Author Topic: High Expense ROTH IRA  (Read 707 times)

Pencil_Stash

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High Expense ROTH IRA
« on: September 07, 2018, 04:12:58 PM »
Hey Mustachians,

Since recently joining the FIRE community, I've decided to sell my USAA mutual funds and buy VTSAX.*

But I also have $40,500 in a Roth IRA through USAA. 
$23,800 is in USCRX and $16,700 is in UGEIX.  The management fees are attached.

So my question is whether or how I go about selling these to get a Roth IRA (with Vanguard?) with lower fees?
Will transferring hurt so much I should just leave my poor workers and stop contributing?
Or transfer within USAA to a lower cost fund?
USAA's S&P500 Index Fund has an expense ratio of 0.25%. :(

Detail that might matter: I'm 26 years old.

Thanks for the help!

Sincerely,
Pencil Stash

*Haven't bought VTSAX yet, if you want to talk me out of it.

terran

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Re: High Expense ROTH IRA
« Reply #1 on: September 07, 2018, 06:45:24 PM »
As long as there's no back end load (a fee when you sell) then there shouldn't be any loss from selling and transferring to Vanguard. Talk to Vanguard and they'll help you move the IRA to them.

smallstache

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Re: High Expense ROTH IRA
« Reply #2 on: September 09, 2018, 07:27:01 AM »
For as good as USAA is at insurance and banking, they suck at mutual funds and brokerage services.

Pencil_Stash

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Re: High Expense ROTH IRA
« Reply #3 on: September 09, 2018, 12:33:58 PM »
For as good as USAA is at insurance and banking, they suck at mutual funds and brokerage services.

I've recently realized that.  When I spoke to one of their advisers (who used to be a professor!?) about switching to Vanguard because of expense ratios, he argued, "Expense ratio doesn't really matter; it really comes down to asset allocation.  You're talking fractions of a percent that will only cost you about $10 over 80 years."

I punched him in the face and switched to Vanguard.

Pencil_Stash

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Re: High Expense ROTH IRA
« Reply #4 on: September 09, 2018, 12:38:50 PM »
As long as there's no back end load (a fee when you sell) then there shouldn't be any loss from selling and transferring to Vanguard. Talk to Vanguard and they'll help you move the IRA to them.

Thanks I'll check it out.  Excited to make the smart moves now and never worry about it again.

seattlecyclone

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Re: High Expense ROTH IRA
« Reply #5 on: September 10, 2018, 11:45:11 AM »
It's relatively common for brokerages to charge one-time fees on the order of $100 to transfer a full account balance to another place. Don't sweat this too much if USAA does it; you'll make it back over time with the expenses you save each year. It's a pretty cheap lesson in the grand scheme of things.

MustacheAndaHalf

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Re: High Expense ROTH IRA
« Reply #6 on: September 10, 2018, 12:30:46 PM »
You would actually save over $7,300 over 80 years just from the expense ratio.  Vanguard's VTSAX costs 0.04% per year versus your current 0.25% per year, and that small 0.21% difference adds up to over 18% when you run it for 80 years.  Multiply that by your $40k to get the $7.3k difference.

Just in general, you talk to the institution receiving the funds to initiate the transfer.  The company losing your money won't be that helpful.  I'm not sure why they are able to make bald faced lies about it with impunity, though.

Aggie1999

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Re: High Expense ROTH IRA
« Reply #7 on: September 10, 2018, 01:08:09 PM »
Eck. Those fees are about as bad as Edward Jones thievery. Get out as fast as possible. You are young so you haven't lost much to them so far.

ekywildcat

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Re: High Expense ROTH IRA
« Reply #8 on: September 15, 2018, 06:06:24 AM »
Exactly, just switched from EJ to Fidelity.  Was really easy, open Fidelity acct. they handled it all.  Never even spoke to my EJ advisor until it was done.  Fidelity will reimburse the $95 EJ closing fee, but EJ is trying to stick me with about $300 of additional fees, some funds had to be sold, wouldn't transfer to Fidelity.  MY EJ advisor is checking into it, but even if I end up paying it, which I'm sure I will, it will be money well spent.

