Author Topic: Transferring from Betterment -> Vanguard  (Read 754 times)

tips^up

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Transferring from Betterment -> Vanguard
« on: October 30, 2018, 02:12:22 PM »
Long time lurker, first time poster.

A few years ago, the daunting minimum of $10,000 for Vanguard seemed like a pipe dream.  Now, I'm a proud tenthousandaire.  Actually a lot more, but nonetheless, very proud to reflect that the $10k minimum is no longer a gigantic dream, but a healthy reality.

My wife and I started a joint "build wealth" Betterment account together about 6 months before our wedding, thinking it'd grow and we'd have extra $ for the celebration.  Well, the value went down.  My brilliant other half said, keep it in, don't sell at a loss.  I also started a Betterment "retirement" account and have been consistently contributing to both.  They have gone way up, now back to slightly above breaking even.  Combined present value of about $82,500 with $79,500 invested.  Since we didn't use it for the wedding, it has become a savings account for our next real estate purchase.

We currently own (have significant mortgages on) our primary and 3 residential rental properties that are positive cash flow and positive appreciation since purchase in our town.  I am a real estate appraiser, so feel comfortable with real estate investments, but enjoy the diversification and passive stock market investments.  We'll both early 30s, both with good jobs w matching 401's, no debt, healthy savings, no kids yet but probably soon.  Even w possibly starting a family on the horizon, we'd both like to retire early (my goal is by 50, in 17 years).

My questions:
1) I'd like to transfer to a Vanguard account to save fees.  Is it best to transfer direct from Betterment to Vanguard?  Or to my high interest checking/savings account, then into Vanguard?

2) Is there any fee or taxes that come due upon this move?

3) Is it best to have 1 single account, rather than the 2 betterment accounts I currently have (is there extra compounding with 1 greater amount, vs 2 smaller amounts)?

4) Will this move create a hit to my excellent credit score (I believe closing bank accounts and credit cards has a negative effect on credit score)?

5) Which Vanguard fund mix is best for a long investment horizon (high risk high reward)?

6) Would maxing out a Roth IRA maximize tax benefits, while maintaining liquidity for a potential RE investment?  (any other tax advantaged strategies with relatively high liquidity?)

7) Is an investment account as a RE down payment savings account silly?  Ideally, we'll scoop up a deal in a recession a few years from now, but that would likely also be bad timing to withdraw money from stocks.  (I look everyday, if a good deal came along, I'd move on it quick but I feel like a correction may be coming in the next few years).

Thanks!

tips^up

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Re: Transferring from Betterment -> Vanguard
« Reply #1 on: October 30, 2018, 03:42:30 PM »
I think I asked too many complex questions in a single post.  If you have insight and experience into any 1 answer, that would be appreciated too.

robartsd

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Re: Transferring from Betterment -> Vanguard
« Reply #2 on: October 30, 2018, 04:44:28 PM »
You made a mistake thinking you needed $10,000 to get in the door at Vanguard. Most Vanguard funds have "Investor" class shares with $3,000 minimum. The most popular also have ETF versions with 1 share minimums (<$100, whole shares only). I recommend Vanguard Target Date funds with their $1,000 minimum and built in diversity for people who are just starting out and want the easiest setup possible.

1) I'm not familiar with Betterment, but I'm sure Vanguard has dealt with it before - contact them, they will help you move your assets to them.

2) Taxes - any capital gains realized are taxable (but at favorable rates as low as 0% depending on your income level and state). Since you say they are "slightly above breaking even" the gains to be taxed will be small.

3) Separate accounts - you can each have your own retirement accounts (IRA) with separate limits. Separate taxable accounts with commingled funds in each provides no benefit (separate accounts with money that is not community property can be helpful to the owner if you divorce).

4) Investments aren't normally reported to credit agency - no impact on credit score.

5) Lots of love for Vanguard Total Stock Market (VTSAX) on these forums. I'd mix in some Vanguard Total International Stock Market (VTIAX).

6) Maxing Roth IRA will not change your tax liability at all. Contributions can be taken out later, but earnings must remain until retirement age (or pay penalty and tax).

7) Investing in stocks to build up fund that you want to use to purchase during a recession is silly. Too much timing risk. You could get lucky and find a good RE deal and be able to sell your stocks at a good price to execute it; or not.

jacoavluha

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Re: Transferring from Betterment -> Vanguard
« Reply #3 on: October 30, 2018, 09:55:05 PM »
Long time lurker, first time poster.

A few years ago, the daunting minimum of $10,000 for Vanguard seemed like a pipe dream.  Now, I'm a proud tenthousandaire.  Actually a lot more, but nonetheless, very proud to reflect that the $10k minimum is no longer a gigantic dream, but a healthy reality.

vanguard doesn't have a $10k minimum; only some funds do

My wife and I started a joint "build wealth" Betterment account together about 6 months before our wedding, thinking it'd grow and we'd have extra $ for the celebration.  Well, the value went down. 

this can and often does happen in the short to intermediate term, in equities investments

My brilliant other half said, keep it in, don't sell at a loss.  I also started a Betterment "retirement" account and have been consistently contributing to both.  They have gone way up, now back to slightly above breaking even.  Combined present value of about $82,500 with $79,500 invested.  Since we didn't use it for the wedding, it has become a savings account for our next real estate purchase.

so at this point you have $3,000 in unrealized capital gains. Gains are long term if the securities are held more than a year

We currently own (have significant mortgages on) our primary and 3 residential rental properties that are positive cash flow and positive appreciation since purchase in our town.  I am a real estate appraiser, so feel comfortable with real estate investments, but enjoy the diversification and passive stock market investments.  We'll both early 30s, both with good jobs w matching 401's, no debt, healthy savings, no kids yet but probably soon.  Even w possibly starting a family on the horizon, we'd both like to retire early (my goal is by 50, in 17 years).

