strangely afraid to roll over my 401k

[caroljm36]

Please help me with this..I learned at this forum that I could actually do an in-service rollover of my 401k, which I hadn't realized. It was good news, but shook me up because all these years I was so used to thinking of the 401k as out of reach and safe, albeit with 1% ERs and not very good funds. Yesterday I scooped it all over into money market to get ready, and have the paperwork filled out to take to HR, but I am really nervous about this move.

First, I wonder how it would affect my job - will they assume I am preparing to leave? when I want to work another 7 years, but business is really slow right now and I'm getting pretty nervous. The company is small and my part of the 401k amounts to about 8% of the total, and moving it could possibly affect their ability to get into something better as the pot gets bigger. I even asked the HR lady if the rollover would have any "bearing on my job status" as I was afraid to even say what I was thinking. Needless to say she just got irritated by my weird question and asked why it would make any difference.

Second, I worry I won't do as well at Vanguard as I have done at Franklin, just for being stuck there and having to make do with their funds. I've been making 9% this year, and planned on putting the rollover into Wellesley, but am having an awful time just keeping my hands out of it and staying the course.

Am I being irrational?

[tfb]

Am I being irrational?

Yes.

[BL]

Wellesley is about 40% equities and 60% fixed income. Is that about what you have in your 401k? If not, you need to read the Wiki here and learn about Asset Allocation.

Are you sure you can do a rollover of 401K? I believe that those who only put in up to 17% cannot do this (with possible exception of attaining a certain age). If you are allowed to put in higher amounts, then this option is more likely. Just wanted to mention this for others as well as just in case you had too little information.

[caroljm36]

Wellesley is about 40% equities and 60% fixed income. Is that about what you have in your 401k? If not, you need to read the Wiki here and learn about Asset Allocation.

Are you sure you can do a rollover of 401K? I believe that those who only put in up to 17% cannot do this (with possible exception of attaining a certain age). If you are allowed to put in higher amounts, then this option is more likely. Just wanted to mention this for others as well as just in case you had too little information.

Yes my employer confirmed I could do an in service rollover. I hadn't realized the situation had changed since I turned 60.

As for allocation I'm about 30/70 now and I think 40/60 would be better for me, since I'm looking to work until 70 if I can.

[CaliJim]

Self directed IRAs invested in low cost index funds can really help reduce your expense ratio. A one percent annual drag on your portfolio, year after year, compounds to a HUGE number. My advice: DO IT.

[nedsaid]

Doing a partial rollover to an IRA doesn't mean you are going to leave your job. Seeing that you work for a small company, I can see why you are concerned. Do what is in your best interest and don't worry about what others think.

The Franklin/Templeton Group is actually a pretty good mutual fund company. If you are happy with the performance you are getting, there is no need to move your funds to Vanguard. You might compare the performance of your 401k with the Wellesley Fund you are interested in. Compare it over the last 5 and 10 years instead of just one year. I own a few Franklin/Templeton funds myself. Their expense ratios for the most part are reasonable.

That said, I am a believer in indexing and low cost funds. I do not own Wellesley, but a lot of people in this forum love that fund. It is a good low cost, managed fund. I index more and more as I get older.

Another factor is the 401k fees. My employer picks up those costs, so my only expenses are the expense ratios of the funds. Sweet deal. Many 401k participants have to pay those costs themselves. The way to tell is to see if your statement lists the number of shares that you own. If it is expressed in shares and dollars and has a ticker symbol you can look up, then that is a good sign. If your balance is listed in dollars only, you are paying hidden fees. If your balance is listed in units rather than shares, you might be in a variable annuity (a really bad sign). If you see the phrase "separate account", then you are in a variable annuity.

If it were me, if my costs were only the expense ratios of the funds and I was satisfied with the performance I would be inclined to stay. If you find you are paying hidden fees, I would get a big chunk of your money out of there and into Vanguard. Keep in mind you want to keep participating in the 401k, you are just moving a chunk of your money. If your performance in your funds is unsatisfactory, then I would move funds. My sense is that you are probably getting acceptable performance. Nine percent year to date in a conservative portfolio is pretty good.