ASW

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Re: High Expense ROTH IRA
« Reply #9 on: September 15, 2018, 08:24:48 AM »
@Pencil_Stash I did this exact thing back in February.  In the end, the easiest thing to do was just sell the investments at USAA and transfer the money into my checking account, then buy the exact same value of VTSAX at Vanguard with my checking account as the funding source.  Apparently, as long as you buy the same amount in the new R-IRA as you sold in the old one, there's no taxable event.  I can't personally confirm this as tax season hasn't rolled back around yet, but I remember my research into it leaving me feeling fairly confident that it will work out.  USAA investments are the worst. 

I still have a couple of small 529s with them that seemed like a lot of work to switch over.  Maybe I should start a new thread for this, but has anyone else successfully transferred a 529 from USAA to Vanguard?

terran

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Re: High Expense ROTH IRA
« Reply #10 on: September 15, 2018, 11:53:58 AM »
@Pencil_Stash I did this exact thing back in February.  In the end, the easiest thing to do was just sell the investments at USAA and transfer the money into my checking account, then buy the exact same value of VTSAX at Vanguard with my checking account as the funding source.  Apparently, as long as you buy the same amount in the new R-IRA as you sold in the old one, there's no taxable event.  I can't personally confirm this as tax season hasn't rolled back around yet, but I remember my research into it leaving me feeling fairly confident that it will work out.  USAA investments are the worst. 

I still have a couple of small 529s with them that seemed like a lot of work to switch over.  Maybe I should start a new thread for this, but has anyone else successfully transferred a 529 from USAA to Vanguard?

As long as you contribute to a new IRA within 60 days of withdrawal then it's an indirect rollover. You can do at most one of the these per year. You may want to contact vanguard to make sure they've marked it as a rollover contribution so anything they send the IRS properly accounts for what happened because USAA will be sending a form saying you withdrew.

smallstache

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Re: High Expense ROTH IRA
« Reply #11 on: September 17, 2018, 12:48:21 PM »
Eck. Those fees are about as bad as Edward Jones thievery. Get out as fast as possible. You are young so you haven't lost much to them so far.

I may not like USAA's brokerage and mutual funds services, but they are a far cry from Edward Jones.

Pencil_Stash

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Re: High Expense ROTH IRA
« Reply #12 on: September 19, 2018, 01:34:58 PM »
Thanks everyone!  Sold the allocations within the ROTH to make them "cash" to make the transfer easier.  Vanguard was very helpful.

Unfortunately the transfer inflated my net worth on Personal Capital by counting the cash twice.  I busted the 100k and they tried calling me for my consultation.  Dang it, I was looking forward to that!

smallstache

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Re: High Expense ROTH IRA
« Reply #13 on: September 20, 2018, 03:25:31 PM »
Personal Capital...no thanks. I prefer to use finance software that is stored on my computer and not associated with telemarketing salesmen.

chasesfish

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Re: High Expense ROTH IRA
« Reply #14 on: September 20, 2018, 05:15:48 PM »
Congrats, what a good move to unload those high expense funds

ASW

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Re: High Expense ROTH IRA
« Reply #15 on: September 21, 2018, 12:35:38 PM »
I still have a couple of small 529s with them that seemed like a lot of work to switch over.  Maybe I should start a new thread for this, but has anyone else successfully transferred a 529 from USAA to Vanguard?

Update: This thread inspired me to simply liquidate my USAA 529s and buy some more VTSAX in my taxable account at Vanguard.  The accounts had negligible gains, so I'm not worried about the penalty of the unqualified withdrawal. 

Now all of my investments are low-cost funds.  Feels good!

smallstache

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Re: High Expense ROTH IRA
« Reply #16 on: September 21, 2018, 01:52:35 PM »
I still have a couple of small 529s with them that seemed like a lot of work to switch over.  Maybe I should start a new thread for this, but has anyone else successfully transferred a 529 from USAA to Vanguard?

Update: This thread inspired me to simply liquidate my USAA 529s and buy some more VTSAX in my taxable account at Vanguard.  The accounts had negligible gains, so I'm not worried about the penalty of the unqualified withdrawal. 

Now all of my investments are low-cost funds.  Feels good!

I was offered the opportunity to move TD Ameritrade ESA accounts to Vanguard 529 accounts but I chose not to.  Vanguard funds in 529 accounts have a higher ER because they have to give the state of Nevada a cut (and/or keep a little more for themselves).  The only reason to move them would be (1) one fewer login to manage and (2) move closer to Voyager Select or Flagship status.  I probably would have moved the accounts to Vanguard if they still offered ESAs but they discontinued them a number of years ago in favor of 529s.