.
 
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D

dornachu

(e-mail address removed) wrote:

[...]
Having recently done the same thing 3 times over the past 3 years, I
can tell you that many companies will not do direct roll-overs.
Having done the same thing twice in the last five years, I can tell you
that many companies both large and small will do direct rollovers. (I
dunno, do three companies and two companies constitute "many"?) If your
company won't (via the custodian they have hired to handle the
accounts), then all the more reason why it's a good thing you're not
working there anymore!

There may be some requirements for a spousal sign-off on the rollover if
married. I'm not sure if this depends on state law or what.
For example: if you are transferring from your company's 401K to a
Vanguard IRA, you first have to open the Vanguard IRA, which will give
you an account #.
How do you open the IRA without putting any money into it?

-Mark Bole
I'm very confused too. I set up an appointment with the financial guy,
he took all my info, made copies and said we'll have to be on a
conference call and to get the money roll over. He specifically told
me that those 3 checks (from my 3 diff 401K account) will have to come
directly to me, and then I have to physically bring them to the
bank.

I'll spill it here, the bank is HSBC. I have an account with them to
take advantage of the 6% return until april 30th. I thought keeping
everything in one place would be a bit easier for me to keep track.
But now I'm a bit fishy about them.

maybe I should leave my money (the 6% thing) till end of april and
bring my money somewhere else?
 
K

kastnna

Would you go to an orthodontist to have your eyes checked?

I'm GENERALIZING, but many of the banks I have encountered are not the
most educated when it comes to other than ordinary financial matters.

Did you know that many banks REQUIRE that someone at each branch be
licensed to sell securities and investments, even if no one is truly
qualified? They tried to make one of my family members get licensed
simply because no one else in the bank wanted to do it. Is that who
you want managing your money? The person that was forced to learn just
enough to pass the test.

I can't count the number of times I've heard a banker say "put it in
one of our CDs" without asking a single suitability question. That is
sickening! How can one put a puzzle together if they don't have all of
the pieces?

Learn enough to handle your own investing and/or seek someone who is
truly qualified to handle your financial matters. That may be
yourself, a brokerage firm, and CFP, or a combination of the
aforementioned.
 
K

kastnna

Since my other post was a little bit of an anti-bank rant I will at
least say this:

Ask the bank's "advisor" his credentials, experience, fee structure,
etc etc.

The fact that he left things so unclear and did such a poor job of
explaining makes me leary of him to start with, but you may decide to
give him the benefit of the doubt anyway.
 
J

joetaxpayer

kastnna said:
I can't count the number of times I've heard a banker say "put it in
one of our CDs" without asking a single suitability question. That is
sickening! How can one put a puzzle together if they don't have all of
the pieces?
I was in a bank and overheard someone discussing a T-bill vs a CD (with
a customer). The T-bill advantage was the non-tax status for state
income tax, not a huge amount, but a 5% tax on 5% CD is .25%. The Banker
emphasized that a T-bill has no FDIC insurance and 'will fluctuate in
value'. The penalty on the CD was 'only' 3 months interest.
Now, I suppose that sticking to the letter of the law, there is no FDIC
insurance on T-bills, but what series of events could ever come to pass
where T-bills are defaulting, yet CDs are safe? And yes, when rates
shoot up, it's possible for a few months the present value of the T-bill
will drop by more than 3 months value when compared to the CD, but this
still smells like bad fish to me, and nauseate me just the same.
JOE
 
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W

Will Trice

Rich said:
That's not hard. The broker/fundco opens the account with
a zero balance and tells you the account number. You can
then provide that account number where needed on any rollover
forms or whatever.
Exactly, I just did this with E-Trade in order to rollover an old 401(k).

However (as one person has mentioned), the 401(k) plan can send a
physical check to you, and as long as the check is made out something
like "The IRA Custodian, FBO John Doe" (you might also have them
list the account number if you know it), that still counts
as a direct rollover even though a paper check is sent to you
(because you can't deposit it). You then bring the check to
your IRA custodian and deposit it in your IRA coded as a rollover.
Done. I've done this many times because I am cynical (realistic? :)
about a check being sent from the 401(k) straight to the IRA
custodian getting lost somewhere.
Indeed. E-Trade actually recommended that I have the check sent to me
instead of going directly from
my 401(k) custodian to E-Trade. Apparently E-Trade occasionally
receives checks from custodians without sufficient paperwork to figure
out where they are supposed to be deposited, leading to the lost deposit
syndrome. I did as E-Trade suggested and everything worked out great,
including correct paperwork and correct information on the check.

-Will
 
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