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Posted by on May 28, 2008, 5:05 am
Vanguard Fund pissed me off !!So I cashed in my previous employer 401k
last thursday.The agent at vanguard informed about the 10% penalty for
early withdrawl.The agent told me that because I had maintained this
account for 2 years I would not be subject to a 25% penalty on this
account.Fast forward to today when I get a return phone call from
vanguard saying that my account was "actually"opened june 13th 2006 so
I would now be assesed 25%!!!This did not sit well with me(LOL)I guess
my question is am I screwed?are vanguard responsible for their error
at the time of fund sale.Had I known I was only two weeks away I could
have made an informed decision and just called back in a couple weeks!
many thanks for any input!!!
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Posted by joeu2004 on May 28, 2008, 6:55 am
On May 28, 1:05 am, scorpionpins...@gmail.com wrote:
> Vanguard Fund pissed me off !!So I cashed in my previous
> employer 401k last thursday. The agent at
> vanguard informed about the 10% penalty for
> early withdrawl.
"The" 10% penalty? If you are referring to the
federal penalty, you can avoid it by rolling over
those funds into an IRA within 60 days. However,
you must cover the withholding with your own funds
to avoid a (federal) 10% penalty on that amount.
(If you did an electronic custodian-to-custodian
transfer, there is no federal 10% penalty to worry
about.)
> The agent told me that because I had maintained this
> account for 2 years I would not be subject to a 25%
> penalty on this account.
That would be a Vanguard penalty. In addition to
"the" 10% penalty? In any case, that penalty cannot
be avoided by doing a rollover.
> Fast forward to today when I get a return phone call
> from vanguard saying that my account was "actually"
> opened june 13th 2006 so I would now be assesed 25%!!!
> [....] my question is am I screwed?are vanguard
> responsible for their error at the time of fund sale.
> Had I known I was only two weeks away I could
> have made an informed decision
This is a legal question, not a financial planning
question. You would do better by posting to
misc.legal.moderated. Better still, of course, you
might consult an attorney. Most attorney's will
tell you where you stand, in broad terms, without
charging you.
(That is not to say that you have a legal right.
Arguably, you should know when the account was
opened and the terms for closing the account.)
But before you go down that path, you should
consider speaking with a manager at Vanguard.
Be polite, even contrite, certainly not angry;
and never threaten legal action or make a legal
argument. Simply say exactly what you wrote
above. They will probably forgive the larger
Vanguard penalty.
A similar thing happen with my mother. When
she withdrew a very large sum to roll over to
another account, no one informed her that
interest for the month would not be paid unless
the money was in the account at the end of the
period. (Yup, no proration. Surprise!) She
was only a few days shy of the end of the period.
The "plebes" insisted there was nothing that
could be done; those were the rules. When we
spoke with the manager, he understood our
position. Not only did he pay the interest,
but also he forgave the account closing fee.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
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Posted by joetaxpayer on May 28, 2008, 8:01 am
scorpionpinscer@gmail.com wrote:
> Vanguard Fund pissed me off !!So I cashed in my previous employer 401k
> last thursday.The agent at vanguard informed about the 10% penalty for
> early withdrawl.The agent told me that because I had maintained this
> account for 2 years I would not be subject to a 25% penalty on this
> account.Fast forward to today when I get a return phone call from
> vanguard saying that my account was "actually"opened june 13th 2006 so
> I would now be assesed 25%!!!This did not sit well with me(LOL)I guess
> my question is am I screwed?are vanguard responsible for their error
> at the time of fund sale.Had I known I was only two weeks away I could
> have made an informed decision and just called back in a couple weeks!
> many thanks for any input!!!
Never good to let emotion get the best of you. There is a 10% penalty
for early withdrawal, and a withholding for taxes of 20% (I'd not heard
that it's 25) but I don't know that 2 yrs meant anything anyway. The
withholding is when you take a 401(k) out and don't roll it over to
another account.
What you should have done was go to a broker who doesn't piss you off
and open an IRA, send Vanguard the paperwork and have them send the
401(k) money directly to that broker. Now, you'd have to get that money
elsewhere and open the IRA yourself if you'd like to avoid the tax and
penalty.
Joe
www.blog.joetaxpayer.com
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
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Posted by PeterL on May 28, 2008, 11:57 am
On May 28, 2:05 am, scorpionpins...@gmail.com wrote:
> Vanguard Fund pissed me off !!So I cashed in my previous employer 401k
> last thursday.The agent at vanguard informed about the 10% penalty for
> early withdrawl.The agent told me that because I had maintained this
> account for 2 years I would not be subject to a 25% penalty on this
> account.Fast forward to today when I get a return phone call from
> vanguard saying that my account was "actually"opened june 13th 2006 so
> I would now be assesed 25%!!!This did not sit well with me(LOL)I guess
> my question is am I screwed?are vanguard responsible for their error
> at the time of fund sale.Had I known I was only two weeks away I could
> have made an informed decision and just called back in a couple weeks!
> many thanks for any input!!!
>
You commit financial hara kiri just because you are mad at the
management company? It's the classic cut of your nose to spite your
face. You may still have time to roll it into an IRA to avoid the
penalty.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
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Posted by Tad Borek on May 28, 2008, 12:14 pm
scorpionpinscer@gmail.com wrote:
> Vanguard Fund pissed me off !!So I cashed in my previous employer 401k
> last thursday.The agent at vanguard informed about the 10% penalty for
> early withdrawl.The agent told me that because I had maintained this
> account for 2 years I would not be subject to a 25% penalty on this
> account.
This question makes no sense, what's the account type and what is this
penalty?
If you mean "withholding," meaning money kept back by Vanguard and sent
to the IRS for taxes, it should have been 20%, not 25%, unless there's
some state tax withholding as well. If you mean "penalty" it's 10%, plus
perhaps a state penalty -- but it wouldn't be 25%. And there's no
significance to two years in either case.
You might have lost some vesting after two years, I guess that's a
possibility. Or - was a SIMPLE IRA, rather than a 401(k)? Those have a
25% levy (federal) if you take a distribution within the first two years.
More important: why would you blow away your retirement savings just
because a mutual fund company upset you? Cutting off your retirement to
spite your custodian, to paraphrase a bit. It's worse than just that
penalty, because you also have to pay federal and state income taxes as
well. Unless you're in a low tax bracket you could end up with less than
50 cents on the dollar.
-Tad
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
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