Rollover Timing Risk

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JerryB
Posts: 100
Joined: Sun Apr 19, 2009 9:53 am

Rollover Timing Risk

Post by JerryB » Tue Oct 16, 2018 7:30 pm

I'm going to transfer a 401K to a Vanguard IRA. The 401K is 100% invested in a stock fund and will rollover into a Vanguard stock fund. How can I hedge the timing risk while the funds are moving between accounts and are not invested? Days like today scare me.

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hoppy08520
Posts: 2006
Joined: Sat Feb 18, 2012 11:36 am

Re: Rollover Timing Risk

Post by hoppy08520 » Tue Oct 16, 2018 7:36 pm

Prior to the rollover, can you rebalance all of your various accounts such that you maintain your overall asset allocation across your entire portfolio, but have your 401(k) account be 100% bonds? Then do your rollover. The only part of your portfolio that will be out of the market during the rollover will be bonds which is more stable.

If your 401(k) balance is so big that you can’t make this happen, then just roll over 20% at a time. It will take a little longer, but so what?
Last edited by hoppy08520 on Tue Oct 16, 2018 7:37 pm, edited 1 time in total.

xenochrony
Posts: 47
Joined: Mon Mar 26, 2018 11:24 pm
Location: California

Re: Rollover Timing Risk

Post by xenochrony » Tue Oct 16, 2018 7:37 pm

I did this recently and was concerned about the timing risk. While theres just as much chance of an upside as there is downside to being out of the market during a rollover, the only thing I could do was to shorten the time period out of the market. Did this by using expedited service from the 401K custodian, triple checking all my rollover forms/authorizations for accuracy/completeness and sending it to VG overnight express.

Did this in the beginning of Feb 2018 and caught a bit of upside on the late January drop. Good luck. :moneybag

aristotelian
Posts: 4776
Joined: Wed Jan 11, 2017 8:05 pm

Re: Rollover Timing Risk

Post by aristotelian » Tue Oct 16, 2018 7:50 pm

Can you do a couple of partial rollovers?

megabad
Posts: 663
Joined: Fri Jun 01, 2018 4:00 pm

Re: Rollover Timing Risk

Post by megabad » Tue Oct 16, 2018 7:55 pm

A modest portfolio over 30 years would grow say 250%. Most of the largest changes in history were 10% or so over a week. In my experience I can usually accomplish rollover within a week. There a couple of exceptions throughout the last 100 years (Great Depression, a day or two in 1970s, 2008, etc). But I would not be all that worried unless I was planning on doing a lot of gigantic rollovers later in life. That said, I would overnight all checks and make darn sure each custodian knew what to do ahead of time.

JerryB
Posts: 100
Joined: Sun Apr 19, 2009 9:53 am

Re: Rollover Timing Risk

Post by JerryB » Tue Oct 16, 2018 8:12 pm

That would be great to do partials. I should check with the 401K custodian if that can be done.

FireHorse
Posts: 73
Joined: Sat Nov 25, 2017 7:03 pm

Re: Rollover Timing Risk

Post by FireHorse » Tue Oct 16, 2018 8:32 pm

JerryB wrote:
Tue Oct 16, 2018 7:30 pm
I'm going to transfer a 401K to a Vanguard IRA. The 401K is 100% invested in a stock fund and will rollover into a Vanguard stock fund. How can I hedge the timing risk while the funds are moving between accounts and are not invested? Days like today scare me.
I completed the rollover last week which was on Thursday that after 830pt down and 550pt down, a bad timing. Thinking back, I could have move the 401k to the money market fund in the 401k investment option, so your $$ is secured when you rollover.

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