I received a check in the mail yesterday for more than $87,000! It was an exciting thing to behold, but alas, it wasn’t mine to keep…not yet anyway. It was the total 401k balance from my old job and it was made out to Vanguard (“FBO” me).
When I got laid off, I assumed that I’d simply roll over my current 401k into my new employer’s program whenever I landed a job. Having since done a bit of research, I discovered that my primary options are:
- Direct rollover into my traditional IRA.
- Direct rollover into my new employer’s 401k.
- Cash it out, pay taxes and 10% penalty, completely screwing up my retirement saving plan and future financial independence.
Obviously, option #3 isn’t even an option and therefore easy to eliminate. Option #2 was fairly easy to pass by, since there’s no telling what investments will be available to me when I get my next job. Option #1 was the clear winner in my eyes, particularly since I already have a Vanguard IRA that’s invested in low cost index funds I am totally on board with.
The rollover process is fairly easy.
- Check online 401k account to confirm that all employer contributions are complete.
- Call Vanguard.
- While on the phone with the Vanguard rep, we conferenced in a Fidelity rep who initiated the rollover.
- A few days later, I got that sweet check and wrote my Vanguard account number on it.
- Mail the check to Vanguard.
- In 1-2 weeks, check online account to be sure money has landed and is allocated correctly.
When all is said and done, my allocation will be:
- 70% Vanguard Total Stock Market Index Fund (VTSAX)
- 10% Vanguard Total International Stock Index Fund (VTIAX)
- 20% Vanguard Total Bond Market Index Fund (VBTLX)
Initially, the international fund will be closer to 12%. In order to get the admiral shares (which come with at a lower cost), I need to hold a minimum of $10,000.
Now, when I enroll for the 401k at my new job, I’ll be starting from scratch. Fingers crossed that they’ll have good funds to invest in. I want to get my contributions up to 20% and have a match on top of that!