Vanguard opts in to retirement automatic rollovers between employers

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adherenceEnergy
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Vanguard opts in to retirement automatic rollovers between employers

Post by adherenceEnergy »

I came across this article about automatic 401k rollovers for a job change between employers and between different brokerages that vanguard opted into.

Some interesting quotes:
Right now, 82% of Vanguard's 401(k) plans require the participant to cash out [or rollover] when he/she leaves for another firm, if the 401(k) account balance is between $1,000 and $5,000.

In 2019, an estimated $92 billion typically leaves the U.S. retirement system annually due to job-changing participants, who cash out their 401(k) savings programs when they switch employers

[RCH] automates the movement of an employee’s 401(k) savings account from their former employer’s plan into an active account with their current employer’s plan
https://riabiz.com/a/2021/9/24/vanguard ... ollow-suit


To me, this sounds like a great change and hopefully more brokerages also opt in to this system.
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David Jay
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Re: Vanguard opts in to retirement automatic rollovers between employers

Post by David Jay »

If nothing else, it will reduce the amount of money in rollovers that smarmy insurance salespeople convince people to put into fixed index annuities.
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retire2022
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Re: Vanguard opts in to retirement automatic rollovers between employers

Post by retire2022 »

adherenceEnergy wrote: Sat Sep 25, 2021 8:39 pm I came across this article about automatic 401k rollovers for a job change between employers and between different brokerages that vanguard opted into.

To me, this sounds like a great change and hopefully more brokerages also opt in to this system.
Actually they should eliminate paper checks rollovers, or allow for ACH transfers and accept in kind transfers.

While I did a recent rollover from my post employment 457 Custodian to Vanguard above the article amounts, ie 1.7 million, I found this to be too long of a process to complete transfer three weeks.

see my story here in case you wanted to read:

viewtopic.php?f=1&t=324944
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beyou
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Re: Vanguard opts in to retirement automatic rollovers between employers

Post by beyou »

retire2022 wrote: Sat Sep 25, 2021 9:02 pm
adherenceEnergy wrote: Sat Sep 25, 2021 8:39 pm To me, this sounds like a great change and hopefully more brokerages also opt in to this system.
Actually they should eliminate paper checks rollovers, or allow for ACH transfers and accept in kind transfers.

While I did a recent rollover from my post employment 457 Custodian to Vanguard above the article amounts, ie 1.7 million, I found this to be too long of a process to complete transfer three weeks.

see my story here in case you wanted to read:

viewtopic.php?f=1&t=324944
In kind will be hard to fully automate since 401k plans often contain private or custom funds (called collective investment trust) that are not transferable securities.

But since there are no tax consequences, liquidating and transferring cash quickly would be a huge improvement.

That said, many plan features and rules are set by the employer. Not sure there is any incentive for employers here. They don’t want to make it easy to leave. And when hiring, adding a new unproven employee to the plan is not exactly something I think employers seek. In fact some accept rollovers and some do not. Some have a waiting period to join. Portability if ever
achieved would need to be legislated.

But this is a good sign that Vanguard is trying to automate a terribly inefficient process, good for them.
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