401K rollover time allowed

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MPLSTCH
Posts: 53
Joined: Sun Mar 26, 2017 9:59 am

401K rollover time allowed

Post by MPLSTCH » Sun Aug 19, 2018 6:45 am

Wife and I plan to move her 401K this year as follows:
Vanguard Index Funds to Vanguard, Schwab, or Fidelity. Uncertain who we will use
Company stock (in kind) to a brokerage account

How much time should we allow for this to complete. If we want it to occur in 2018 tax year....how much time should we allow?

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dwickenh
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Location: Illinois

Re: 401K rollover time allowed

Post by dwickenh » Sun Aug 19, 2018 7:57 am

2-3 weeks is normal, but I would allow more than that if you want to be sure it happens in 2018.
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

diy60
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Joined: Wed Sep 07, 2016 6:54 pm

Re: 401K rollover time allowed

Post by diy60 » Sun Aug 19, 2018 8:22 am

Agree with the above poster. If wanting to do by 2018 year end, I would initiate before November. After that things can get busy both personally and commercially. Good luck.

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BL
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Re: 401K rollover time allowed

Post by BL » Sun Aug 19, 2018 8:33 am

Those 3 brokerages probably all accept company stock and 401k, so why not use same company? Hopefully your company stock is not a large % of your portfolio, or you might want to sell some.

Make your decision and move ASAP.

MPLSTCH
Posts: 53
Joined: Sun Mar 26, 2017 9:59 am

Re: 401K rollover time allowed

Post by MPLSTCH » Mon Aug 20, 2018 12:16 pm

BL wrote:
Sun Aug 19, 2018 8:33 am
Those 3 brokerages probably all accept company stock and 401k, so why not use same company? Hopefully your company stock is not a large % of your portfolio, or you might want to sell some.

Make your decision and move ASAP.
We do plan on using the same company for both 401k Index funds and company stock. We are too heavy in stock and plan to sell some immediately. Plan for 2018 is to sell a portion by keep MAGI low enough to not affect Medicare too much. In 2019 we will be retired and plan to sell up to the point where 15% bracket ends.

Alan S.
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Location: Prescott, AZ

Re: 401K rollover time allowed

Post by Alan S. » Mon Aug 20, 2018 1:51 pm

MPLSTCH wrote:
Sun Aug 19, 2018 6:45 am
Wife and I plan to move her 401K this year as follows:
Vanguard Index Funds to Vanguard, Schwab, or Fidelity. Uncertain who we will use
Company stock (in kind) to a brokerage account

How much time should we allow for this to complete. If we want it to occur in 2018 tax year....how much time should we allow?

Are the company shares in the 401k or ESOP plan? If so, are you planning on utilizing NUA?

Luke Duke
Posts: 779
Joined: Tue Jun 18, 2013 11:44 am
Location: Texas

Re: 401K rollover time allowed

Post by Luke Duke » Mon Aug 20, 2018 1:54 pm

Do you expect to want to make any backdoor Roth IRA contributions in the future?

RetiredAL
Posts: 157
Joined: Tue Jun 06, 2017 12:09 am
Location: SF Bay Area

Re: 401K rollover time allowed

Post by RetiredAL » Mon Aug 20, 2018 5:26 pm

MPLSTCH wrote:
Sun Aug 19, 2018 6:45 am
Wife and I plan to move her 401K this year as follows:
Vanguard Index Funds to Vanguard, Schwab, or Fidelity. Uncertain who we will use
Company stock (in kind) to a brokerage account

How much time should we allow for this to complete. If we want it to occur in 2018 tax year....how much time should we allow?
First make sure as to whether or not there are any Post-Tax $ in the 401K. Commonly, there is. A call to your 401K people will clarify this and if YES, can they roll-over those $ to over to a Roth separately from the IRA roll-over. Rolling over Post-tax now to a Roth frees you from complicated cost tracking in the IRA later. Over the last few weeks, there has been several ugly stories of cost tracking issues.

Who is your 401K with today. If you keep the roll-over transfer within the same company, you speed up the times and minimize communication/processing errors between disparate systems/people. These errors can be ugly to remedy after-the-fact.

My experience 2 years ago when I retired:

My 401K was at Fidelity, as were both the receiving Roth and Roll-over IRA. In my case, these accounts already existed, but if not, an empty shell could have been created awaiting funds movement. I did the transfer about 10 days ( mid-month ) after I retired, long enough for any pending transactions ( new funds from my last pay and any dividend/interest payments ) to post to the 401K. On the designated day minus 1, I sold all my 401K holdings to cash, as most were not transferable in-kind. On the designated day, I called the Fidelity Retirement Specialist I'd been working with. She made journal entries first to the Roth, 2nd'ly to the Roll-over IRA, to move all the 401K $ out. I could immediately see the $ had moved while on the phone. After we closed the call, I bought the equivalent funds for the same $ amount that they closed out for the previous night. Important to me, I was only out of the market 1 day. Since the market was down a small amount that day, I had a small gain for the week. I was lucky.

