Need Support! Managed IRA Transfer to Vanguard

[TrevorFIRE45]

Hey all, I just did something which hurt TONS, but I believe will pay off in the long run, especially according to MMM. Here's what I did. I had a USAA managed account that was charging me $30 / month for my IRA and making 7% over the year. So NOT beating the market. I have read enough now to know that I need to get rid of the fees and make my 7% without doing much, Index Funds. So I pulled the trigger and initiated the transfer. I thought USAA would liquidate funds and I would sweep in straight cash to Vanguard, but my index funds, and let it ride. Instead they moved over all my holdings with expense ratios ranging from .4 to 2.4!!! Plus I was paying the portfolio manager. Here's the part that hurt, when all my holdings came to Vanguard I had to sell off my winners at $35 fee per holding! Ouch! I thought about it and realized that I would have spent that much on maintenance in 7 months with USAA anyways. I hope I'm making the right move, I still have 4 holdings that are not winning right now so i'll hold them a bit longer. If I made a huge mistake please let me know! I still have time to cancel the orders. Any thoughts or suggestions would be appreciated!

[velvethammer]

I just did a similar thing with the same (unintended) consequences.  I have a small (4-figure) Roth that I moved to Vanguard.  I too thought it would settle to cash and then I would just purchase Vanguard funds from there.  However, the assets transferred in-kind, so now I still have my investments in American Funds.  I suppose I can just liquidate and purchase Vanguard funds.  It sounds like that is what you did also?  I don't think there are any tax implications to doing this since the money stays in the Roth, but I am unsure.

[TrevorFIRE45]

You are correct, I have just sold off most of my winners and will wait for the rest that are down to go up. Hopefully! You are correct that there are no tax implications unless you pull the money from the account totally. Then you'd be subject to penalty. Good luck! I think we'll be better off moving to Vanguard in the long run. Index Funds FTW!

[radram]

You are correct, I have just sold off most of my winners and will wait for the rest that are down to go up. Hopefully! You are correct that there are no tax implications unless you pull the money from the account totally. Then you'd be subject to penalty. Good luck! I think we'll be better off moving to Vanguard in the long run. Index Funds FTW!

I only see 1 issue with your plan.  You have a fund that under-performs that you will keep until it over-performs.  What if that never happens? Remember that 80% of all funds under-perform, so this is likely.

[StraightasaPfeil]

Hi guys, I'm about to perform the exact same switch with my USAA Roth. Any advice on how to make this less messy?

[TrevorFIRE45]

You are correct, I have just sold off most of my winners and will wait for the rest that are down to go up. Hopefully! You are correct that there are no tax implications unless you pull the money from the account totally. Then you'd be subject to penalty. Good luck! I think we'll be better off moving to Vanguard in the long run. Index Funds FTW!

I only see 1 issue with your plan.  You have a fund that under-performs that you will keep until it over-performs.  What if that never happens? Remember that 80% of all funds under-perform, so this is likely.

I'm right there with ya. luckily it's a small % of my total investment. it won't hurt to hold for a few weeks and see if there is any improvement, if not, i'll be making some moves. thanks for the input!

[TrevorFIRE45]

Hi guys, I'm about to perform the exact same switch with my USAA Roth. Any advice on how to make this less messy?

The only thing I could say that may make this simpler is if you have USAA liquidate all your holdings and put into your money market on USAA's side, then request transfer from USAA to Vanguard (through Vanguard). You'll probably still pay some commission to sell off holdings, but it may be less messy. I still have some holdings that were unable to be transferred to Vanguard, so I had to go through and do a special request to USAA to liquidate and send over. I am told, it may take 6 mos to fully transfer those few holdings over to Vanguard. It's gonna be messy, but much better in the long run!

[seattlecyclone]

Yes, liquidating before you transfer can often be a better deal because Vanguard's commissions for selling non-Vanguard funds can be pretty high. Sorry you had to learn that lesson the hard way!

[TrevorFIRE45]

I have to keep telling myself, that each $35 commission I paid, is 1 month of service fees (just to start) with the managed USAA. So by now i'm up to 8 mos and i'll basically after that i'm back to null. It'll work out in the long haul! Small expense ratios FTW!

[DailyGrindFree]

Yes, liquidating before you transfer can often be a better deal because Vanguard's commissions for selling non-Vanguard funds can be pretty high. Sorry you had to learn that lesson the hard way!

Hmmm. I rolled over my funds from another traditional IRA account to Vanguard and kept the same funds (Prudential Class A, B and C). Are you saying that I will have to pay a lot to convert them to VTSAX?

[MDM]

Hmmm. I rolled over my funds from another traditional IRA account to Vanguard and kept the same funds (Prudential Class A, B and C). Are you saying that I will have to pay a lot to convert them to VTSAX?

Perhaps $35 each, based on https://investor.vanguard.com/investing/trading-fees-commissions and assuming they are "Transaction fee (TF) funds".  Whether that is a lot or a little is in the eye of the beholder.

[DailyGrindFree]

Hmmm. I rolled over my funds from another traditional IRA account to Vanguard and kept the same funds (Prudential Class A, B and C). Are you saying that I will have to pay a lot to convert them to VTSAX?

Perhaps $35 each, based on https://investor.vanguard.com/investing/trading-fees-commissions and assuming they are "Transaction fee (TF) funds".  Whether that is a lot or a little is in the eye of the beholder.

@MDM: Thanks, MDM! $35x3=$105 is not bad I guess. This should be a live and learn moment for me.

@seattlecyclone: Last week, I also started the process to move my old company 401K to this account. It was about 20K. They liquidated the assets and sent the check to Vanguard on Oct 27. Interestingly enough, the only fee I see is for "Vanguard Target Retirement 2035 Trust II" and it is $25 [Full Distribution Fee].

[TrevorFIRE45]

Yes, liquidating before you transfer can often be a better deal because Vanguard's commissions for selling non-Vanguard funds can be pretty high. Sorry you had to learn that lesson the hard way!

Hmmm. I rolled over my funds from another traditional IRA account to Vanguard and kept the same funds (Prudential Class A, B and C). Are you saying that I will have to pay a lot to convert them to VTSAX?

For most fees outside of Vanguard funds, it'll cost you 35 per transaction to sell off your holdings. This applies to most but not all. My USAA mutual funds were the only ones I wasn't charge a commission fee for.

[Car Jack]

If you asked Vanguard which way would be better.....moving in kind and selling or liquidating and moving over the cash, they should have told you this.  When I moved some of my Fidelity IRA over to Vanguard, they told me that selling at Fidelity, then transferring would be free but transferring then selling at Vanguard would be $75.  I guess I was lucky that I asked the question and they knew the answer.  There's no universal right answer, though.

[TrevorFIRE45]

If you asked Vanguard which way would be better.....moving in kind and selling or liquidating and moving over the cash, they should have told you this.  When I moved some of my Fidelity IRA over to Vanguard, they told me that selling at Fidelity, then transferring would be free but transferring then selling at Vanguard would be $75.  I guess I was lucky that I asked the question and they knew the answer.  There's no universal right answer, though.

You're right, definitely blaming myself here for not doing all the research! It was an expensive lesson I taught myself. Good on ya!