401K Rollover, Traveling Wallet Roamer

401k Rollover, The Fear

I stared at the stack of 18 papers in front of me.

What am I going to do?

Maybe 18 pages doesn’t sound that scary, but think about it this way. If you had to read and 18 page medical journal and then present on it to prove that you understood it, well I’m sure your probably feeling overwhelmed right now too.

That’s what it is after all to most people. Ask them to read a 401K rollover document from their 401K provider and you might as well tell them to go rent a physics book from the library. Not only do they have no interest in reading on the topic. It’s also seen as so high level that you’re intimidated before you even start.

It’s a recipe for ….well for getting nowhere.

This post is part of my 30 day writing challenge. Each week I will be focusing on one topic. This week I have chosen to focus on Money. If talking about Money is your thing don’t forget to come back everyday until next Monday when I choose my new topic for the week.

The Silver lining that turned into a dark cloud

After feeling apathetic toward my job for a while I started thinking about a way to get out of there.  Mr. Roamer and I discussed plans for taking a year off. Working together to figure out the most ideal time to take the leap. I even read Sam Dogen’s book How to Engineer your Layoff  to see if I could leave with some extra cash in my pocket.  All the while telling myself how when I leave I’ll finally be able to rollover my 401K into my Vanguard account and nix those big expense ratios.

Then the unexpected happened.

Last November I was laid off, and while it was a shocker and not at all fitting with our plan. I was happy to leave and the silver lining to the dark cloud of bad news was….

I could finally rollover my 401K.

However, that silver lining quickly turned into a dark cloud of it’s own as I realized that days kept passing and the rollover was nowhere in sight.

Nothing was happening.

The Fear

Looking back on the whole process I can now openly admit I was afraid. But had you asked me earlier that wouldn’t have been my initial response. I was busy. Sure I just got laid of and thus had an extra 40 hrs a week to figure it out. But we were going on vacation and I have 2 kids that keep me busy. Time… I just didn’t have it.

And isn’t that what we always tell ourselves. 401K rollover paperwork, Ain’t nobody got time for that.

You know there is a saying that says

if it’s important you’ll find a way. if it’s not you’ll find an excuse.

But truth be told the excuses were just the surface. I had heard the horror stories about fees and taxes when you do it wrong. I was so worried about doing something wrong that I just kept pushing it out. I was worrying about what I didn’t know, I was worrying about messing up. With 58K in my account a mistake could cost me a lot of money. It would mean paying taxes and getting hit with the 10% penalty.

To scared to make a mistake, So we do nothing.

It’s strange because that was one of the thing I thought would be a plus after leaving my employer. I would finally be able to move it from the bad offering to my Vanguard account. I thought I would jump on that right away.

It’s that thought that finally push me into action.That and the fact that I had lost 6 k. Now I know the market was going down during that time but I still felt like it was more of the idea that I was being penalized that got me moving.  I’d heard that once you leave an employer you could be subject to extra costs. It’s that thought that finally push me into action.

How the process looked like for me

  • Got laid off Nov 2nd
  • Talked to Transamerica let them know I want to rollover
  • Received paper docs in email 12/8/15( feel overwhelmed)
  • Poked around vanguard, Felt unsure didn’t finish
  • Sent email to fellow blogger to get advice (1/20/16)
  • Called Vanguard asked about rollover process
  • Sent Mr. email to print rollover paperwork (2/3/16)
  • Send email to fellow blogger to get advice (2/17/16)
  • Open Rollover IRA account with Vanguard
  • Get papers printed
  • Called Transamerica , Someone finally walks me through paperwork, I get it 100% filled out.
  • Submit paperwork through fax, get email about distribution (2/23/16)
  • See money in my Vanguard account (3/2/16)

It’s now sitting happily in my Vanguard account. But look at that. It took me 4…4 months to get it done. Yet if I were to add up the actual time it took me to do all that.  It was maybe 8 hours worth of work. As a lean person, I’m ashamed I wasted so much time. The whole process should have taken me max a week spreading out over a few days.

Maybe you are about to go through this process or you know someone who is and you are still deciding what’s best for you. I knew I wanted to do a rollover but just in case you need to weight your options here is an info graphic by Stefanie from Empowered Dollar.

 

If you click over and read Stefanie’s post there is one thing I would like to add. She doesn’t really mention the drawbacks about getting a check sent to you. Which was one of the mistakes I was really trying to avoid. This is because when you get a check most institutions will withhold the taxes you owe. But if you are trying to roll it over to an IRA you need to deposit the whole amount which means you need to come up with the difference.

So if you had $10,000 your check would only be $8,000 if you’re in the 20% tax bracket. Then you need to deposit the $8,000 check along with an extra $2,000 from your pocket to get it back to the original $10,000.  For me that would look like 58,000 x 20% = 11,600. If a check was issued to me I would need to come up with almost 12K. Then my understanding is that I would get what was withheld by the institution back during tax time. So now you know why I was so worried about making a mistake. 12K is  a lot of money.

So if you do have to do a rollover don’t forget to get on the phone with both your old provider and the new one to have them walk you through the forms. It could save you from making a costly mistake.

Have you done a 401K rollover? What was your biggest fear?

If you found this post helpful and know someone who is going through the process send it over to them to help them out. 🙂

The Roamer traveling wallet

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4 thoughts on “401k Rollover, The Fear”

    1. Exactly unless you have previous experience it is something unknown with a lot of money tied to it. Knowing personal finance is a help. But that was my biggest surprise. I’m a lot more financially literate but I still felt so overwhelmed. I can see how it would be so much more intimidating for people who don’t know about personal finance.

  1. So I found your blog from the comments section of another blog and coincidentally I was just googling this exact topic early today and was all stressed out about it. I want to move to Vanguard versus rolling my 401k over into my new companies plan but am nervous HOW to do it. Also, I have a retirement PRA that is separate from the 401k that I am not sure what to do with either. Sometimes you just have to jump or risk delaying things forever! Thanks for the inspiration!!

    1. Thanks so much for stopping by and taking the time to comment. it’s always great to interact with readers.

      I hope you got the 401K rollover straightened out. Like I said, CALL, call both institutions ask questions. Finally, there’s nothing left to do but jump. 🙂

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