In the end, it is your money and you have to act in your own best interest. I read your post again and saw that you have your money in money markets. I also saw the phrase "not very good funds." It tells me you have already made your decision. You just need to confidently execute your decision and not make a big deal of it.

[livesoft]

I'm gonna guess that all your company colleagues that are age 59.5 or older have already done their rollover including the HR person you talked to.

I mentioned in-service rollovers at a 401(k) meeting and our HR person jumped up and said, "Yes, and I've already rolled over my money."

[grabiner]

Second, I worry I won't do as well at Vanguard as I have done at Franklin, just for being stuck there and having to make do with their funds. I've been making 9% this year, and planned on putting the rollover into Wellesley, but am having an awful time just keeping my hands out of it and staying the course.

You might roll over into similar funds. If you replace Templeton Foreign with Vanguard International Value or Total International, and Franklin Total Return with Vanguard Intermediate-Term Investment-Grade or Total Bond Market Index, and Franklin Equity Income with Vanguard Equity Income or Value Index, you won't change your portfolio much except for the expense reduction. You can check the returns to see which funds track each other.

I checked these funds as examples, and the performance for all the pairs is similar, except that Franklin Total Return is significantly riskier than Total Bond Market and thus has higher returns but lost much more in 2008. Ten-year charts also show how much a small leak can sink a big ship; the funds don't track perfectly, but an extra 0.8% in expenses makes an 8% difference over ten years, which is why the similar Vanguard funds are usually ahead.

[nisiprius]

I honestly do not feel that there's any big rush about doing this. In fact I think one should try to avoid doing anything under a sense of time pressure in investing. And, I know others will disagree, but I don't see why you should add to your stress by doing something that you don't need to do that makes you uncomfortable. "Trust thyself: every heart vibrates to that iron string."

The important decisions are your decision to save, how much you are saving, and the most basic decision of all: how much stocks, how much in bonds.

You can run the Vanguard cost calculator until the cows come home to see how many more dollars you might theoretically have because of lower expenses, but it isn't going to make the difference between happiness and unhappiness in retirement.

If you were to scoop your cash it right out of the money market fund and scoop it right back into the same funds you had, and slept on it... or waited a week, or a month, or a year or two to do it, why not?

P.S. Be aware that you probably did not need to liquidate your funds in order to move them. One perfectly good way to do things is to move your existing mutual funds "in kind," out of your 401(k) and into a Rollover IRA at Vanguard Brokerage Services. You have the same funds you had, you've stripped off a hopefully thin layer of extra hidden fees in the 401(k), and you can then take your time deciding which funds you want to exchange for Vanguard funds and why.

It would not be impossible that what you are feeling is fear of the unknowns of retirement. Suddenly the reality has hit home at age 59-1/2 when you hadn't planned even to think about it for another six or seven years.

In any case, there may be areas in life where it's good to push yourself out of your comfort zone, but I don't think this is one of them. Swapping your high-cost actively-managed funds for low-cost index funds is not going to open up some grand new vista of possibilities that were closed off before.

[Watty]

will they assume I am preparing to leave?

This would actually be more a sign that you were planning to stay. If you were planning to leave then you would likely just wait and do a normal rollover after you left.

[retiredjg]

This sounds to me like "fear of the unknown". Why don't you move one third or half and see how you feel in 6 months? I suspect once you've got something moved, you will not feel uncomfortable any more and will be happy to move more.

[Steelersfan]

When my company first offered something like this a number of my employees took advantage of it. I thought it spoke well for their financial acumen and did not affect my opinion of them.

It did not affect their performance as employees and I continued to value their contributions to the success of the business.

[livesoft]

I honestly do not feel that there's any big rush about doing this.

I calculate that my spouse will save about $5,000 a year in excess fees since she was able to get her money out of her 401(k) plan this past summer.

[caroljm36]

P.S. Be aware that you probably did not need to liquidate your funds in order to move them. One perfectly good way to do things is to move your existing mutual funds "in kind," out of your 401(k) and into a Rollover IRA at Vanguard Brokerage Services. You have the same funds you had, you've stripped off a hopefully thin layer of extra hidden fees in the 401(k), and you can then take your time deciding which funds you want to exchange for Vanguard funds and why.

