How to do a 401k Rollover at Vanguard

I recently rolled over a 401k plan from my former employer-sponsored plan into a Rollover IRA at Vanguard. Rolling a 401k into an IRA is not a difficult process, but it does take a little time and preparation. I put together this visual guide to walk you through the process of doing a 401k rollover…
Advertising Disclosure.

Advertiser Disclosure: Opinions, reviews, analyses & recommendations are the author’s alone. This article may contain links from our advertisers. For more information, please see our Advertising Policy.

default image

I recently rolled over a 401k plan from my former employer-sponsored plan into a Rollover IRA at Vanguard. Rolling a 401k into an IRA is not a difficult process, but it does take a little time and preparation.

I put together this visual guide to walk you through the process of doing a 401k rollover into an IRA. Though this tutorial shows how to do it at Vanguard, the process should be fairly similar at other brokerages or financial institutions. I chose Vanguard because I have been with them for the better part of a decade and I prefer to keep my accounts as consolidated as possible.

Choose the best IRA custodian for your needs. You don’t have to go with Vanguard; there are many institutions that can serve as your IRA custodian. Here are more tips on Where to Open an IRA, and What to Look For When Opening an IRA.

Deciding to Roll Over a 401k into an IRA

The first thing you need to do is decide if you should rollover a 401k into an IRA. You can typically only do a 401k rollover after you are no longer employed by the company that sponsored the plan [Some people over age 59½ may be eligible for an In Service 401k Distribution and do a 401k Rollover while they are still working].

In many cases a rollover is a good idea because it gives you complete control over how and where you invest your assets, while many 401k plans have more limited investment options. There are other options for your 401k than a Rollover IRA, so be sure to investigate the options for your 401k when you leave your job.

Once you decide to go with a Rollover IRA, you will need to open a Rollover IRA. At Vanguard you can Rollover your IRA and complete most of the process online, you can download an IRA transfer kit and fill it our by hand, or you can call their customer service department for assistance. The Vanguard CS department is among the best I have dealt with and they walked me through the entire process on the Vanguard website, then did a conference call with my 401k custodian and myself to complete the transfer. The process took about 30 minutes, start to finish.

How to Rollover a 401k into an IRA at Vanguard

The basic process is simple, open a Rollover IRA, then transfer in your funds to the Rollover IRA. Of course, there are a few more details, which we will cover. Before you get started with Vanguard you will want to contact your current 401k plan custodian to determine how to initiate a transfer to another custodian. Some companies require several signed forms, while the company I transferred my retirement account from would only release the funds via a phone call (and the requisite security questions). Armed with this information, you are ready to start the transfer process.

Step 1: Rollover IRA Funding Method

Once you log on to your Vanguard account or open a new account, you can start the process. The first bit of information Vanguard needs is an approximate amount of your Rollover IRA transfer, whether or not it is a Roth 401k, and the location of the funds (e.g. are they still in your 401k plan, or have you received a check for the funds).

The answer to the location of your funds will alter the process slightly; if you have already received a check you won’t need to involve the former custodian. However, you will have to handle more paperwork on your end and you run the risk of early withdrawal penalties if you fail to make the rollover transfer in time. Personally, I think there is less risk by having the financial institutions complete the transaction without sending you the liquidated funds.

The next step is to inform Vanguard what information your current 401k custodian requires to complete the transfer. The current options are shown below. My former custodian required the following information: Rollover IRA account number, who to make the check out to, and the address. If you don’t know what your current plan requirements are, the Vanguard customer service reps or the customer services reps at your current custodian should be able to give you this information.

Step 2: Select Your Investments

This is where you choose how you want to allocate your rollover funds. It’s a good idea to know which type of fund you want to invest in before starting the 401k rollover process or transferring your funds. That way you don’t get your asset allocation out of whack, and you won’t have to spend an hour trying to decide on which fund to invest in.

If you aren’t sure which type of fund is best for you right away, then consider rolling your funds into the Vanguard Prime Money Market Fund, or a similar low-risk fund until the transfer is complete and you have more time to do a full asset allocation. You can choose additional Vanguard mutual funds once your account is open. (If you are doing this process at another mutual fund house or online brokerage, then consider an equivalent to the Vanguard Money Market fund, at least until you have time to rebalance your investment portfolio).

Step 3: Account Information

If you are already a Vanguard customer, this part is easy, as you can log in at the beginning of the 401k Rollover process and your information will be auto-populated. If you do not already have a Vanguard account you will need to open one at that time. It’s been 7 or 8 years since I opened my Vanguard account, so I can’t tell you how long it will take. But based on other accounts I have opened recently, it shouldn’t be more than an extra 10-15 minutes.

Step 4: Review Your New Rollover IRA Account

The final step is a standard review and finalization process. You should go over your information to verify accuracy, electronically sign or print your application to sign it and send it in and designate your beneficiary. The beneficiary is automatically set by law if you decline to specify anyone different.

