Wednesday, March 7, 2007

401(k) Rollover Update

It takes nerves of steel to get through the 401(k) rollover process. When we last visited my rollover, I had sent my paperwork out, along with my check, to get processed and deposited into my new account.

A week or 2 went by and I still didn't see the amount show up in my 401(k). So I emailed my plan sponsor.

They told me I left out one of the documents and that I should send this document to them soon, or else they will send my check back to me. The implication there was that they would be sending me back into my 401(k) rollover nightmare.

I know I sent them this particular document, because right before I sent them all of the documents, I photocopied every single one, in order.

I spoke with them on the phone, and they asked me to fax them the document. So I did, earlier this afternoon. I got so busy at work that I wasn't able to call and see if they received it. I am going to be sure to follow up with them tomorrow, though.

If all goes well, that should be the last piece of the puzzle and by this Friday or next Friday, I will have my rollover complete.

If the funds were deposited in my account last Friday as I expected them to be, it would have worked out extremely well for me because that was the end of a bad week for the market. My funds are up a percent or so since then.

My opinion is that this process is a lot more complex than it should be. I'm transferring money from one account of mine into another. It should not require multiple paper forms to be filled out for multiple parties, multiple phone calls, faxes, and it should happen in days, not months.

But I think it will be worth it because when it's all over, I will have one less account to worry about.

A lot of people will tell you about how great it is to do a direct rollover of an old 401(k) balance:

The Motley Fool
The ever-wacky Suze Orman

But they aren't writing from experience. They are writing to you about the theory behind the rollover. In theory it's a great thing. In practice, it is not fun (unless you like paperwork). I guess the difference between a blogger and a journalist/financial advice person like Suze Orman is that bloggers are more likely to do something, then write about it, whereas a journalist will just read about it, then write about it. There's a big difference!


EasyChange said...

In general, I like Suze Orman, but I agree with your point about bloggers vs journalists. I think this is a critical distinction.

It is worth noting that when Robert K. or Suze O. says something, it is not always what they are doing themselves. These folks have millions; they don't need to go through the hassles that the average person does.

MoneyMan said...

Couldn't have said it better myself.

Except for the Suze Orman thing... she is a bit too much for me.

Anonymous said...

I am trying to do the same. I had two retirement plans at my old job. The Virginia retirement (state pension) is easy. Just a notarized signature, no verification from former employer since I've been gone more than 6 months. The 403(b) is a pain. Two forms (one for contribution, one for company match), and each has to be signed by both the former employer and the administrator of the receiving (new) plan. So I will be mailing off these forms with SASEs begging each organization to do it correctly. Then I mail the forms to TIAA-CREF and wait for them to send me a check which I then send to the new plan with a different form. I hope this gets done by 2009 when I may be looking to move back to where I grew up and change jobs!

Thanks for blogging about your experience and giving me a little more confidence that I'm doing this correctly.

jdohaney said...

A year late but here is a hint--use a financial advisor for such things.

Rollovers are very tedious and overly regulated. The assistance of an advisor makes the process much smoother. You do pay a load or commission in this situation, but trust me having the allocation professionally designed and gaining the benefit of an advisor is well worth it.

Suze Orman is correct on many counts, but she is way off when she recommends no-load shops or discount brokerages. She assumes the public understands the risks associated with the equity and fixed income markets and she assumes the paperwork that comes with rollovers is easy and understandable. Incorporating a financial advisor into this procedure not only shortens the process but gives you the benefit of a professional who can address questions you may need answered now and into the future on a number of financial matters.

MoneyMan said...

If you're absolutely clueless, then MAYBE I think an advisor is a good idea for getting you through the process.

However, for my situation, and for many other middle class folks with the ability to read some basic books, advisors are a ridiculous idea. They charge way too much and add extremely little value especially relative to a smaller portfolio.

As for consulting an advisor in the future, unless you're making millions and really don't have any free time, I think there's very little need for an advisor.