Rolling over a Vanguard 401(k): Step-by-step guide

If you have a 401(k) retirement plan at Vanguard from a previous job, there are a few options for you to consider when doing a rollover. Depending on your old employer’s plan, the transfer process for Vanguard can be done over the phone or online, and a check will either be mailed to your new account provider or sent directly to you to deposit into the new account.

We’ve laid out an easy-to-follow, five-step guide to help you roll over your old Vanguard 401(k):

1. Confirm a few key details about your 401(k) plan
2. Decide where to move your money
3. Initiate your rollover with Vanguard
4. Get a check in the mail and deposit it into the new account
5. Make sure your funds are being invested properly

STEP 1

Confirm a few key details about your Vanguard 401(k)

You might not think you have much information on your old employer’s 401(k), but don’t worry: Even a single old statement, or the benefits statement from your company, can help. You’re essentially only looking for the following three pieces of information:

1. Is your account eligible for a rollover? In most cases, it takes about two weeks from the time you leave a company for your 401(k) to be eligible for a distribution or rollover. You can confirm that your retirement savings are ready to be transferred by contacting Vanguard or your previous employer’s benefits department.
2. Do you have a Traditional or Roth 401(k)? This will determine which type of IRA you’ll need to open (more on this in step 2). A traditional 401(k) is almost always the default; only 12% of 401(k) plans even offer a Roth 401(k) as part of their benefits package, but it’s still worth checking out. The only difference is when you pay taxes; with a traditional 401(k), your contributions are tax-deductible, but when you take a distribution in retirement, you’ll owe income taxes. With Roth accounts, the opposite is true: Contributions are made after-tax, which means the distributions later are tax-free.
3. Is your mailing address up to date? Make sure your mailing address is updated on your Vanguard 401(k) account. They’ll use this address to send you a paper check as part of the rollover process. If you need to update your address, make sure to do so during your phone call authorization (more in step 4).

STEP 2

Decide where to move your money

In order to move the money out of your 401(k) account, you’ll first need to have a new retirement savings account opened for that money to move into.

You have two main options:

1. An IRA — an IRA is an “individual retirement account”. As the name suggests, it’s an account you open up on your own and it isn’t connected to an employer.
2. A new 401(k) — you might have an active 401(k) account with a new employer. If so, you may be able to transfer your old 401(k) savings into that new employer’s account. This isn’t always possible though, and you’ll need to check with your current 401(k) provider and an HR person at your new company.

Still not sure which is right for you? We’ve written a full guide on the five key differences between 401(k)s and IRAs.

Ultimately, most people who roll over an old 401(k) do so into an IRA for a few key reasons:

• Not tied to an employer — IRAs are generally easier to keep track of since you open them yourself at your provider of choice, like Fidelity, Vanguard, or Betterment. Even if your new company offers a 401(k), no matter where you work in the future, you’ll have acecss to your IRA.
• A wider range of investment options — Most 401(k)s offer only a limited set of investment options — primarily mutual funds. With an IRA, you can invest your money in a wide range of stocks, ETFs, and sometimes even alternative asset classes like cryptocurrency.
• Quicker process — according to the GAO, rollovers into 401(k)s tend to be more time-consuming and administratively challenging than rollovers into IRAs.

Think of your IRA as helping you do two key tasks:

1. Receive the money you’ve saved in your 401(k) at previous jobs so you can consolidate your savings and keep track of them.
2. Grow that money by allocating it to investments that will increase over time.

The good news? Opening an IRA can almost always be done online and should take you less than 10 minutes if you don’t already have one.

STEP 3

Initiate your rollover with Vanguard

You’re making great progress. You’ve confirmed key details about your 401(k) plan and you have an IRA to transfer your money into. The next step is to initiate your rollover with Vanguard. Vanguard has two methods for requesting a rollover to another institution:

1. by calling Vanguard
2. through their online portal

Authorize via Phone

In most cases, the easiest way to initiate a rollover for your Vanguard account is by calling and speaking with a Vanguard representative. Requesting a rollover over the phone allows you to confirm your information, correct any issues on your account, update your mailing address if needed, and initiate the rollover all in one go. Vanguard’s phone number should be visible on an old account statement, website, or on distribution form.