Even though I already have a Vanguard account I was prompted to input my address for verification, but all other information was auto-populated.

Not using Vanguard?

I wrote this review for rolling a 401k into an IRA at Vanguard because I have had an investment account with them for almost a decade. Most major financial institutions should have a similar process, though it may differ in some ways. The good news is that many companies will help you with the rollover process. Choose the financial institution you are most comfortable with and that best suits your needs, then call their customer service if you have any issues.

Need to choose a company to open a Rollover IRA? Here are some of the top recommendations.


About Post Author

Get Instant Access
FREE Weekly Updates! Enter your information to join our mailing list.

Posted In:

About Ryan Guina

Ryan Guina is The Military Wallet's founder. He is a writer, small business owner, and entrepreneur. He served over six years on active duty in the USAF and is a current member of the Illinois Air National Guard.

Ryan started The Military Wallet in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about personal finance and investing at Cash Money Life.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free Personal Capital account here.

Featured In: Ryan's writing has been featured in the following publications: Forbes, Military.com, US News & World Report, Yahoo Finance, Reserve & National Guard Magazine (print and online editions), Military Influencer Magazine, Cash Money Life, The Military Guide, USAA, Go Banking Rates, and many other publications.

Reader Interactions

Comments

    Leave A Comment:

    Comments:

    About the comments on this site:

    These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

  1. Roger @ The Chicago Financial Planner says

    Great post Ryan and a great service for your readers. As Neal would likely concur, many folks do not roll their accounts over to an IRA because they are confused and apprehensive about the process. Your detailed account of the process and the ease of doing this will hopefully alleviate some of this fear and confusion.

    • Ryan Guina says

      I can understand the fear of the unknown. I’ve made a few boneheaded financial moves due to lack of knowledge and understanding of rules. I’ve done well overall, but in hindsight, I know I could have done many things very differently!

  2. Neal A. Deutsch, CFP says

    Well written and thought out. As a Certified Financial Planner(tm) for decades, the present economy has brought me weekly calls for assistance in rolling over 401(k) plan assets. Since client understanding is paramount for peace of mind, the above is a great tribute to a process well designed.

  3. Craig says

    Thanks, I don’t like paperwork and hate confusing stuff with this, which is why I set up the lifecycle IRA for myself, hassle free and stress free. I will talk to a rep before and to see my best options when the time comes.

    • Ryan says

      That’s your best bet. They walked me through the process… it was very easy.

      Call your current 401k custodian before you call Vanguard and ask what the rollover requirements are to transfer your funds to Vanguard. Then get a general idea of how much money you will be transferring – you will need both pieces of information before you start the process.

      Start to finish, it only took me about 30 minutes and I did it all over the phone and sitting in front of my computer.

  4. Craig says

    This is something I need to do in Feb. I was told by Vanguard that the 401K needed to be 2 years old before I could roll over. It seems like there is a lot of confusing paper work involved which has been a bit intimidating for me.

    • Ryan says

      Craig, I didn’t have to do any paperwork to complete my transfer – I set up my account online and electronically signed it. The plan custodian for my former 401k plan only required the account number, name to make the check out to, and the address to send the check, and I was able to do that end of the transaction over the phone.

      However, each institution you are transferring your funds from may have different requirements. Either way, I recommend speaking with the Vanguard reps and having them walk through the process with you. They are very helpful.

The Military Wallet is a property of Three Creeks Media. Neither The Military Wallet nor Three Creeks Media are associated with or endorsed by the U.S. Departments of Defense or Veterans Affairs. The content on The Military Wallet is produced by Three Creeks Media, its partners, affiliates and contractors, any opinions or statements on The Military Wallet should not be attributed to the Dept. of Veterans Affairs, the Dept. of Defense or any governmental entity. If you have questions about Veteran programs offered through or by the Dept. of Veterans Affairs, please visit their website at va.gov. The content offered on The Military Wallet is for general informational purposes only and may not be relevant to any consumer’s specific situation, this content should not be construed as legal or financial advice. If you have questions of a specific nature consider consulting a financial professional, accountant or attorney to discuss. References to third-party products, rates and offers may change without notice.

Advertising Notice: The Military Wallet and Three Creeks Media, its parent and affiliate companies, may receive compensation through advertising placements on The Military Wallet; For any rankings or lists on this site, The Military Wallet may receive compensation from the companies being ranked and this compensation may affect how, where and in what order products and companies appear in the rankings and lists. If a ranking or list has a company noted to be a “partner” the indicated company is a corporate affiliate of The Military Wallet. No tables, rankings or lists are fully comprehensive and do not include all companies or available products.

Editorial Disclosure: Editorial content on The Military Wallet may include opinions. Any opinions are those of the author alone, and not those of an advertiser to the site nor of  The Military Wallet.