Congratulations on your new job! Moving to a new employer is an exciting step, and it also brings up the important question of what to do with your old 401(k). If your previous employer’s plan was with Vanguard, you're in the right place. This comprehensive guide will walk you through the process of rolling over your Vanguard 401(k) to your new employer’s retirement plan, step by step. We’ll cover everything from the initial research to the final investment of your funds, ensuring you can navigate this process with confidence and avoid any costly mistakes.
Step 1: Get to Know Your Accounts and Options
Before you do anything else, let’s get you acquainted with the details. Do you have a clear picture of your Vanguard 401(k) and your new employer's plan? This is the most crucial first step to ensure a smooth transition.
Sub-heading: Gather Your Information
Your Vanguard 401(k): Log in to your Vanguard account online or pull out a recent statement. You'll want to find key information like your account number, the current balance, and the type of contributions you made (Traditional, Roth, or a mix). Knowing if you have pre-tax (Traditional) or after-tax (Roth) money is essential for the rollover process. Also, confirm your contact information, especially your mailing address, is up to date on your Vanguard account. An incorrect address can cause significant delays.
Your New Employer’s 401(k): Contact your new HR or benefits department. Ask them for the Summary Plan Description (SPD) or any other documentation that details their 401(k) plan. You need to know:
Does the new plan accept rollovers from a previous employer's plan? (Most do, but it's vital to confirm).
What are the investment options? Compare them to Vanguard's offerings.
What are the fees associated with the new plan? This includes administrative fees and fund expense ratios.
Who is the plan administrator or recordkeeper? (e.g., Fidelity, T. Rowe Price, etc.) and what is their contact information?
This is also a great time to ask about any eligibility waiting periods for the new plan. Some plans require you to be employed for a certain period before you can contribute or roll over funds.
Sub-heading: Understand Your Rollover Choices
You have a few choices for what to do with your Vanguard 401(k) after you leave your job. The most common are:
Leave it in your old Vanguard 401(k): If your balance is over a certain amount (often $5,000 or $7,000), your previous employer's plan may allow you to keep your money there. This is a good option if you like the investment options and fees. However, you can't contribute to it, and you may lose access to certain services.
Roll it over to an IRA: This is a popular choice, as it gives you a much wider range of investment options and greater control over your money. You can open a Rollover IRA (for Traditional funds) or a Roth IRA (for Roth funds) at a brokerage of your choice, including Vanguard itself.
Roll it over to your new employer's 401(k): This is what this guide will focus on. It allows you to consolidate your retirement savings in one place, making it easier to manage.
Let's proceed with the rollover to your new employer's 401(k) plan.
Step 2: Initiate the Rollover with Your New Plan Administrator
Now that you have all the necessary information, it’s time to start the process. This step can often be done online or over the phone.
Contact the New Plan Administrator: Reach out to the recordkeeper of your new employer’s 401(k) plan. Let them know you want to initiate a rollover from your previous Vanguard 401(k). They will provide you with the necessary forms and instructions.
Complete the Rollover Request Form: This form will ask for details about your old Vanguard account, such as the account number, the name of the previous employer, and the amount you want to roll over. It will also ask for information about your new account to ensure the funds are routed correctly.
Choose a Rollover Type: You will almost certainly be asked if you want a direct rollover or an indirect rollover.
Direct Rollover: This is the gold standard and the option you should choose if available. With a direct rollover, the money is transferred directly from Vanguard to your new 401(k) plan administrator. Vanguard will typically send a check made out to your new plan administrator "FBO" (for the benefit of) you, or they may wire the funds. This method avoids any tax withholding and is the cleanest way to move your money.
Indirect Rollover: In this case, Vanguard would send a check or deposit the funds directly to you. You then have 60 days to deposit the entire amount into your new 401(k) to avoid taxes and a 10% early withdrawal penalty (if you're under 59½). A significant drawback to this option is that Vanguard is required to withhold 20% of the funds for federal income taxes. If you want to roll over the full amount, you would need to make up that 20% from your own pocket within the 60-day window. Avoid this option unless it is your only choice.
Step 3: Contact Vanguard and Authorize the Distribution
With your new plan's rollover request submitted, it's time to inform Vanguard. This is often the most critical phone call you'll make in this process.
Prepare for the Call: Before you call Vanguard, have your old 401(k) account statement, your new 401(k) account number, and the new plan administrator's name and mailing address handy.