In order for your call to go smoothly, follow these tips:

1. Set aside 30 minutes and a quiet space in which to make the call. Most of the time the call itself will take around 10 minutes, but there can often be a waiting time before you’re connected to an operator.
2. If you have an old 401(k) statement, keep it handy. No worries if not — you’ll be asked for your social security number and some other personal details to verify your identity.
3. Before you do the call, log into your new IRA account. Note down the following information:
4. • Your IRA account number
   • Any other check-related instructions. These details are usually found on the IRA provider’s website in a “Funding” or “Rollover instructions” section and include things like the name of the institution to whom the check is made out (usually the full legal name of the IRA provider you’ve chosen).

Now you’re ready to make the call! Once again, don’t forget to confirm your mailing address during the call. Vanguard will likely mail your rollover check to the address they have on file. If you need to update your address with them, just let the rep know during the call and provide your current address.

Authorize Online

In some cases, you may be eligible to submit a rollover request online through Vanguard’s online portal. Rolling over online allows you to avoid a phone call, but it’s important to make sure you have the proper details for your destination IRA account. If you’ve confirmed that your mailing address and contact information on your account is correct and that your plan is eligible for a rollover, initiating your rollover online is worth considering. If you aren’t sure, you may want to initiate your rollover over the phone to avoid any issues during processing.

Log into your Vanguard account online and look for the “Options if I leave my employer” link. Follow the instructions from there to initiate your rollover.

STEP 4

Look out for your check in the mail and deposit into your new account

Usually, Vanguard will only distribute your 401(k) funds directly to you, using the mailing address they have on file for your account. Once you get the check, it’s then up to you to deposit that check with your new IRA provider.

There are a few ways you can deposit your check depending on the provider:

• Mobile deposit — the easiest option is to check your providers mobile app to see if they have a mobile deposit option. Not all providers provide this option but it’s worth checking. Mobile deposits are the quickest option and typically take 3-5 business days to show up in your account.
• Deposit in person at a local branch — if your provider has a physical branch near by, you can also deposit the check in person. Checks deposited in person typically take 3-5 business days to show up in your account.
• Send the check by mail — you can also send the check by mail to the provider using the address you previously looked up. Funds that are mailed can take up to 15 business days to show up in your account.

STEP 5

Make sure your IRA is being invested appropriately

Remember there are two goals of rolling over an old 401(k) into an IRA — the first is to consolidate your 401(k) assets, and the second is to grow those assets by allocating them into investments that will increase in value over time.

Your very last step in executing a rollover is to make sure that the second goal is being met and that the retirement funds in your IRA are being appropriately invested. If you chose an automated IRA then this should happen automatically. That’s because as soon as your retirement funds arrive, they’ll be allocated into a portfolio that was created for you during the sign-up process for your new IRA account. You should still log in and check to make sure that’s the case, but usually there’s nothing more for you to do.

If you choose a self-directed account then you’ll have to invest the money yourself. Often the simplest option is to purchase a target-date retirement fund — this is an investment vehicle that puts your money into a combination of higher-risk, higher-return stocks and lower-risk, lower-return bonds. The exact mix changes as you age so that you have more stocks when you’re younger and less as you get older: because stocks generate higher returns but are more volatile we should own more of them early on when we can withstand their fluctuations in order to achieve their higher long-term returns.

Otherwise, you can assemble a portfolio on your own by making trades.

Conclusion

401(k) rollovers are a great way for you to tax-efficiently transfer the savings in old 401(k) accounts you have. If you roll over into an IRA, you may also be able to invest in a wider range of assets.

The process can seem a little daunting, but there’s just five key steps to follow. Most people who complete a rollover are glad they did. The assets in accounts like your IRA will probably end up being your biggest source of financial support when you retire. Investing a little time to get those assets set-up and working for you in the right way can really pay off.

Extras

Roth conversions

For those who want extra credit: you may have heard of the term “Roth conversion”. That’s when somebody rolls over a traditional 401(k) employer plan into a Roth IRA. Why would somebody do this? It all comes down to taxes. Recall that with a traditional 401(k) your contributions are made pre-tax. When you roll over a traditional 401(k) into a traditional IRA, your assets continue to grow with no taxes being paid — until you start withdrawing your money, usually at the time of retirement. At that point, you’ll pay income taxes at whatever your rate will be then. If you believe your income tax at retirement will be greater than your income tax today, then it might make sense to consider a Roth conversion. This allows you to pay income taxes on your rollover amount today. Then, the money in your Roth IRA grows and can be withdrawn tax-free.