Author Topic: Finally Left Edward Jones, now what is the correct account?  (Read 820 times)

gsd802

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Finally Left Edward Jones, now what is the correct account?
« on: November 05, 2019, 04:54:03 AM »
Good morning everyone,

After months/years of procrastinating I finally called Vanguard last night and had them help me get my two accounts pulled out of Edward Jones to Vanguard.  I am new at all this as far as terminology and knowing the correct moves to make.  I basically just want my investments to have higher performance that what I get at the credit union.

I have two accounts with Edward Jones. 

ROTH IRA - which I max each year.
SIMPLE IRA - Which my employer no longer contributes to but I always put in $5,200 annually when they did.  Vanguard told me this account will now be a Traditional.  (Thats just a normal 401k, correct?)

My Vanguard account is a VTSAX.

What will these two accounts I put in to Vanguard be called?  Are they also VTSAX?  I just want to make sure I reinvest and (Hopefully) account grows.  Because I no longer have employer contributions, I will no longer be adding Traditional IRA but I want it set up so that grows from reinvesting.

The $5,200 a year that I put into my SIMPLE, should I now put that into my VTSAX?

The first week of 2020 I plan on putting $6,000 into my ROTH and the $5,200 into the account that you all help me decide on.  I think I read you will get more gains that way rather than doing a little each month.

Thank you all.


terran

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Re: Finally Left Edward Jones, now what is the correct account?
« Reply #1 on: November 05, 2019, 07:11:27 AM »
A Roth IRA and a simple IRA are accounts. VTSAX is an investment. Investments are held in an account (just like money is held in a bank account).

Hopefully Vanguard rolled the Roth IRA into another Roth IRA and the Simple IRA into another simple IRA if you're still employed by the company that set it up (which might be you if self employed) or an IRA (sometimes called a traditional IRA). If not there will be tax and/or penalties to pay at tax time. You may still be able to get this money into IRAs as you have 60 days from distribution of an IRA to roll it over into another IRA. Unfortunately, you can only make one such indirect rollover per year, so I'm not sure you'd be able to roll both of them over. Check to see if Vanguard did in fact transfer the accounts as the original account type, and if not talk to Vanguard about what your options are.

Simple IRAs require a sponsoring employer, so if you're no longer working for that employer you can't continue to contribute.

If you no longer have an employer sponsored retirement plan then your only option is an IRA. Between a Roth IRA and traditional IRA you can contribute a total of $6000 in 2020, but only up to your total earned income for the year, so only if you or a spouse is still working. Traditional is tax deferred meaning you get a tax deduction now and pay tax when you withdraw (same as the Simple IRA). Roth is not, so you pay tax now but not when you withdraw. Depending on your income and whether or not you and/or a spouse are covered by a retirement plan at work you may or may not be able to contribute to these types of accounts, so share those details if you're concerned or see https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2019 and https://www.irs.gov/retirement-plans/ira-deduction-limits

If you're self employed there are some more retirement plans that are options.

If you want to invest more than the space you have available in retirement accounts you can open a taxable brokerage account, and invest in whatever you want there. Unlike the retirement accounts you've used to date, you will pay taxes on interest (from bonds) and dividends (from stocks) you hold in the taxable account, and you'll also pay tax on any gains when you sell investments held in a taxable account. The amount of tax varies depending your income and how long you've held the investment. It tends to be better to hold bond investments in retirement accounts and stock investments in taxable accounts since stock investments aren't taxed as much. You can learn more at https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

As far as what to invest in, VTSAX is a popular choice. It's a stock investment fund which means it's "risky"/volatile (meaning it moves around a lot), but it invests in stocks from the whole US market so it's well diversified. Some people would also want to invest in some bonds (like VBTLX) which are likely to grow much less, but be a lot less volatile (meaning the price won't go up and down as much). Some people might also want to invest in an international stock investment (like VTIAX) to diversify further into international markets. There are lots more options to invest in, but those will cover the basics and it's all I invest in. You can learn more at https://www.bogleheads.org/wiki/Asset_allocation

While you're figuring things out (or forever) investing in a target date fund wouldn't be a bad idea. These invest in all of the three investment types I mentioned above (plus international bonds) and automatically set and adjust the asset allocation, so you don't have to worry about it. The downsides are that you're "stuck" with what Vanguard has decided is the right asset allocation, you pay Vanguard a little more to manage it, and they're somewhat less tax efficient when held in a taxable account since they contain bonds. All in all not a bad deal, especially if held in retirement accounts where you don't have to worry about tax efficiency. More here: https://investor.vanguard.com/mutual-funds/target-retirement/#/