New Vanguard IRA Question

[anxiousclothing]

Im a newbie, and I apologize for my ignorance. I recently stumbled across MMM and it has completely changed viewpoints and have opened my eyes. Unfortunately, I am a SLOW learner and I have to read information several times to grasp the information. I understand the tIRA discussion and reasoning. Unfortunately, I already had a Roth IRA that I opened several years ago through a Financial Advisor that wasn't meeting my needs, mainly due to the fact that I was uneducated and extremely hands off. Last week I opened a Vanguard account and transferred my Roth IRA over to Vanguard. The transfer is complete and I see the funds are invested in (FGBLX) Fidelity Global Balanced Fund.

I have two questions. How do I transfer them to Vanguard (VTSAX)? I clicked on the Exchange button and it took me to a page to select the funds that I want to exchange for, however, there aren't any Vanguard funds to select. Am I doing this right?
I also see an account that says Vanguard Federal Money Market Fund (Settlement Fund). What is this and what do I need to do?

I included two pictures that I hope helps show what I am talking about. Please help point me in the right direction and any additional information would be VERY much appreciated. I would like to get on the right track and then submit a case study.

[secondcor521]

1.  If you're exchanging between Vanguard funds, the "Exchange (Sell to Buy)" option is exactly what you need to use.  Since your current fund is a Fidelity fund and based on the screen shot, I think you'll have to do it in two steps:  First, sell the Fidelity fund by clicking on the "Sell" button.  Second, buy the Vanguard fund by clicking on the "Buy" button.  You might need to wait a day or two for the sell to go through before making the buy, but I'm not sure about that.

2.  A settlement fund is just a temporary parking spot for cash inside your IRA.  When you sell stuff (like the Fidelity fund), the cash proceeds go into your settlement fund.  When you buy stuff (like the Vanguard fund), the money to pay for it comes from your settlement fund.  If you contribute additional money to your IRA, it goes into your settlement fund first, and then you can use it to buy stuff.

While the money is in that parking spot, Vanguard actually invests it for you in a cash-like mutual fund so you do get a bit of interest on the cash while it is sitting there.

You don't need to do anything with it except know what it is.  (Well, I think Vanguard has two or three different options for settlement funds, so you could look at the other ones and see if you like one of them better, but they're all good.)

[anxiousclothing]

Thank you for the reply. Buy selling will i have to pay taxes on the sale even though I buy?

[secondcor521]

No, not as long as the transactions occur inside your IRA.  One characteristic of both Roth and traditional IRAs is that they are tax-deferred, meaning you don't pay taxes on any capital gains realized inside of the IRA.

[anxiousclothing]

Thank you for the help. I noticed that my new account says $0 of $5500 contributed this year so far. Do I need to subtract my contributions  this year from with previous company and invest the difference for this year?

Also is VSTAX my best option or is target retirement fund better?

Lastly, will vanguard auto purchase my monthly contributions or do I have to do that manually?

[secondcor521]

Yes.  Vanguard's counter only keeps track of contributions that Vanguard is aware of.  It'll work fine for you in future years.

Best and better are subjective terms.  Both options you identified are popular.  I'd suggest learning enough about the funds and their costs and investment objectives until you understand the differences between the funds, then see which one matches your investment plans and objectives the best.

Vanguard can do automatic investments for you if you tell them to.  I personally haven't done them, but I believe all you do is log in and click on a few buttons telling them how much, how often, and what fund.