Thanks to its vast array of ultra-low-cost index mutual funds and exchange traded funds (ETFs), Vanguard has become one of the largest investment companies in the world. It's also become a popular destination for those who are looking to roll over their retirement savings from a workplace 401(k) plan to an IRA.
Many investment companies have worked to keep the rollover process as simple as possible to attract assets, and Vanguard is no exception.
- You can roll over your 401(k) to Vanguard via its website or by phone.
- You’ll likely have to fill out paperwork from your employer, who in most cases will send a check directly to Vanguard.
- If the check is sent to you instead, be sure to send it to Vanguard within 60 days; otherwise, you’ll be subject to IRS penalties.
- Vanguard has a large lineup of index funds and ETFs to choose from, and it also offers funds from other providers in addition to stocks, bonds, and other investments.
To avoid delays in the rollover process, it's important to know what to expect and what information is required to complete the transaction. Here are five things to be aware of:
1. Paperwork Required
To get the rollover started, you need to contact both Vanguard and your employer. You can use Vanguard's website to initiate the rollover to an IRA. If you need assistance, you can also contact the company's customer service by phone for help.
First, you need to select what type of account you need for your IRA. You can choose to purchase Vanguard mutual funds and ETFs directly from the company, or you can open a brokerage account for access to funds from non-Vanguard providers, as well as individual stocks, bonds, and certificates of deposit (CDs). Include a recent copy of your quarterly 401(k) statement to verify your account information.
Many employers have their own rollover paperwork that you need to fill out to release the funds from your 401(k). You need to complete this and return it to your employer with the instructions that the rollover check be made out and sent directly to Vanguard.
Once you have completed all of your paperwork, the rollover typically takes around two or three weeks to complete.
2. Fees and Costs
Vanguard does not charge you any processing fees to complete your rollover. In most cases, your employer does not charge you any type of fee either.
Depending on how much money you are rolling over and which investments you choose, certain fees may apply. Vanguard charges a $20 annual account maintenance fee unless you meet specific minimum investment requirements or you enroll in electronic statement delivery.
Brokerage accounts may carry additional costs. Purchases of Vanguard index funds and ETFs come without any transaction costs, but buying shares of non-Vanguard mutual funds and products may come with fees. Additionally, purchases of individual stocks, bonds, or options contracts come with their own commission schedule, which depends on the overall balance of the account.
3. Available Investment Choices
One of the great benefits about rolling over your retirement dollars to an IRA is the vast wealth of choices it gives you. Whereas 401(k)s are generally limited to a handful of investment options, almost any type of security or investment is available in an IRA.
The amount of assets Vanguard manages globally.
When you roll over your 401(k) to a Vanguard IRA, you have access to Vanguard's lineup of hundreds of index mutual funds and ETFs. If you are choosing a brokerage account for your IRA, you get access to the Vanguard family of funds as well as most other fund family products, in addition to individual stocks and bonds.
4. Indirect Rollovers
Some employers may choose to send the rollover directly to you instead of to Vanguard. This is known as an indirect rollover. If this happens, forward the check to Vanguard without delay. The money needs to arrive at Vanguard within 60 days so you can avoid any IRS penalties.
5. Rolling Over Roth Accounts
Many employers now offer the Roth 401(k) option within their retirement plans. If you are interested in rolling over a Roth 401(k) to Vanguard, the process is essentially identical. You would just be moving your money into a Roth IRA instead of a traditional IRA, with no additional costs involved.
The Bottom Line
Before you decide to roll over your 401(k) to a Vanguard IRA, it's important to understand what to expect, the fees and rules involved, and what information you'll need to provide—to your former employer and Vanguard—to complete the transaction.