FYI Betterment to Vanguard

[chadat23]

I've seen questions regarding moving from Betterment to Vanguard and if it's worth the tax expense of liquidating just to move. While things aren't yet finalized for me, I'm in the process of doing an "in kind" transfer so (excluding partial shares, assuming I'm understanding everything properly) nothing's going to be sold, management responsibilities are just being transferred for the assets I already own so the tax effect should be minimal.

Once everything's in my Vanguard accounts I'm expecting to sell everything in my T-IRA and R-IRA and just make them two-fund portfolios. For my taxable account, my tentative plan so to move towards a 2 fund portfolio where I'll first sell high fee assets that I've owned for more than a year. Then I'll keep selling and reallocating as much as I can each year while not pushing my long-term capital gains rate out of the 0% tax bracket.

Hopefully this is helpful to someone, and if it looks like I need help, let me know!

Chad

[sipsubsonic]

I am wondering if you could post a step-by-step for this process? I know nothing.

My current situation is I have <$30,000 in Betterment taxable account which has been there for ~4 years and am considering trying to DIY it for the first time with Vanguard. Currently in the lowest tax bracket, so I think taxes shouldn't be a big issue?

Would love any other general advice, also any resources on doing the DIY route with Vanguard for someone who is new to the game would be appreciated.

[Bill_]

I am wondering if you could post a step-by-step for this process? I know nothing.

My current situation is I have <$30,000 in Betterment which has been there for ~4 years and am considering trying to DIY it for the first time with Vanguard. Currently in the lowest tax bracket, so I think taxes shouldn't be a big issue?

Would love any other general advice, also any resources on doing the DIY route with Vanguard for someone who is new to the game would be appreciated.

If you are in the lowest tax bracket you may not pay any federal tax on long term capital gains.  If this is your case your should consider harvesting your gains to fill up the 0% tax bracket for long term gains.  You'll be raising your cost basis and saving yourself a large tax bill down the road.

[sipsubsonic]

I am wondering if you could post a step-by-step for this process? I know nothing.

My current situation is I have <$30,000 in Betterment which has been there for ~4 years and am considering trying to DIY it for the first time with Vanguard. Currently in the lowest tax bracket, so I think taxes shouldn't be a big issue?

Would love any other general advice, also any resources on doing the DIY route with Vanguard for someone who is new to the game would be appreciated.

If you are in the lowest tax bracket you may not pay any federal tax on long term capital gains.  If this is your case your should consider harvesting your gains to fill up the 0% tax bracket for long term gains.  You'll be raising your cost basis and saving yourself a large tax bill down the road.

Aha! Brilliant. So what you're saying is that if:
- All my assets have been owned for longer than 1 year
- The total capital gains + my income do not push me over the 15% tax threshold

Then I could simply cash out my Betterment account and use the cash to start at Vanguard, with no tax penalty for doing so?

What about dividends, could those be subject to tax? (I'm new to all this, but was just reading about Qualified vs. Non-Qualified and not sure where the dividend earnings from Betterment fall)

[seattlecyclone]

I am wondering if you could post a step-by-step for this process? I know nothing.

My current situation is I have <$30,000 in Betterment which has been there for ~4 years and am considering trying to DIY it for the first time with Vanguard. Currently in the lowest tax bracket, so I think taxes shouldn't be a big issue?

Would love any other general advice, also any resources on doing the DIY route with Vanguard for someone who is new to the game would be appreciated.

If you are in the lowest tax bracket you may not pay any federal tax on long term capital gains.  If this is your case your should consider harvesting your gains to fill up the 0% tax bracket for long term gains.  You'll be raising your cost basis and saving yourself a large tax bill down the road.

Aha! Brilliant. So what you're saying is that if:
- All my assets have been owned for longer than 1 year
- The total capital gains + my income do not push me over the 15% tax threshold

Then I could simply cash out my Betterment account and use the cash to start at Vanguard, with no tax penalty for doing so?

Yes, with some giant asterisks.

It's true that the base tax rate on capital gains in a low bracket is 0%. It's also true that this income, even if taxed at 0%, does still count as income for the purpose of determining your ACA subsidies (if applicable), earned income credit (if applicable), saver's credit (if applicable), and probably a dozen other things. Any of these things could make the effective rate on your capital gains income be more than 0%.

[sipsubsonic]

I am wondering if you could post a step-by-step for this process? I know nothing.

My current situation is I have <$30,000 in Betterment which has been there for ~4 years and am considering trying to DIY it for the first time with Vanguard. Currently in the lowest tax bracket, so I think taxes shouldn't be a big issue?

Would love any other general advice, also any resources on doing the DIY route with Vanguard for someone who is new to the game would be appreciated.

If you are in the lowest tax bracket you may not pay any federal tax on long term capital gains.  If this is your case your should consider harvesting your gains to fill up the 0% tax bracket for long term gains.  You'll be raising your cost basis and saving yourself a large tax bill down the road.

Aha! Brilliant. So what you're saying is that if:
- All my assets have been owned for longer than 1 year
- The total capital gains + my income do not push me over the 15% tax threshold

Then I could simply cash out my Betterment account and use the cash to start at Vanguard, with no tax penalty for doing so?

Yes, with some giant asterisks.

It's true that the base tax rate on capital gains in a low bracket is 0%. It's also true that this income, even if taxed at 0%, does still count as income for the purpose of determining your ACA subsidies (if applicable), earned income credit (if applicable), saver's credit (if applicable), and probably a dozen other things. Any of these things could make the effective rate on your capital gains income be more than 0%.

Ok, I see. So lots of variables are at play. I would probably lose the earned income credit (which maxes out at ~$500 for me), ACA and Saver's don't apply. Not sure about the dozen other things, got lots to learn.

I'm deciding between doing in-kind transfer or cash transfer from Betterment to Vanguard. It seems like if I wanted to be most efficient (always a fun goal) I would do in-kind transfer and then manually harvest the amount of gains that would be tax advantageous through Vanguard?

I see on IRS site that in 2017, investment income must be less than $3,450 in order to qualify for Earned Income Credit.

[seattlecyclone]

Right, if you want to keep your earned income credit you may benefit from transferring assets in kind and selling a little bit each year while making sure to keep your total investment income under the cap.