Is now the absolute worst time to do a rollover?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
SoDakJeff
Posts: 86
Joined: Mon Mar 13, 2017 11:48 am

Is now the absolute worst time to do a rollover?

Post by SoDakJeff » Tue Mar 24, 2020 7:59 am

My wife has an old 403(b) at Principal. She hasn't contributed anything to it for years, and instead contributes to her Roth 401(k), also at Principal. The fund choices are not very good, either. I've been wanting to roll that account over to my wife's IRA at Vanguard for quite a while, and since she just turned 59 1/2 earlier this month I was thinking now might be the time.

Thinking about the old adage "sell high, buy low", though, would this be a terrible time to execute that rollover? Better to wait until the market has come back up for a while? I'm retired now and my wife will be continuing to work until age 65, if that makes a difference.

Thanks for your thoughts on this.

livesoft
Posts: 70073
Joined: Thu Mar 01, 2007 8:00 pm

Re: Is now the absolute worst time to do a rollover?

Post by livesoft » Tue Mar 24, 2020 8:01 am

There are many ways to do a rollover, so I would say now is not the absolute worst time to do a rollover if the investments are in cash doing nothing right now.
Wiki This signature message sponsored by sscritic: Learn to fish.

Topic Author
SoDakJeff
Posts: 86
Joined: Mon Mar 13, 2017 11:48 am

Re: Is now the absolute worst time to do a rollover?

Post by SoDakJeff » Tue Mar 24, 2020 8:15 am

Thanks for the reply.

The 403(b) is currently invested in three funds: Vanguard Institutional Index fund for US stocks (fine with me). For International stocks there's American Funds EuroPacific Growth fund, and for bonds we have Wells Fargo Government Securities fund.

I haven't checked for a few days, but I'm guessing the total value of that account now is in the $200,000 range.

tibbitts
Posts: 9707
Joined: Tue Feb 27, 2007 6:50 pm

Re: Is now the absolute worst time to do a rollover?

Post by tibbitts » Tue Mar 24, 2020 8:18 am

SoDakJeff wrote:
Tue Mar 24, 2020 7:59 am
My wife has an old 403(b) at Principal. She hasn't contributed anything to it for years, and instead contributes to her Roth 401(k), also at Principal. The fund choices are not very good, either. I've been wanting to roll that account over to my wife's IRA at Vanguard for quite a while, and since she just turned 59 1/2 earlier this month I was thinking now might be the time.

Thinking about the old adage "sell high, buy low", though, would this be a terrible time to execute that rollover? Better to wait until the market has come back up for a while? I'm retired now and my wife will be continuing to work until age 65, if that makes a difference.

Thanks for your thoughts on this.
The issue with rollovers is time out of market. Hedge any potential (upward, at least) market movement and it doesn't matter when you do the rollover. For me $200k would be too much to risk without some kind of hedge in place, but it depends what percent of your overall investments that is. If it's 1% then obviously just do it.

livesoft
Posts: 70073
Joined: Thu Mar 01, 2007 8:00 pm

Re: Is now the absolute worst time to do a rollover?

Post by livesoft » Tue Mar 24, 2020 8:23 am

I had a fund in 2008-2009 with the text "Government Securities" in its name that turned out could own 20% other thing and it owned 20% cornerstone bonds that lost a lot of money.

If you have $200,000 in another tax-deferred account invested in fixed income, then you could switch the account to be rolled over to all cash and make a concomitant change of the $200,000 in the other tax-deferred account. Then any rollover would not create much change no matter what happened while the rollover was taking place.

But for us, we put only one single fund in these old "orphan" accounts and don't have 2 funds in them. We use the rest of our portfolio to maintain overall portfolio asset allocation. So even if you do not do a rollover now, move the $200,000 all to a single fund and make changes elsewhere to get back to your desired asset allocation. It will also make any subsequent rollover easier.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
grabiner
Advisory Board
Posts: 26063
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Is now the absolute worst time to do a rollover?

Post by grabiner » Tue Mar 24, 2020 8:53 am

Selling one stock fund to buy another is a market-neutral move; if the market goes up, you get the benefit of the increase whether it happens before or after the switch.

If your funds are in limbo for a week, you will miss one week of market returns, but the expected cost of being out of the market for one week is trivial. You could miss out on a 10% gain, but you are just as likely to miss out on a 10% loss.
Wiki David Grabiner

jebmke
Posts: 10242
Joined: Thu Apr 05, 2007 2:44 pm

Re: Is now the absolute worst time to do a rollover?

