[USER]

I have two questions (and please be kind).
I want to consolidate my 401 (k)’s into a rollover IRA. Would you be concerned that the market is down if I sell and buy right back in?

Have you ever rolled over a 401(k) from a previous employer that offered both pre-tax and after-tax contributions?

Fidelity has told me that I would have to get two checks:
– One Check for the pre-tax contribution
– One Check for the Roth (post-tax) contribution

The pre-tax contribution would be moved to a Rollover IRA
&
The post-tax contribution would be moved over to my Roth IRA

Has someone done this before, and is this really the correct approach?

[Cody]

1. You may avoid a long blackout period by transferring your 401(k) to respective Traditional and Roth IRAs at the same custodian as your workplace plan.

For example, moving a Fidelity 401(k) to Fidelity IRAs is quick. Then, you can fully invest the funds.

Then, you may initiate an in-kind transfer to your custodian of choice.

2. Yes, that is how it works. The 401(k) will send two transfers/checks. Pre-tax contributions and its earnings to a Traditional IRA.

Roth contributions and its earnings to a Roth IRA.

Bonus: Consider whether you’ll plan to make future backdoor Roth IRA contributions subject to pro rata taxation issues.

[Michael]

Yes, you will need different transfers for Roth and Traditional assets. You might be able to avoid being out of the market at all depending on your current investments by doing a transfer in kind.

Most mutual funds are not brokerage specific and can be transferred to any broker or your choosing.

I rolled VTSAX from an account at Vanguard to Fidelity without selling anything.

[Ron]

#1 I’d be concerned. It’s not only the market is down, it’s volatile. Perhaps some market pleasing news comes out and the market makes up 1/2 of the 9% it’s down in a few days.

You’ve locked in the down value of your stocks just before this otherwise fortunate event for most investors (although it’ll probably be illusory given the uncertainty).

I haven’t done a 401K rollover to Fidelity, but I’ve done 5 or 6 to Vanguard. Did Fidelity tell you it has to be a check?

I did only the first one by check, but not because I was required to, but because I didn’t know any better.

I did all subsequent ones directly, although generally cash (again, I didn’t know better).

My biggest 401K I split up into partial transfers. It was no problem, and that is one way to mitigate against randomly happening to choose a particularly unfortunate period to sell everything to cash and transfer.

An aside, I happened to choose February 2020 to initiate an IRA to IRA transfer. Of course COVID shutdowns hit and the transfer didn’t hit my Vanguard account until almost June 2020.

In addition to seeing if there any problem splitting up your rollovers even from one institution, of course if you have multiple 401Ks, you don’t have to do them at the same time, again spreading out the risk over multiple periods.

From what I understand the source of the rollover funds has more control over the conditions than the recipient, in my experience.

In any case maybe you are stuck with the conditions as you state, just suggesting some other things to check on if you haven’t already.

[Sandra]

Yes, I did this exactly with Fidelity and it worked out fine

[Nick]

Yes, I just did the exact same thing a few months ago. The checks took about 1 week to be processed, so I was out of the market for 1 week.

Think it was pretty close to a wash

[Author]

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