Call Vanguard Participant Services: The best number to call for a retirement plan is 800-523-1188 (Monday to Friday, 8:30 a.m. to 9 p.m., ET). Be prepared to verify your identity.
Request a Rollover Distribution: Tell the representative that you want to roll over your 401(k) to your new employer's plan.
Specify that you want a direct rollover.
Provide them with the necessary information for the new plan administrator, including the mailing address for the check if that is the method of transfer.
Confirm the amount you are rolling over. You may choose to roll over the entire balance or a partial amount, if your plan allows it.
Follow Up on Paperwork: The Vanguard representative may require you to sign and return a distribution form. Make sure you understand the instructions and send it back promptly.
Step 4: Await the Rollover Check and Deposit It
This step is primarily about tracking the funds.
Track the Check: If a check is being mailed, ask Vanguard for an estimated mailing date. Keep a close eye on your mail. The check will likely be made payable to the new plan administrator, "FBO [Your Name]".
Do Not Cash the Check: It is critical that you do not cash this check. This would be considered an indirect rollover and would trigger a mandatory 20% tax withholding and potential penalties.
Deposit the Check: As soon as you receive the check, follow the instructions from your new plan administrator to deposit it. This might involve:
Mobile deposit through their mobile app (if available).
Mailing the check to the address provided on the rollover form.
Depositing it in person at a local branch.
Step 5: Confirm and Invest Your Rolled-Over Funds
You're almost there! The final step is to make sure your money is properly invested in your new plan.
Confirm Receipt: After depositing the check, contact your new plan administrator to confirm that the funds have been received and credited to your account. This can take anywhere from a few days to a few weeks, so patience is key.
Choose Your Investments: Once the funds are in your new account, they may be held in a default investment option (like a money market fund). Don't leave them there! Log in to your new 401(k) account and actively choose how to invest your money from the available fund options.
Align with Your Goals: Review your investment goals and risk tolerance. Consider a target-date fund for simplicity or build a diversified portfolio using a mix of stock and bond funds offered in the plan.
10 Related FAQs
How to find out if my new employer's 401(k) accepts rollovers?
You can contact your new employer's HR or benefits department and ask for the Summary Plan Description (SPD) or any rollover forms. This document will detail the plan's rules and if it accepts incoming rollovers.
How to avoid taxes and penalties on a 401(k) rollover?
To avoid taxes and penalties, always choose a direct rollover. This ensures the money moves directly from your old plan to your new one without passing through your hands. If you receive a check made out to you, you must deposit the full amount into a qualified retirement account within 60 days.
How to initiate a rollover if my Vanguard 401(k) balance is small?
If your balance is less than a certain threshold (often $5,000), your former employer may have the right to "force out" your funds. They will send you a check. In this case, you can still roll it over to an IRA or your new 401(k) within 60 days to avoid taxes.
How to find my Vanguard 401(k) account number?
Your account number can be found on your old 401(k) statement, whether it's a paper statement or an electronic one you can access online by logging into your Vanguard account.
How to handle a rollover if I have both Traditional and Roth 401(k) funds?
Your new employer's plan must be able to accept both Traditional (pre-tax) and Roth (after-tax) contributions. If they do, your old plan will likely send two separate checks or transfers. It's crucial that the Roth funds go to the Roth portion of your new 401(k) to maintain their tax-free withdrawal status in retirement.
How to contact Vanguard's retirement plan services?
For questions about an employer-sponsored retirement plan, you can call Vanguard's Client Services team at 800-523-1188. Their hours are typically Monday through Friday, 8:30 a.m. to 9 p.m., Eastern time.
How to know if a direct rollover check should be made out to me or the new institution?
A direct rollover check should be made out to the new institution "FBO [Your Name]". If it is made out to you personally, it is considered an indirect rollover and has tax implications.
How to invest my money after the rollover is complete?
Once the funds are in your new 401(k), you will need to log in to your account and go to the investment selection section. You can choose from the available funds, which may include target-date funds, index funds, or actively managed funds.
How to track the rollover process once it's started?
Keep a log of all calls, the names of the representatives you speak with, and any reference numbers you are given. You can also track the status of the check or transfer by calling both Vanguard and your new plan's administrator.
How to make sure my rollover is tax-free?
The key is to complete a direct rollover. If you receive a check, you must deposit the entire amount into a new qualified retirement account within the 60-day window. This is known as a tax-free rollover and allows your retirement savings to continue growing on a tax-deferred basis.