Post by jebmke » Tue Mar 24, 2020 8:57 am

grabiner wrote:
Tue Mar 24, 2020 8:53 am
Selling one stock fund to buy another is a market-neutral move; if the market goes up, you get the benefit of the increase whether it happens before or after the switch.

If your funds are in limbo for a week, you will miss one week of market returns, but the expected cost of being out of the market for one week is trivial. You could miss out on a 10% gain, but you are just as likely to miss out on a 10% loss.
One would have to look at the entire portfolio. There may be ways to mitigate this by shifting other funds around, position the 401(k) in lower volatility bonds and make the move bond-to-bond. Then evaluate whether to un-roll the positions or leave as-is.
When you discover that you are riding a dead horse, the best strategy is to dismount.

aristotelian
Posts: 6971
Joined: Wed Jan 11, 2017 8:05 pm

Re: Is now the absolute worst time to do a rollover?

Post by aristotelian » Tue Mar 24, 2020 9:50 am

Is there any way you could buy stocks in your 401k or IRAs while her rollover is out of market.

rascott
Posts: 1715
Joined: Wed Apr 15, 2015 10:53 am

Re: Is now the absolute worst time to do a rollover?

Post by rascott » Tue Mar 24, 2020 10:54 am

SoDakJeff wrote:
Tue Mar 24, 2020 7:59 am
My wife has an old 403(b) at Principal. She hasn't contributed anything to it for years, and instead contributes to her Roth 401(k), also at Principal. The fund choices are not very good, either. I've been wanting to roll that account over to my wife's IRA at Vanguard for quite a while, and since she just turned 59 1/2 earlier this month I was thinking now might be the time.

Thinking about the old adage "sell high, buy low", though, would this be a terrible time to execute that rollover? Better to wait until the market has come back up for a while? I'm retired now and my wife will be continuing to work until age 65, if that makes a difference.

Thanks for your thoughts on this.


I'd honestly wait.... yes.... you could balance things out in your other accounts to make your equity exposure equal while this money sits in cash... pending transfer.

But then even then you'll need to be sure to time your readjustments correct as well. And when a normal day is currently +/- 5%.... an user error could cost you a lot of money. It's a not a market valuation concern.... just a volatility concern.

rascott
Posts: 1715
Joined: Wed Apr 15, 2015 10:53 am

Re: Is now the absolute worst time to do a rollover?

Post by rascott » Tue Mar 24, 2020 10:57 am

grabiner wrote:
Tue Mar 24, 2020 8:53 am
Selling one stock fund to buy another is a market-neutral move; if the market goes up, you get the benefit of the increase whether it happens before or after the switch.

If your funds are in limbo for a week, you will miss one week of market returns, but the expected cost of being out of the market for one week is trivial. You could miss out on a 10% gain, but you are just as likely to miss out on a 10% loss.
When I did a rollover from a 401k last year....I was out of the market for 3 weeks. The 401k custodian sent a check.... then there was a ten business day hold on the check by the broker before they would allow me to buy.

It's a gamble for sure.....

fourwheelcycle
Posts: 816
Joined: Sun May 25, 2014 5:55 pm

Re: Is now the absolute worst time to do a rollover?

Post by fourwheelcycle » Tue Mar 24, 2020 4:13 pm

tibbitts wrote:
Tue Mar 24, 2020 8:18 am
The issue with rollovers is time out of market. Hedge any potential (upward, at least) market movement and it doesn't matter when you do the rollover.
I have done rollovers before and I always worry about the week or so I am out of the market. How do you hedge the risk that the market may go up while you are out for a week or ten days?

retiredjg
Posts: 39879
Joined: Thu Jan 10, 2008 12:56 pm

Re: Is now the absolute worst time to do a rollover?

Post by retiredjg » Tue Mar 24, 2020 4:24 pm

I was planning to do a rollover recently and decided to wait. A rollover like this will happen in cash and can take 1 - 3 weeks in good times. I figured it might take more time with all the disruption.

I'm not waiting so I can time the market to some advantage. I'm waiting until the market is not going up and down 5% or 10% a day several times a week/month. Maybe I'll be waiting awhile, but I want at least a reasonable chance of having about the same number of shares when I leave the old place and when I arrive and buy at the new place.

In "normal" times, the market can always take a lurch any day, but usually does not. In a time like this, the market is lurching almost daily. It would work for me or against me. I'd rather just wait.

tibbitts
Posts: 9707
Joined: Tue Feb 27, 2007 6:50 pm

Re: Is now the absolute worst time to do a rollover?