I didn't know I could do that. Can it be done with no time out of the market? Vanguard told me Franklin would be sending a check, so I wanted to at least go mmkt to mmkt in case there is a huge drop and rise both at the wrong time. More stress prevention than anything else.

It would not be impossible that what you are feeling is fear of the unknowns of retirement. Suddenly the reality has hit home at age 59-1/2 when you hadn't planned even to think about it for another six or seven years.

I fear retiring too soon. I got a late start in the world of work and if I can get to 70 I'll have made the best of a bad situation.

[tfb]

Be aware that you probably did not need to liquidate your funds in order to move them. One perfectly good way to do things is to move your existing mutual funds "in kind," out of your 401(k) and into a Rollover IRA at Vanguard Brokerage Services.

Except when you rollover to the same company managing the 401k (e.g. Fidelity administered 401k to Fidelity IRA), 401k plans typically don't distribute securities in kind. I'm curious which administrator allowed this.

[john94549]

If the OP pulls the money from her company's fund (which, admittedly, might be quite legal and rational), and then gets sacked, will she: (1) assume she was quite right, that her fears were well-grounded, and that by her simple, and quite logical, age-based transaction, she was regarded no longer as a "team player"; (2) assume she was quite right, that her fears were well-grounded, and that anonymous internet posters led her astray; (3) assume she was quite right, that her fears were well-grounded, but "stuff happens", so don't take it personally, or (4) assume her sacking had absolutely nothing to do with the financial transaction.

That noted, best wishes to the OP.

[caroljm36]

If the OP pulls the money from her company's fund (which, admittedly, might be quite legal and rational), and then gets sacked, will she: (1) assume she was quite right, that her fears were well-grounded, and that by her simple, and quite logical, age-based transaction, she was regarded no longer as a "team player"; (2) assume she was quite right, that her fears were well-grounded, and that anonymous internet posters led her astray; (3) assume she was quite right, that her fears were well-grounded, but "stuff happens", so don't take it personally, or (4) assume her sacking had absolutely nothing to do with the financial transaction.

That noted, best wishes to the OP.

Haha, you got it...it's the "team player" part I worry about. And it's dangerous to ask for or give advice..quite right that I could be sacked for other reasons so I don't really want it out there that I may be transitioning into retirement mode prematurely. Maybe I'll just take part of it for now.

Thanks everyone.

[ofcmetz]

I honestly do not feel that there's any big rush about doing this.

I calculate that my spouse will save about $5,000 a year in excess fees since she was able to get her money out of her 401(k) plan this past summer.

Were are in a similar position^.

OP, I would take advantage of any chance I had to transfer out of a high cost plan into an IRA that I controlled. I don't see why anyone would see this as a sign of lack of loyalty.

[Default User BR]

You could always "talk it up" with the boss before. "Hey, I found out I can roll over 401(k) money even though I'm nowhere near retirement! That means I can invest in some things we don't have."


Brian

[caroljm36]

You could always "talk it up" with the boss before. "Hey, I found out I can roll over 401(k) money even though I'm nowhere near retirement! That means I can invest in some things we don't have."


Brian

I did that with HR, because the CEO is usually gone to *his* premature retirement winery.

FWIW this is all basically over ~1% ER and very limited fund choices. The only bond fund is Strategic Income. The front end loads and 12B-1 fees are waived.

[nisiprius]

Caroljm, I may have screwed up when I said you could transfer in kind:

Be aware that you probably did not need to liquidate your funds in order to move them. One perfectly good way to do things is to move your existing mutual funds "in kind," out of your 401(k) and into a Rollover IRA at Vanguard Brokerage Services.

Except when you rollover to the same company managing the 401k (e.g. Fidelity administered 401k to Fidelity IRA), 401k plans typically don't distribute securities in kind. I'm curious which administrator allowed this.

tfb is usually correct and I may have dispensed misinformation. In my case, I had to do it as a two-step process. I first performed a rollover from my Fidelity 401(k) to a Fidelity rollover IRA. I then performed a transfer in kind to Vanguard Brokerage Services.

I honestly do not feel that there's any big rush about doing this.

I calculate that my spouse will save about $5,000 a year in excess fees since she was able to get her money out of her 401(k) plan this past summer.

