Roth rollover - can I lose value while the funds move between institutions?

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oaktechnical
Posts: 12
Joined: Thu Mar 05, 2015 3:45 pm

Roth rollover - can I lose value while the funds move between institutions?

Post by oaktechnical »

Spouse quit job. Roth 401k balance is $90k. We intend to rollover from John Hancock [JHP]* to Schwab. Is it true that we could lose value from unlucky market timing while the institutions sell & buy over a period of hours or days?

I fear losing value with this scenario:
• market dips significantly
• at those prices, the losing institution [JHP] sells the SP500 index shares so that the funds can be wired to the gaining institution [SCHWAB]
• hours or days pass while funds are in limbo, during which time the market rises
• Schwab buys SPY at a recently increased price.
We'd be starting with a value roughly equivalent to 240 shares of SPY and potentially ending with 200 shares of SPY.
Is this possible? Perhaps I misunderstand how long it takes to execute institution-to-institution rollovers. I wish I could be assured that the selling and the buying would happen using the prices at the end of a trading day....or the apples-to-apples prices at any moment in time.

Our phone call to Schwab was surprisingly terse.

*We want to leave JHP because the employer plan contains funds with expense ratios of 1.5% and higher. One point five percent. I didn't slip a decimal point. The plan's S&P 500 index fund has ER = 1.5%
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Nate79
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Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Roth rollover - can I lose value while the funds move between institutions?

Post by Nate79 »

Yes it can happen and transfers can take weeks. Do you have funds in a different retirement account that would allow you to first put this account in a bond fund and buy the equivalent amount of stock fund in the other account. This doesn't work if you are 100% stocks or don't have sufficient funds in a separate account.

Otherwise you may be SOL.
rkhusky
Posts: 12806
Joined: Thu Aug 18, 2011 8:09 pm

Re: Roth rollover - can I lose value while the funds move between institutions?

Post by rkhusky »

You could also gain money. The market has experienced larger one day losses than one day gains. The expected one day return is about 0.04%.
ut2sua
Posts: 98
Joined: Tue Apr 21, 2020 9:19 pm

Re: Roth rollover - can I lose value while the funds move between institutions?

Post by ut2sua »

OP, can you roll it over to a JHP's IRA account (401K to IRA) within the same broker. They might be able to give you the exact same shares if the funds match between their 401K and their IRA funds. You then could buy some ETFs/funds that are common between JHP and Schab with your IRA account (I imagine some Vanguard ETFs/funds, for example). Then you can move the share between the broker as is (if they allow that). More work this way, but you may eliminate the risk that concerned you. Personally, I would not do this, but it is one way around your issue. Good luck
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CAsage
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Re: Roth rollover - can I lose value while the funds move between institutions?

Post by CAsage »

Yes, it could happen. Timing is squishy and not guaranteed. If you are sufficiently flush, you could change this account to "cash" for the duration of the transfer, and change some other asset in another account to "that stock", so that your overall allocation doesn't change, and you move your stock position to another IRA or whatever. Just a thought.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
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