Initializing My 401k Rollover To Roth IRA Was A Breeze With Vanguard

Rolling your 401k over to an IRA is probably the wisest course of action after leaving a job.  That said, a ton of people don’t do it.  Why?  I’m not aware of any academic studies on the subject, but I suspect it comes down to 2 factors:

1. Inertia – People are busier than ever these days, and taking the time to rollover an old 401k probably just isn’t near the top of anybody’s list when starting a new job (although it probably should be).  The 401k is there, it’s already invested, and most plans even have an option to rebalance themselves.  There’s no urgency, and so it never seems to get done (just ask me:  I drove around with a bad tail-light for over a year even though I knew it was out.  I still can’t think of a good reason why I didn’t just go ahead and change it).
2. It’s A Hassle – The perception is that anything having to do with finances or investing is just too much of a hassle.  That’s not true, but the perception is there and most people don’t bother questioning the conventional wisdom.  There’s also a perception that 401k rollovers involve a lot of bureaucratic nonsense.  That’s also not true, although you do need to make sure to follow the rules lest ye be struck down with an unjust early withdrawal penalty by the IRA.

My 401k Rollover To Roth IRA Took 10 Minutes On The Phone

The last time I had rolled over a 401k several years ago, I did it the hard way.  I printed out all the paperwork and filled it out myself.  In retrospect, that was a silly thing to do.  This time, I was smart about it.  I called up Vanguard (my favorite mutual fund company) using the number on their site and told I was interested in rolling over an old 401k into my Roth IRA there.  I was immediately (no wait) transferred to a very friendly and knowledgeable rollover specialist who guided me through the process step-by-step.  The entire 401k rollover to Roth IRA process took less than 10 minutes, start to finish.  It went something like this:

Me: Hello, I’d like to rollover an old 401k plan to my Vanguard Roth IRA, please.

Vanguard Agent: Certainly, we’ll just need to verify your account information.

[omit exchange of personal information to verify my identity]

Vanguard Agent: Very good.  Which institution is your old 401k account currently held at?

Me: It’s [company name omitted to protect the innocent (and avoid lawsuits)]

Vanguard Agent: Thanks for that.  I have their support number right here.  I’m going to initiate a 3-way call with [company name] customer support and walk you through the rollover process.

Me: Thanks!

[Phone rings.  The 401k customer support agent for the other company answers, and the Vanguard agent introduces himself and me]

Vanguard Agent: Good afternoon, My name is X and I’m from Vanguard.  I’ve got a mutual customer of ours, Kyle, on the line with us who would like to rollover an old 401k with your company to an IRA at Vanguard.

[I exchange account information with the 401k company's support rep and verify my identity.  The 401k rep sends me a link to a webpage I use to authorize the transfer electronically online.  No paperwork involved. This takes a grand total of about 2 minutes.  The Vanguard agent on the line tells me exactly what I need to enter on the form, including the account number, address to have the check sent to, etc.  We then thank the 401k company's rep and hang up.]

Vanguard Agent: Now that the transfer is initiated, which investment options would you like the incoming funds routed to?

[Since I already have my Roth IRA asset allocation in place, I have the rep direct the funds to the bond fund.  I tell him I'll just rebalance everything once the funds are in place.]

Vanguard Agent: It looks like everything is in place.  Is there anything else I can do for you today?

Me: That’s it for now.  Thank you for your help.  Goodbye.

That’s it.  The entire process took less than 10 minutes and my investment costs on the 401k funds was reduced by over 80% thanks to Vanguard’s rock-bottom expenses.  Less than 10 minutes of work netted me literally thousands of extra dollars in retirement.  That’s the equivalent of making over $10,000 per hour.  Too much of a hassle?  Not to me.

By the way, while I definitely recommend Vanguard, most of the major fund companies have comparable rollover-assistance services these days.  So there’s really no excuse.