How to invest IRA Rollover money - WWYD?

[disneysteve]

We finally completed rolling over two of my wife's old retirement accounts, a 403b and a 401k. The total rolled over was about $100,000 which is now sitting in the settlement account of her Vanguard rollover IRA.

The 403b was in a global fund (about 19K).
The 401k was in a bond fund (about 70K) and a midcap value fund (about 9K).


Anyway, now there's about 100K sitting in cash that needs to be invested. I can select comparable funds and maintain roughly the same asset allocation we've had. I know I don't want to engage in market timing but I also don't want to be stupid as we're talking about a good chunk of money.

How would you suggest feeding the money in? Lump sum? DCA over a few weeks or a couple of months? WWYD?

[Jluke]

Wellington, Wellesley, LifeStrategy or balanced fund.

50 now. Then 10 each month.

[corn18]

Always lump sum. It was invested before you rolled it over, it should be invested again, immediately.

[disneysteve]

Always lump sum. It was invested before you rolled it over, it should be invested again, immediately.

That’s an excellent point.

[cypher1]

Wellington, Wellesley, LifeStrategy or balanced fund.

50 now. Then 10 each month.

I like all those funds, and if I was in my 50s I'd personally go either Wellington or Balanced (VBIAX) to keep it simple (or go back to core 3 funds). Same strategy for DCA spread out in months based on the amounts as Jluke states.

Normally I'd do all lump sum like corn18, but I feel this kind of opportunity is the exception of market timing, as mentioned in recent posts. Yes, the market is still doing great, and if you feel confident in the next 3-18 months will continue growing, go for it. But maybe I'm just paranoid of more volatility. Along with unemployment numbers possibly rising in the next couple quarters, I'd still apply a little more caution with dumping it back into the market. To clarify I have no actual data to back me up. But I simply suspect more volatility throughout this year with state economies still heavily impacted for services shut down, even if a vaccine is now available.

To summarize; if you're young do lump sum, closer to retirement do DCA based on your comfort level.

[cypher1]

Always lump sum. It was invested before you rolled it over, it should be invested again, immediately.

That's a good point.

[kork13]

I assume it was transferred in kind? Or did you liquidate & transfer the cash?

Lump sum everything to match your desired funds. Is a retirement account, so taxes don't matter. Time IN the market is what matters, not timING the market. 10-20 years from now, the difference will be negligible. This is especially important if the amounts we're transferred in cash, not in kind.

That said, easier said than done... If you're really uncomfortable with it, transfer them into your desired funds over a few weeks/months. Just make sure you stick to that plan.

[MonkeyMama]

Time IN the market is what matters, not timING the market.

This. Personally I'd lump sum.

[Petunia 100]

We finally completed rolling over two of my wife's old retirement accounts, a 403b and a 401k. The total rolled over was about $100,000 which is now sitting in the settlement account of her Vanguard rollover IRA.

The 403b was in a global fund (about 19K).
The 401k was in a bond fund (about 70K) and a midcap value fund (about 9K).


Anyway, now there's about 100K sitting in cash that needs to be invested. I can select comparable funds and maintain roughly the same asset allocation we've had. I know I don't want to engage in market timing but I also don't want to be stupid as we're talking about a good chunk of money.

How would you suggest feeding the money in? Lump sum? DCA over a few weeks or a couple of months? WWYD?

IMO, you should look at all of your retirement money as one pot of money. Invest this 100k according to your overall AA plan.

[disneysteve]

I assume it was transferred in kind? Or did you liquidate & transfer the cash?

I didn't have a choice. I thought we could do a transfer in kind but in each case, the holdings had to be liquidated and the cash transferred. I don't know if that's the norm for a rollover IRA or if that happened to be the rules of the companies we were leaving. I had checked in advance to make sure that the specific funds held were transferable to Vanguard, but that turned out not to matter.

[disneysteve]

IMO, you should look at all of your retirement money as one pot of money. Invest this 100k according to your overall AA plan.

I agree completely. ALL of our money is one pot and our AA covers all of it. My question was just whether or not to dump in all in at once or space it out over a short period.

[kork13]

I didn't have a choice. I thought we could do a transfer in kind but in each case, the holdings had to be liquidated and the cash transferred. I don't know if that's the norm for a rollover IRA or if that happened to be the rules of the companies we were leaving. I had checked in advance to make sure that the specific funds held were transferable to Vanguard, but that turned out not to matter.

Interesting. My understanding is that Vanguard is only opening accounts as brokerage accounts, which typically are super flexible & can hold any publicly held/traded asset. Unless it was rolled into an existing non-brokerage IRA? The other likelihood is that the previous custodians just didn't want to play ball. Some custodians just don't want the hassle of in-kind transfers, because cash is easier.

In any case, given it's in cash, I'd definitely just lump sum it all in now. Even if it crashed 30% next month, by 2-3 years from now (likely sooner), it would have recovered & grown in excess.

[cypher1]

Interesting. My understanding is that Vanguard is only opening accounts as brokerage accounts, which typically are super flexible & can hold any publicly held/traded asset. Unless it was rolled into an existing non-brokerage IRA? The other likelihood is that the previous custodians just didn't want to play ball. Some custodians just don't want the hassle of in-kind transfers, because cash is easier.

I'm guessing it's more towards the rules of company leaving, like DS mentioned. Wouldn't be surprised if they just didnt want to deal with it. Otherwise I've only done one rollover with Vanguard and they made it such a seamless transaction between previous employer. Next time I won't wait years to rollover again.

[disneysteve]

Although I was expecting transfers in kind, I'm not upset that it didn't happen that way. Not only did I want to shrink the number of accounts we had, I also wanted to reduce the number of funds we own. Originally, there were a total of 5 funds between the 403b and 401k. I had gotten it down to 3. Now that all of that money is in cash, I may get it all into one fund or possibly two at most so it simplifies everything a lot. Heading toward retirement, getting more of our portfolio into one place and fewer funds should make things easier to deal with once it comes time to start drawing from that money.

[Petunia 100]

Although I was expecting transfers in kind, I'm not upset that it didn't happen that way. Not only did I want to shrink the number of accounts we had, I also wanted to reduce the number of funds we own. Originally, there were a total of 5 funds between the 403b and 401k. I had gotten it down to 3. Now that all of that money is in cash, I may get it all into one fund or possibly two at most so it simplifies everything a lot. Heading toward retirement, getting more of our portfolio into one place and fewer funds should make things easier to deal with once it comes time to start drawing from that money.

403b plans typically offer mutual funds wrapped inside of an insurance product. Maybe that is what prevented a transfer in kind.