convert mutual fund to etf to take advantage of brokerage bonus

[samanil]

Hi Mustachians,

I am trying to sell my mutual funds (VTIAX and VTSAX) and buy etfs (VTI) so I can do an account transfer to robinhood and get a sizeable brokerage bonus (3%). I guess robinhood doesn't have mutual funds so I have to do this exchange to do the transfer. This is at Chase, and it is in my roth and traditonal IRA accounts. When I go to sell my mutual funds it says

"We can't place your order.
Can't redeem > 95% of a mutual fund current value"

Can anyone explain what this means to me?

Also, am I correct that buying/selling in a tax advantaged account is not a taxable event? It's only taxable if you withdraw funds?

Any tips for doing this exchange? Thanks!

[secondcor521]

Just a guess:  Chase is probably trying to avoid the situation where your MFs are worth $X, you put in an order to sell $X, and at market close (when all MF transactions occur), the MFs have declined in value and are no longer worth $X but are worth 99% of $X.

See if you can find an option to sell in terms of number of shares instead of in terms of dollars.  This exists at Vanguard; I don't know if it exists at Chase.

Yes, if selling inside either a traditional or a Roth IRA, there is no taxable event.

Withdrawals from traditional IRAs generally create ordinary taxable income.  Withdrawals from Roth IRAs are generally not taxable.  If you withdraw from an IRA, generally you'll receive a 1099-R the following January.

No tips.  Personally the 3% kicker for Robinhood isn't worth it to me, but I can see the appeal.

[MustacheAndaHalf]

Vanguard processes all purchases and sales for its mutual funds, while ETFs are traded on markets.  For mutual funds, that means Chase needs to contact Vanguard to sell your funds and receive cash, which it deposits back in your account.

I agree with secondcor521 on selling all your shares.  If Chase offers to sell a percentage, try selling 100% of shares.  Dollar amounts can be impacted by the market close, and markets closed lower on Friday.

[Heckler]

In Canada, such a transfer from TFSA to TFSA (similar to your Roth) or RRSP to RRSP (Your IRA) would best be done by contacting the new receiving institution (Robinhood in this case) and filling in their form to Transfer all funds “in Cash”.  The new institition would deal directly with the old, where the customer (you) does mothing but fill in the form.

Eg: You complete and send the Transfer Funds form to Robinhood.  Robinhood would then contact Chase, Chase would sell and send funds direct to Robinhood 

This achieves two things -
1. Most importantly - funds never leave the tax sheltered account umbrella.  No impact to contribution limits, no taxable income created.
2. No faffing about with the company who is loosing your business.  Eg: Nobody to convince you to stay with Chase.


This is how its done in Canada.  I suggest further research with Robinhood directly for how its done in USA.

[Heckler]

“ Not a recommendation to transfer or rollover. 3% match requires Robinhood Gold (subscription fee applies). Keep Gold for 1 year and the IRA for 5 years. Other terms apply.” - Robinhood.com

Is the 3% bonus worth the minimum five years of Gold subscription fees?  If you chose to stay paying Gold fees for life?

[Heckler]

Yup. See Trustee-to-trustee transfer

https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions

[Heckler]

“ IRA transfers and old 401(k) rollovers also earn 3% until April 30.”

Could be cutting it tight to meet the terms and conditions.

My experience with account transfers is to expect two business weeks time before funds arrive, it might be faster.  My 2022 RRSP transfer took 20 calendar days because they needed an ink signature instead of digital signature on the pdf form.  It might be different in the US.

[Heckler]

Yup. See Trustee-to-trustee transfer

https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions

This is super important for you to understand the tax implications for how to transfer your IRA funds.  Do not sell and withdraw them, you’d likely have a huge surprise income tax bill.

[samanil]

“ Not a recommendation to transfer or rollover. 3% match requires Robinhood Gold (subscription fee applies). Keep Gold for 1 year and the IRA for 5 years. Other terms apply.” - Robinhood.com

Is the 3% bonus worth the minimum five years of Gold subscription fees?  If you chose to stay paying Gold fees for life?

You only need gold for 1 year, and it's $5 per month. I would be transferring about 100k, so a 3k bonus.

[jim555]

I believe you can convert VTSAX --> VTI for free with no tax implications if these are held in Vanguard.  You may need to be in a Vanguard brokerage account to do it, they can convert your account to a brokerage account if needed.

[MustacheAndaHalf]

I believe you can convert VTSAX --> VTI for free with no tax implications if these are held in Vanguard.  You may need to be in a Vanguard brokerage account to do it, they can convert your account to a brokerage account if needed.

From OP's original post:

This is at Chase, and it is in my roth and traditonal IRA accounts.