I chose to take my pension $ as a lump sump. That had to wait until 30 days after retirement + a few days to process. I received an email as to the day this would happen and another email when it posted to its IRA. I invested those $ that day.

Thus for me, this was a very simple and clean process.

MPLSTCH
Posts: 53
Joined: Sun Mar 26, 2017 9:59 am

Re: 401K rollover time allowed

Post by MPLSTCH » Mon Aug 20, 2018 8:09 pm

Alan S. wrote:
Mon Aug 20, 2018 1:51 pm
MPLSTCH wrote:
Sun Aug 19, 2018 6:45 am
Wife and I plan to move her 401K this year as follows:
Vanguard Index Funds to Vanguard, Schwab, or Fidelity. Uncertain who we will use
Company stock (in kind) to a brokerage account

How much time should we allow for this to complete. If we want it to occur in 2018 tax year....how much time should we allow?

Are the company shares in the 401k or ESOP plan? If so, are you planning on utilizing NUA?
the stock shares are in the 401k........we DO plan utilizing NUA

MPLSTCH
Posts: 53
Joined: Sun Mar 26, 2017 9:59 am

Re: 401K rollover time allowed

Post by MPLSTCH » Tue Aug 21, 2018 6:23 am

RetiredAL wrote:
Mon Aug 20, 2018 5:26 pm
MPLSTCH wrote:
Sun Aug 19, 2018 6:45 am
Wife and I plan to move her 401K this year as follows:
Vanguard Index Funds to Vanguard, Schwab, or Fidelity. Uncertain who we will use
Company stock (in kind) to a brokerage account

How much time should we allow for this to complete. If we want it to occur in 2018 tax year....how much time should we allow?
First make sure as to whether or not there are any Post-Tax $ in the 401K. Commonly, there is. A call to your 401K people will clarify this and if YES, can they roll-over those $ to over to a Roth separately from the IRA roll-over. Rolling over Post-tax now to a Roth frees you from complicated cost tracking in the IRA later. Over the last few weeks, there has been several ugly stories of cost tracking issues.

Who is your 401K with today. If you keep the roll-over transfer within the same company, you speed up the times and minimize communication/processing errors between disparate systems/people. These errors can be ugly to remedy after-the-fact.

My experience 2 years ago when I retired:

My 401K was at Fidelity, as were both the receiving Roth and Roll-over IRA. In my case, these accounts already existed, but if not, an empty shell could have been created awaiting funds movement. I did the transfer about 10 days ( mid-month ) after I retired, long enough for any pending transactions ( new funds from my last pay and any dividend/interest payments ) to post to the 401K. On the designated day minus 1, I sold all my 401K holdings to cash, as most were not transferable in-kind. On the designated day, I called the Fidelity Retirement Specialist I'd been working with. She made journal entries first to the Roth, 2nd'ly to the Roll-over IRA, to move all the 401K $ out. I could immediately see the $ had moved while on the phone. After we closed the call, I bought the equivalent funds for the same $ amount that they closed out for the previous night. Important to me, I was only out of the market 1 day. Since the market was down a small amount that day, I had a small gain for the week. I was lucky.

I chose to take my pension $ as a lump sump. That had to wait until 30 days after retirement + a few days to process. I received an email as to the day this would happen and another email when it posted to its IRA. I invested those $ that day.

Thus for me, this was a very simple and clean process.

Thank you fr sharing your experience. My guess is moving to Vanguard would be easiest since the index funds we are in are with Vanguard. And thanks for the reminder to check dividends date.

scrabbler1
Posts: 2229
Joined: Fri Nov 20, 2009 2:39 pm

Re: 401K rollover time allowed

Post by scrabbler1 » Tue Aug 21, 2018 9:09 am

MPLSTCH wrote:
Mon Aug 20, 2018 8:09 pm
Alan S. wrote:
Mon Aug 20, 2018 1:51 pm
MPLSTCH wrote:
Sun Aug 19, 2018 6:45 am
Wife and I plan to move her 401K this year as follows:
Vanguard Index Funds to Vanguard, Schwab, or Fidelity. Uncertain who we will use
Company stock (in kind) to a brokerage account

How much time should we allow for this to complete. If we want it to occur in 2018 tax year....how much time should we allow?

Are the company shares in the 401k or ESOP plan? If so, are you planning on utilizing NUA?
the stock shares are in the 401k........we DO plan utilizing NUA
Ten years ago, I went through what you are planning to do this year. My company had merged its 401k and ESOP plan, so the company stock and other investments were treated similarly where possible.

When I left the company at the end of October (2008), I did a direct, trustee-to-trustee rollover of my pretax contributions and their earnings into an IRA. I used NUA to cash out the company stock (97% of the stock's value was NUA, so huge tax savings). I had some after-tax contributions in there, too, which I took as cash.

Specific instructions to the plan administrator were enough to have everything handled properly and in a timely manner. The stock proceeds and after-tax money went directly to my local bank's checking account in a few days. The IRA rollover was a trustee-to-trustee check mailed to me in about a week. A week after that, I went to my local Fidelity office to handle the whole thing, so the whole process took about 2 weeks, done by mid-November.

