Rollover to IRA CD
L1: Rollover to IRA CDI recently took early retirement at age 50 and I have about 100K in my 401K. I want to rollover my 401K to an IRA CD at a well known banking institution. The problem is my 401K holder (Vanguard) will not send a check to the bank for the full amount without an account number and the bank will not setup the account until they receive the funds.
Vanguard will make the check out to me but withhold 20% taxes that I would have to make up from my personal saving. But they say they cannot do the rollover without an account number. The bank says that they do not create the account numbers until the funds are deposited.
Any suggestions on how to resolve this?
Thanks for any input.2008-06-20 11:20, By: IndyMike, IP: [18.104.22.168]
L2: Rollover to IRA CDThe simple solution would be to have Vanguard make the check out to “ABC Bank as trustee for the IRA of IndyMike” and mail the check to you. You then hand carry it to the bank and they open the account. This fully qualifies as a direct rollover under the IRS Regs and avoids any withholding.
Of course, even a simple solution can be made difficult ifeither of thoseparties so wish.
If you will need to consider making these funds part of a 72t plan, do not tie everything up in a CD as you will not want to incur any bank penalties for early withdrawals from a CD product to meet your 72t distribution requirement.
2008-06-20 12:35, By: Alan S., IP: [22.214.171.124]
L2: Rollover to IRA CDAlan
Thanks for the reply. After talking to these folks at Vanguard several times this morning I get the feeling that unless I can get the bank to provide me with an account number, they”re going to keep 20% of my funds for taxes. But I am suppose to talk to them again Monday and I will run this by them.
I am also considering just rolling my 401K over to a traditional IRA with Fidelity or T Rowe Price, etc and setting up a 72t…..as you can see I am not happy with Vanguard so I doubt I will keep it with them. Is there any financial company out there that would not only help me with the rollover but also assist me in setting up the 72t. I would probably just invest in one of their 2015 or 2025 retirement funds.
Thanks2008-06-20 13:01, By: IndyMike, IP: [126.96.36.199]
L2: Rollover to IRA CDAs Allanstated:
Of course, even a simple solution can be made difficult if either of those parties so wish.
I”m surpised at the “attitude” of Vanguard. I worked in retail banking for 30 years and we would gladly supply an account number.Find a new bank.2008-06-20 15:25, By: Cheri, IP: [188.8.131.52]
L2: Rollover to IRA CDDid you tell the bank that its a direct rollover from a 401k into an IRA, and that vanguard needs an account number? Usually banks are pretty good about accomodating people who want to give them money, and from my experience Vanguard is always good about things like that, did you try sending vanguard a message on the web explaining the situation and asking for advice?2008-06-21 21:10, By: Steve, IP: [184.108.40.206]
L2: Rollover to IRA CDIf you really want to use a bank CD, then it is a simple three-step process rather than a one-stepper, which won”t work.
Step 1: Simply open an IRA Rollover Account with Vanguard usingtheir money market account.Step 2: Have Vanguard “distribute” the entire IRA account to you …NO TAX WITHHOLDING …which you then deposit into your checking account.Step 3: Go to the bank and open your IRA CD account within 60-days from the date you receive the check from Vanguard by writing the bank a check for the exact amount you received from Vanguard.This process satisfies everyone”s individual requirements. Sorry, but you are not going to get either the bank or Vanguard to change their procedures.To add to Alan”s comment about thinking twice about using a bank CD for a 72(t) plan: This method generally doesn”t work either from a technical aspect of from a money management approach. My suggestion is for you to look at other options rather than using the bank CD approach.Jim2008-06-23 07:30, By: Jim, IP: [220.127.116.11]
L2: Rollover to IRA CDHello, IndyMike:Actually, it is not Vanguard”s attitude here that surprises me but the bank”s. Vanguard, and most other mutual fund companies, will GLADLY open an IRA account witha zero dollar balance if it will be used to deposit a 401k or IRA roll-over. Vanguard did this for me and the account was empty for about 2 months as the money oozed from Fidelity to them.
Once Vanguard sends out the money, they want rock solid evidence on where it went an account at another custodian is that proof. By doing this, they are protecting both your and their interests. Personally, I want my bank and my mutual fund company to be very careful about handing out my money… just in case it”s not me asking for it. I think that most of us do too, even when it is less convenient than it might be.
I don”t do much business with banks. My credit union does everything I need in that area. If I was dealing with a bank, however, and they refused to open an empty IRA account for a roll-over, I would strongly consider going to other banks to see what they could do. It should not be all that difficult to find one that will meets this need and they should be the one to get this business. You say that this bank is “well known”. Seems to me that they would be better off being well known for serving their customer”s needs.Ed2008-06-23 16:40, By: Ed_B, IP: [18.104.22.168]
L2: Rollover to IRA CDThanks for all the thoughtful responses…..I do understand Vanguard”s position and I am now considering just rolling over to a Vanguard IRA.
If I rollover to a traditional IRA at Vanguard am I going to have any problem starting a 72t at the first of next year? 2008-06-23 17:40, By: IndyMike, IP: [22.214.171.124]
L2: Rollover to IRA CDIndyMike:
If you process an IRA Rollover with Vanguard, your K-plan custodian, you will not have any problems starting the 72(t). From other posts here … I have never used them myself …Vanguard seems to understand the 72(t) process. Also, you will have another advantage using Vanguard.
If you have investments in your K-plan that you like that are not Vanguard funds, you could use Vanguard”s brokerage platform to keep the non-Vanguard funds and do an “in-kind” transfer to the new IRA. However, if you can create a well diversified investment strategy using only Vanguard products, then you can set up the IRA as a “direct” account instead of the “brokerage platform” account. The “direct” method is much simpler to operate and usually cheaper on fees. Since you are talking about a relatively small account size ($100K), the “direct” approach would probably serve you best.
I”m glad you have decided to abandon the bank CD approach. If you are seeking stability with your investments since our current market environment is so unstable and running quite negatively these days, you could opt for higher concentrations in fixed income or even the money market account until the market settles down. Then when the market starts moving back positive you can easily switch to a more growth oriented strategy, all within the one account with Vanguard.
Jim2008-06-24 06:19, By: Jim, IP: [126.96.36.199]