We can all do the math (and if not, Vanguard's website is happy to do it for us). If she's rolling over into identical funds, then indeed it is a true savings. But I still stick to my guns. $5,000, $10,000, or $15,000 is not going to make the difference between misery and happiness in retirement, and once you start going down the root of taking small financial differences as an imperative, you cause yourself stress and misery. If she's rolling over from high-cost active funds into low-cost index funds, then the comparison is even trickier. I call myself a Boglehead, but the reason why active funds exist is that they contain a boatload of extra fluctuation, and seeing that extra $5,000 year actually materialize in your own account in any give year is not by any means a sure thing.

[tfb]

We can all do the math (and if not, Vanguard's website is happy to do it for us). If she's rolling over into identical funds, then indeed it is a true savings. But I still stick to my guns. $5,000, $10,000, or $15,000 is not going to make the difference between misery and happiness in retirement, and once you start going down the root of taking small financial differences as an imperative, you cause yourself stress and misery. If she's rolling over from high-cost active funds into low-cost index funds, then the comparison is even trickier. I call myself a Boglehead, but the reason why active funds exist is that they contain a boatload of extra fluctuation, and seeing that extra $5,000 year actually materialize in your own account in any give year is not by any means a sure thing.

Hmm, I'm surprised you are questioning the foundation of Bogleheadsism. I would agree $5,000, $10,000, or $15,000 is not going to make the difference between misery and happiness in retirement. Are you saying the stuff we hold dear to our heart, that indexing is superior to active management, "cost matters," actually don't matter that much? That indexing beats active on average, but when it comes down one specific actively managed fund X and an index fund alternative Y, we can't be confident enough to say Y will be better than X?

[Call_Me_Op]

Please help me with this..I learned at this forum that I could actually do an in-service rollover of my 401k, which I hadn't realized. It was good news, but shook me up because all these years I was so used to thinking of the 401k as out of reach and safe, albeit with 1% ERs and not very good funds. Yesterday I scooped it all over into money market to get ready, and have the paperwork filled out to take to HR, but I am really nervous about this move.

First, I wonder how it would affect my job - will they assume I am preparing to leave? when I want to work another 7 years, but business is really slow right now and I'm getting pretty nervous. The company is small and my part of the 401k amounts to about 8% of the total, and moving it could possibly affect their ability to get into something better as the pot gets bigger. I even asked the HR lady if the rollover would have any "bearing on my job status" as I was afraid to even say what I was thinking. Needless to say she just got irritated by my weird question and asked why it would make any difference.

Second, I worry I won't do as well at Vanguard as I have done at Franklin, just for being stuck there and having to make do with their funds. I've been making 9% this year, and planned on putting the rollover into Wellesley, but am having an awful time just keeping my hands out of it and staying the course.

Am I being irrational?

Hi Carol,

One thing to be careful about is to keep the roll-over assets segregated from other IRA assets, because the roll-over assets have much stronger asset protection attributes.

[JW Nearly Retired]

If the OP pulls the money from her company's fund (which, admittedly, might be quite legal and rational), and then gets sacked, will she: (1) assume she was quite right, that her fears were well-grounded, and that by her simple, and quite logical, age-based transaction, she was regarded no longer as a "team player"; (2) assume she was quite right, that her fears were well-grounded, and that anonymous internet posters led her astray; (3) assume she was quite right, that her fears were well-grounded, but "stuff happens", so don't take it personally, or (4) assume her sacking had absolutely nothing to do with the financial transaction.

That noted, best wishes to the OP.

Haha, you got it...it's the "team player" part I worry about. And it's dangerous to ask for or give advice..quite right that I could be sacked for other reasons so I don't really want it out there that I may be transitioning into retirement mode prematurely. Maybe I'll just take part of it for now.

Thanks everyone.

The 1% ER is not going to cost you much compared to getting sacked. I would postpone this at least until business improves and nobody needs to be laid off.
JW

[CaliJim]

Hi Carol,

One thing to be careful about is to keep the roll-over assets segregated from other IRA assets, because the roll-over assets have much stronger asset protection attributes.

Hey Me_Op:

Can you say more about what these asset protection attributes are? This is a new concept for me. Start another thread if appropriate. Thanks.