Author Topic: Recently Discovered I have an American Funds Account?  (Read 412 times)

byks1aj

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Recently Discovered I have an American Funds Account?
« on: July 09, 2021, 08:39:36 AM »
25M. I recently found out that I have an UTMA American Funds account that was established as a college savings account circa 2010. I don't know how this account made it the better part of a decade without any sort of notification or trigger that I wasn't a minor anymore until now or went forgotten about by my mother until now, but alas, here we are. Currently the account holds a value of approx. $25,700 with 386 shares of American Funds New Perspective CI A (ANWPX). From what I can understand it looks like there was an initial contribution to asset in 2010 and the rest of the value has just been growth and dividend reinvestment.

Some additional info: I have currently just finished a MS in Environmental Science and am working making approx. 65k annually. I currently contribute ~20% of my income to a work managed 401k and invest another approx. $1300 a month to a Wealthfront account. Currently, these account are valued at approximately 50k and 30k respectively. I also have some other assets just floating around (approx. 3.3k in Robinhood invested into VTI and another 3.4k in crypto [XRP, dumb I know]).

Does anyone have any advice for this account or in general moving forward (I have heard nothing but bad things about American Funds over my exploration into investing/FIRE/personal finance)? Would this be beneficial to roll over into a different account? Is this better to cash out and move on with (I am also looking to purchase my first home, soon...possibly a down payment as I didn't know this money even existed)? Should I keep this money invested? Any pointers, info, or links would be helpful - I feel like I am being blindsided by this, even though this may be the best way to be blindsided.

Thank you in advance for any info you can share!! Links to materials, etc. appreciated as well.

RWD

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Re: Recently Discovered I have an American Funds Account?
« Reply #1 on: July 09, 2021, 10:01:39 AM »
ANWPX has an expense ratio of 0.76%. That means every year it is costing you about $200. Also, the front load has cost you around $1,550 (nothing you can do about that now). It has also under-performed the total US stock market by a fair margin. Definitely get rid of this account one way or another.

secondcor521

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Re: Recently Discovered I have an American Funds Account?
« Reply #2 on: July 09, 2021, 10:30:18 AM »
You can contact the UTMA custodian and convert the account to a regular taxable brokerage account in your name.  There will likely be a process for you to identify yourself to them so they know it's your money and you're over the applicable age of majority in your state (at 25 you definitely are).  You might have to fill out some paperwork that will be similar to new account paperwork.

Once that happens, then you can keep the shares or sell them.  If you sell them, you'll owe capital gains taxes but your basis and holding period will be carried over from the original purchase(s) inside the UTMA account.  Whatever you do, I would recommend applying these funds to whatever prioritized list of goals you have happens to be and invest it or spend it or save it as appropriate to your goals.  If it ends up getting invested, then follow your IPS.

It's odd that you didn't know about this account, because you should have been including any dividends and capital gains distributions from these funds on your tax returns all along.  Perhaps your parent(s) were filing them for you, but by age 25 they really probably should have been having you do that.  Perhaps the taxable amounts and your income were low enough to where you didn't have to file.

Going forward, you'll need to report any dividends and capital gains from this account on your tax return.  And this applies whether you convert the UTMA account to a regular brokerage account or not.

MDM

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Re: Recently Discovered I have an American Funds Account?
« Reply #3 on: July 09, 2021, 07:49:14 PM »
I have currently just finished a MS in Environmental Science and am working making approx. 65k annually.
One might guess that your income this year will be the lowest (only 6 or 7 months paid?) it is likely to be for many years.  That could give you the opportunity to tax gain harvest that fund and direct the proceeds elsewhere.

See the Investment Order post and links therein for general advice.

And welcome to the forum!

byks1aj

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Re: Recently Discovered I have an American Funds Account?
« Reply #4 on: July 10, 2021, 05:58:56 AM »
I have currently just finished a MS in Environmental Science and am working making approx. 65k annually.
One might guess that your income this year will be the lowest (only 6 or 7 months paid?) it is likely to be for many years. 

It would be cool to do this if my situation allowed however I should probably clarify that I worked throughout college in my field (at least all of this year in my current position) so this does not apply to me. If I would have known about this years ago I would have done this but as an individual I already am put into the 15% bracket. Unless I get married to someone with $0 income (who knows, always possibilities) I probably won't be taking advantage of this.

MDM

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Re: Recently Discovered I have an American Funds Account?
« Reply #5 on: July 10, 2021, 07:18:31 AM »
...I already am put into the 15% bracket.
Good for you to have combined the job and the graduate work - congratulations!

Might want to brush up on your tax calculations, unless that is the "12% federal + 3% state" bracket. ;)

Kidding aside, projecting your annual tax liability during the year - rather than being surprised when you file next year - is a good personal finance habit.

RWD

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Re: Recently Discovered I have an American Funds Account?
« Reply #6 on: July 10, 2021, 07:50:35 AM »
...I already am put into the 15% bracket.
Good for you to have combined the job and the graduate work - congratulations!

Might want to brush up on your tax calculations, unless that is the "12% federal + 3% state" bracket. ;)

Kidding aside, projecting your annual tax liability during the year - rather than being surprised when you file next year - is a good personal finance habit.

They could be referring to the long term capital gains brackets?

MDM

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Re: Recently Discovered I have an American Funds Account?
« Reply #7 on: July 10, 2021, 09:10:03 AM »
...I already am put into the 15% bracket.
Good for you to have combined the job and the graduate work - congratulations!

Might want to brush up on your tax calculations, unless that is the "12% federal + 3% state" bracket. ;)

Kidding aside, projecting your annual tax liability during the year - rather than being surprised when you file next year - is a good personal finance habit.

They could be referring to the long term capital gains brackets?
That's very possible. :)