Principal Financial Group vs Vanguard
Step-by-Step: Principal Financial Group to Vanguard
Should You Roll Over Your Principal Financial Group 401(k) to Vanguard?
Rolling over a 401(k) from Principal Financial Group to Vanguard usually makes sense when: (1) you've left the employer, (2) the Principal Financial Group plan has high fees or limited fund choice, (3) you want to consolidate retirement accounts, or (4) you want better customer service or tools at Vanguard. Plans administered by Principal Financial Group commonly have higher expense ratios and more limited fund menus than self-directed brokerages — rolling out is one of the most common moves people make after leaving a job.
Reasons to keep your money at Principal Financial Group
Don't roll over if: (1) you have $5,000+ in Principal Financial Group and the plan offers institutional-class share funds you can't access elsewhere, (2) you're 55+ and might use the "rule of 55" to take penalty-free 401(k) withdrawals after leaving the employer (this only works with the employer plan, not an IRA), or (3) you're worried about creditor protection — 401(k)s have stronger ERISA protection than IRAs in some states.
Tax implications
A direct rollover from a Traditional 401(k) at Principal Financial Group to a Traditional IRA at Vanguard is non-taxable. Roth 401(k) money rolls into a Roth IRA, also non-taxable. If you convert pre-tax 401(k) funds to a Roth IRA at Vanguard, the entire converted amount is taxable as ordinary income in that tax year — useful for backdoor Roth strategies but plan for the tax bill.
Common pitfalls
The biggest mistake is taking a 60-day indirect rollover instead of a direct rollover. Principal Financial Group would withhold 20% for federal taxes; you'd have to come up with that 20% from another source within 60 days or face taxes plus a 10% early withdrawal penalty. Always ask for a "direct rollover" or "trustee-to-trustee transfer" — never have the check made payable to you personally.