MPLSTCH
Posts: 53
Joined: Sun Mar 26, 2017 9:59 am

Re: 401K rollover time allowed

Post by MPLSTCH » Tue Aug 21, 2018 10:06 am

scrabbler1 wrote:
Tue Aug 21, 2018 9:09 am
MPLSTCH wrote:
Mon Aug 20, 2018 8:09 pm
Alan S. wrote:
Mon Aug 20, 2018 1:51 pm
MPLSTCH wrote:
Sun Aug 19, 2018 6:45 am
Wife and I plan to move her 401K this year as follows:
Vanguard Index Funds to Vanguard, Schwab, or Fidelity. Uncertain who we will use
Company stock (in kind) to a brokerage account

How much time should we allow for this to complete. If we want it to occur in 2018 tax year....how much time should we allow?

Are the company shares in the 401k or ESOP plan? If so, are you planning on utilizing NUA?
the stock shares are in the 401k........we DO plan utilizing NUA
Ten years ago, I went through what you are planning to do this year. My company had merged its 401k and ESOP plan, so the company stock and other investments were treated similarly where possible.

When I left the company at the end of October (2008), I did a direct, trustee-to-trustee rollover of my pretax contributions and their earnings into an IRA. I used NUA to cash out the company stock (97% of the stock's value was NUA, so huge tax savings). I had some after-tax contributions in there, too, which I took as cash.

Specific instructions to the plan administrator were enough to have everything handled properly and in a timely manner. The stock proceeds and after-tax money went directly to my local bank's checking account in a few days. The IRA rollover was a trustee-to-trustee check mailed to me in about a week. A week after that, I went to my local Fidelity office to handle the whole thing, so the whole process took about 2 weeks, done by mid-November.

Did you move the stock "in kind" to a taxable account? It is my understanding this must be done to utilize NUA

scrabbler1
Posts: 2229
Joined: Fri Nov 20, 2009 2:39 pm

Re: 401K rollover time allowed

Post by scrabbler1 » Tue Aug 21, 2018 10:16 am

MPLSTCH wrote:
Tue Aug 21, 2018 10:06 am
scrabbler1 wrote:
Tue Aug 21, 2018 9:09 am
MPLSTCH wrote:
Mon Aug 20, 2018 8:09 pm
Alan S. wrote:
Mon Aug 20, 2018 1:51 pm
MPLSTCH wrote:
Sun Aug 19, 2018 6:45 am
Wife and I plan to move her 401K this year as follows:
Vanguard Index Funds to Vanguard, Schwab, or Fidelity. Uncertain who we will use
Company stock (in kind) to a brokerage account

How much time should we allow for this to complete. If we want it to occur in 2018 tax year....how much time should we allow?

Are the company shares in the 401k or ESOP plan? If so, are you planning on utilizing NUA?
the stock shares are in the 401k........we DO plan utilizing NUA
Ten years ago, I went through what you are planning to do this year. My company had merged its 401k and ESOP plan, so the company stock and other investments were treated similarly where possible.

When I left the company at the end of October (2008), I did a direct, trustee-to-trustee rollover of my pretax contributions and their earnings into an IRA. I used NUA to cash out the company stock (97% of the stock's value was NUA, so huge tax savings). I had some after-tax contributions in there, too, which I took as cash.

Specific instructions to the plan administrator were enough to have everything handled properly and in a timely manner. The stock proceeds and after-tax money went directly to my local bank's checking account in a few days. The IRA rollover was a trustee-to-trustee check mailed to me in about a week. A week after that, I went to my local Fidelity office to handle the whole thing, so the whole process took about 2 weeks, done by mid-November.

Did you move the stock "in kind" to a taxable account? It is my understanding this must be done to utilize NUA
Because I was leaving the company, and it was not publicly traded (yet), I had to sell the shares back to them when I left (per plan rules). I had some options regarding how much time I had to sell them, though. I chose to sell them all when I left and was permitted to use NUA. Either this counted as "in kind," or "in kind" wasn't really required.

RetiredAL
Posts: 157
Joined: Tue Jun 06, 2017 12:09 am
Location: SF Bay Area

Re: 401K rollover time allowed

Post by RetiredAL » Tue Aug 21, 2018 6:20 pm

MPLSTCH wrote:
Sun Aug 19, 2018 6:45 am

Thank you fr sharing your experience. My guess is moving to Vanguard would be easiest since the index funds we are in are with Vanguard. And thanks for the reminder to check dividends date.
It not whose funds your hold, it's who is the Administrator of your plan. If Vanguard is a the Admin, then by all means keep it Roll-over with Vanguard. If the Admin is someone else, then you have to initiate an external Trustee to Trustee process, and those can take time to actually happen.

Since it's tax deferred, selling to cash as part of the transfer is no big deal. Out of the market for 2 to 3 weeks could be significant, either as a plus or a minus. Bigger concern relating to the transfer lag is IF it straddles the year, will that mess up something else, like a Roth Backdoor that has already been made.

If you take everything to cash yourself, you can target missing interest/dividend dates. If you let the Admins set the transfer/sell date, there could be some residual that tags along for a little while.

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