My questions:
1) I'd like to transfer to a Vanguard account to save fees.  Is it best to transfer direct from Betterment to Vanguard?  Or to my high interest checking/savings account, then into Vanguard?

only transfer directly to vanguard if you want to transfer in-kind - that is, you transfer the shares you already own. But you have to decide if this is how you want your money invested. It seems like maybe you don't.

2) Is there any fee or taxes that come due upon this move?

only if you liquidate and realize capital gains. Long term gains are most often taxed at 15%. Depends on your income. Short term gains are taxed at your ordinary income rate

3) Is it best to have 1 single account, rather than the 2 betterment accounts I currently have (is there extra compounding with 1 greater amount, vs 2 smaller amounts)?

1 is probably better, for simplicity

4) Will this move create a hit to my excellent credit score (I believe closing bank accounts and credit cards has a negative effect on credit score)?

no

5) Which Vanguard fund mix is best for a long investment horizon (high risk high reward)?

a broad, low cost index fund, like Total Stock Market

6) Would maxing out a Roth IRA maximize tax benefits, while maintaining liquidity for a potential RE investment?  (any other tax advantaged strategies with relatively high liquidity?)

yes you should be contributing to an IRA each year. So should your spouse. For retirement. Not for anything else.

7) Is an investment account as a RE down payment savings account silly?  Ideally, we'll scoop up a deal in a recession a few years from now, but that would likely also be bad timing to withdraw money from stocks.  (I look everyday, if a good deal came along, I'd move on it quick but I feel like a correction may be coming in the next few years).

The most important question. Yes it's kinda silly. Depends on the stock:bond allocation. The account could decrease by about 50% times the percent in equities, quickly, at any point in time. So if it's 80% stocks : 20% bonds, it could drop by 40%. That's fine for a long term investment. But not for money you may want/need in the short to intermediate term.

Thanks!

tips^up

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Re: Transferring from Betterment -> Vanguard
« Reply #4 on: October 31, 2018, 09:23:18 AM »
Is there a better alternative for a liquid savings account?  My checking account (CityWide) is 1.99% for $0-$20k, 0.01% above $20k.  Savings is 0.85% $0-$25k, 0.40% above.  Checking is maxed at $20, savings not maxed at this point as I've been funneling more money into Betterment.

jacoavluha

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Re: Transferring from Betterment -> Vanguard
« Reply #5 on: October 31, 2018, 10:58:13 AM »
high yield savings like Ally, Purepoint, etc. Vanguard Prime money market. Treasury bills. Not hard to do better than 2% these days on infinite balances.

tips^up

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Re: Transferring from Betterment -> Vanguard
« Reply #6 on: October 31, 2018, 11:54:22 AM »
Thanks for the ideas...
You say it ain't hard to beat 2% but only 1/4 of your ideas beat it, and barely, and not convincingly better than my local bank at 1.99%.

Ally high yield = 1.90%
https://www.ally.com/bank/online-savings-account/

Purepoint = 2.15%, $10k minimum
https://www.purepoint.com/online-banking/savings-account/high-yield

Vanguard Prime money market = 1.55% YTD return, 0.97% 3-yr
https://investor.vanguard.com/mutual-funds/profile/performance/vmmxx

T-bill rates, 4-weeks (not really liquid) = 2.17%
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=billrates

jacoavluha

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Re: Transferring from Betterment -> Vanguard
« Reply #7 on: October 31, 2018, 12:17:22 PM »
Thanks for the ideas...
You say it ain't hard to beat 2% but only 1/4 of your ideas beat it, and barely, and not convincingly better than my local bank at 1.99%.

Ally high yield = 1.90%
https://www.ally.com/bank/online-savings-account/

Purepoint = 2.15%, $10k minimum
https://www.purepoint.com/online-banking/savings-account/high-yield

Vanguard Prime money market = 1.55% YTD return, 0.97% 3-yr
https://investor.vanguard.com/mutual-funds/profile/performance/vmmxx

T-bill rates, 4-weeks (not really liquid) = 2.17%
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=billrates

Vanguard prime MMF SEC yield currently 2.21%. YTD means nothing. You can move funds in and out quickly and without tax consequence.

T bill interest is also exempt from state income tax. And they're liquid if held at a brokerage. Though certainly more hassle than a plain savings account or MMF.

Ally has a 1% additional bonus now. Though that promo ends today. The short term yield with that is approaching 5%.

tips^up

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Re: Transferring from Betterment -> Vanguard
« Reply #8 on: October 31, 2018, 04:08:11 PM »
Cool, thanks!

robartsd

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Re: Transferring from Betterment -> Vanguard
« Reply #9 on: November 01, 2018, 12:04:46 PM »
Is there a better alternative for a liquid savings account?  My checking account (CityWide) is 1.99% for $0-$20k, 0.01% above $20k.  Savings is 0.85% $0-$25k, 0.40% above.  Checking is maxed at $20, savings not maxed at this point as I've been funneling more money into Betterment.
You could play the bank account sign up bonus game (usually requires direct deposit, bill pay, and/or debit card purchases to make it look like you're using this a s a primary banking account - most of the time direct deposit can be simulated with ACH transfer from another bank) or spread it around to get all promo rates for the first few grand at multiple banks (more passive). Money market or T bills at a brokerage is the easier place to park all the money together and get similar returns.