Post by tibbitts » Tue Mar 24, 2020 4:40 pm

fourwheelcycle wrote:
Tue Mar 24, 2020 4:13 pm
tibbitts wrote:
Tue Mar 24, 2020 8:18 am
The issue with rollovers is time out of market. Hedge any potential (upward, at least) market movement and it doesn't matter when you do the rollover.
I have done rollovers before and I always worry about the week or so I am out of the market. How do you hedge the risk that the market may go up while you are out for a week or ten days?
So far I have been able to do it by shifting money in a taxable account from cash to a similar investment as I had in the IRA, and on the same day shifting the IRA to cash. Then doing the reverse once the new IRA was in place. You may have to do a few iterations to complete a move this way. Of course you also lose any advantage from the market dropping, but this kind of "hedging" carries no cost. More sophisticated investors could explain how you could accomplish something similar that would apply only to upward market movements using futures/options, etc.

afan
Posts: 4529
Joined: Sun Jul 25, 2010 4:01 pm

Re: Is now the absolute worst time to do a rollover?

Post by afan » Tue Mar 24, 2020 5:42 pm

Can you do a transfer instead of a rollover? You could do a series of transfers, each for a fraction of the total. You would only have that much out of the market during the process. The effects of any big moves, up or down, would be only on the amount of the transfer in process at the time.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

User avatar
StormShadow
Posts: 855
Joined: Thu Feb 09, 2012 6:20 pm

Re: Is now the absolute worst time to do a rollover?

Post by StormShadow » Tue Mar 24, 2020 6:10 pm

I wouldn't want to do a rollover at this time. Market is hyper volatile at the moment.

MathWizard
Posts: 3922
Joined: Tue Jul 26, 2011 1:35 pm

Re: Is now the absolute worst time to do a rollover?

Post by MathWizard » Tue Mar 24, 2020 6:43 pm

My wife has one from her firmer employer. We're not rolling it over to an IRA until the market settled down.

With the market whipsawing 10% daily , we don't see any need to roll over.

venkman
Posts: 1141
Joined: Tue Mar 14, 2017 10:33 pm

Re: Is now the absolute worst time to do a rollover?

Post by venkman » Tue Mar 24, 2020 10:56 pm

Could you do an in-kind rollover? If you can get everything to Vanguard, you should be able to exchange old assets for new ones on the same day.

It might cost a little bit to sell off the non-VG funds, but that's trivial compared to a day's worth of market movement.

mlcolorado
Posts: 30
Joined: Tue Oct 20, 2015 4:23 pm

Re: Is now the absolute worst time to do a rollover?

Post by mlcolorado » Wed Mar 25, 2020 1:23 am

Vanguard does not support/allow in kind rollovers from non-Vanguard 401K/403B to Vanguard IRA. I just asked last week. Vanguard recommended going in kind, if possible, from 401K/403B to IRA with same vendor, and then doing a in kind non-Vanguard IRA to Vanguard IRA, which Vanguard does support. I am leaving the stock funds in the 403b to recover before moving the funds.

Topic Author
SoDakJeff
Posts: 86
Joined: Mon Mar 13, 2017 11:48 am

Re: Is now the absolute worst time to do a rollover?

Post by SoDakJeff » Wed Mar 25, 2020 9:01 am

My thanks to all who contributed.

We're really not in any big hurry to get that 403(b) moved. Mostly just wanted to consolidate that account with others we have at Vanguard, with funds that have lower ER's. Based on the responses here, I think I'll wait a while until things (hopefully) settle down a bit.

Thanks again.

Dottie57
Posts: 8125
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Is now the absolute worst time to do a rollover?

Post by Dottie57 » Wed Mar 25, 2020 9:17 am

SoDakJeff wrote:
Wed Mar 25, 2020 9:01 am
My thanks to all who contributed.

We're really not in any big hurry to get that 403(b) moved. Mostly just wanted to consolidate that account with others we have at Vanguard, with funds that have lower ER's. Based on the responses here, I think I'll wait a while until things (hopefully) settle down a bit.

Thanks again.
Glad to hear u are waiting.

Luke Duke
Posts: 953
Joined: Tue Jun 18, 2013 11:44 am
Location: Texas

Re: Is now the absolute worst time to do a rollover?

Post by Luke Duke » Wed Mar 25, 2020 10:31 am

SoDakJeff wrote:
Tue Mar 24, 2020 7:59 am
Thinking about the old adage "sell high, buy low", though, would this be a terrible time to execute that rollover? Better to wait until the market has come back up for a while?
Do you plan to buy similar (lower cost) funds or will you be changing your AA?

Post Reply