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Zecco IRA for my 401K Rollover: The Time to Hesitate is Now

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For a few years now, I have been Lazy about transferring a 401k to a Rollover IRA. I have no excuse. I know I could invest in a brokerage with very cheap exchange traded funds (ETFs). Instead of paying the nearly 1% in expenses, I could probably pay around 0.25%. As long as I'm coming clean here, it's not just one 401k, but three of them. And it's not just a few dollars, it's around $80,000. In short, it's not exactly an insignificant move.

Last week, I finally applied for a Zecco IRA. It has a $30 a year fee, which I calculate to add 0.036% in expenses for the $80,000. With that cost, I would get the ability to execute trades commission-free. This means that I can rebalance my portfolio as often as I would want and the biggest cost would the spread between the buy and the ask prices. That would be enough to prevent me from shifting money too often.

After waiting such a long time to get going, I wanted to act right away. I was determined to not be Lazy for once. I called up New York Life, the company in charge of the largest 401k I have and asked them about rolling over the 401k. The process requires them sending a check to my home. I would then take that check and ship it to Zecco. I can't believe this is still the case in the land of electronic transfers. I was expecting it to be faster. I was expecting that it might be more secure.

Why is the time to hesitate now? The stock market is so volatile. I don't want my check to be in the mail during this time. In some ways I'm trying to time the market. I think stocks are cheap and I don't want to miss a recovery. I have the feeling that things might settle down in the next month.

Last updated on July 29, 2011.

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16 Responses to “Zecco IRA for my 401K Rollover: The Time to Hesitate is Now”

  1. Mrs. Micah says:

    Maybe at this point you can figure out how the market should be when you want to transfer it. As you say, it’s definitely uncomfortable out there right now. But the market is never without volatility.

    Also, don’t they have a better process for rolling it over? It seems like most companies should be able to automate that by now.

  2. NatalieMac says:

    I’d do a little more research into how to roll that account over. I’ve been told that under no circumstances should the old 401K company ever send you a check because you’ll then incur tax and early withdrawal penalties, even if you simply immediately deposit it to an IRA.

  3. Lazy Man says:

    I’ve done it before, it’s just been awhile. The key from my understanding is to not have the 401K send a check to you IN YOUR NAME. If they write it in the name of the next institution “for the beneficiary of [your name]”, I believe it’s not a problem.

  4. JvW says:

    I am looking into doing this (today, actually!) for an old 401(k) of my husband’s and I am shocked that they would send you a paper check. In this day and age? For real?

    I was hoping to move his money into a Roth and pay the taxes now, as we haven’t contributed any money into a Roth for 2007. And, according to David Bach, you are correct about who the check is made out to.

  5. Tom says:

    Zecco is a great company and I’ve been banking with them for a little over a year now and can’t complain, good choice and good luck! :)

  6. Irina says:

    I tried to rollover one of my CDs and TRPrice said they will send me a check and then, I will have to do so-called “60-DAYS INDIRECT ROLLOVER” to another administrator, meaning I had 60-days to reinvest my money at the same type of IRA that I had for this CD with them.

    Still, there will be IRS reporting paperwork (next year tax), but NO taxes! My guess is that the same rule would be true for 401k INDIRECT ROLLOVER which is what your company wants you to do, but you need to double check this with them. A DIRECT ROLLOVER IS THE BEST, you can ask ZECCO if they will do it from their end. I believe it can be initiated from sending end or receiving end.

    In my case, I was in a hurry. I didn’t want to renew my CD at a low interest rate, otherwise I would never go with INDIRECT ROLLOVER..

  7. Irina says:

    I see now, you are saying something else. If they issue a check NOT IN YOUR NAME it will not be sent to YOUR HOME. It will be sent to ZECCO (or another administrator) for “for the beneficiary of (your name).

  8. Lazy Man says:

    No, they DO want to send it to my home, but NOT in my name (with the “for the beneficiary of” my name). It will be up to me to send it to the other administrator (Zecco in this case).

  9. Jonathan says:

    That is how Fidelity was with my 401k rollover. They sent me a check, and I had to send it on to Vanguard (my destination account). Tedious, but it worked.

    I wouldn’t worry about the market. It just as likely might go down and you’d save some money :)

  10. I had a similar experience last year when I wanted to transfer some of my son’s Coverdell ESA funds to a different institution. I fully expected an electronic transfer and instead received a check – at least I was able to have them make it out to the new institution so it really was a matter of sticking it in an envelope with a deposit slip. But my reaction was also disbelief that they wouldn’t/couldn’t just do an electronic transfer.

  11. This is what I’m waiting on now actually (transferring a Roth, though). I hate being out of the market but it’s a necessary evil I guess. The bad news is Vanguard says it could take up to 12 weeks (!) for Scottrade to send them all my info to get me back in. 12 weeks!

  12. Scott Brooks says:

    As long as the rollover check is payable to your new custodian
    you will not need to worry about the 60 day process. The process
    will vary based on your employer, the size of your company, and
    the company that handles your 401k account.

  13. Heidi says:

    The time to hesitate is definitely now. I’ve just had the most terrible experience with them, and that’s only with $2,500. I’ve seen people have $10,000 and more stolen from Zecco.

    They play a game where you transfer your money, then when you want to do anything with it, they tell you that you haven’t filled out the paperwork. Then you send it to them. Then you do it again when they pull the same trick… and again.

    At one point, Zecco even had a page dedicated to “where is my money?” because several people have now lost thousands of dollars into the ether that is zecco.com.

    Warning and beware! There are several suits for fraud and general “bait and switch.”

  14. Brad says:

    I have been with Zecco for over a year now. I have a regular account and an IRA and have never had a problem. They are have improved their offerings over the year and are only getting better.

    I would have to say the people that have problems usually have the problems because of their own doing, not because of Zecco.

    If you follow the rules and information provided by Zecco or any brokerage you will be ok. You don’t follow rules you will have issues.

  15. pRhyME says:

    “I have the feeling that things might settle down in the next month.”

    Things are only going to get worst my friend.

  16. ClubbieTim says:

    Zecco is horrible. They’re software interface is poor. They can’t link accounts like Ameritrade and the keep changing their user agreement…

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