Author Topic: Merrill Lynch IRA roll over tooooo...???  (Read 7011 times)

MJS_79

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Merrill Lynch IRA roll over tooooo...???
« on: March 01, 2014, 01:55:30 PM »
I inherited a Roth IRA about 7 years ago and at that time the guy I invested with was at Edward Jones.  He is now at Merrill Lynch.  Long story short, I neglected the IRA because I never felt like it was "my" money since it was inherited.  It really hasn't done anything in the 6-7 years I've had it and I finally dug in to it and realized it had a large percentage of holding in Bonds.  (ugh)  I recently started selling the bonds and reinvesting in growth funds.  I also started an account for each of my 2 daughters that were funded with $5000 when they were born.  My IRA has about $205k in it and my daughters are about $5-6k.  (youngest will be 1 in 2 weeks and the oldest will be 3 in June)  It makes me nervous that I jumped in to the market after the last year of great growth but I was so fed up with my balance never changing that I couldn't take it any more.  I just started reading about Vanguard, T Rowe, etc.  I'm wondering if anyone has made the jump from a company like Merrill to Vanguard and how happy they are with the change.  The guy who is my advisor and I have a very good relationship so it will be a hard conversation to have but I really need to maximize my earning potential.  Im sure I'll have a million more questions along the way but I feel like this is the area in which I need to make the biggest change. 

Just a quick rundown of my info:
34, married, 2 kids.
Base pay 52k
$210k in my 401k (contribute 10% and employer matches 8%)
House paid off.  apprx value 275k
30k in the bank (this will probably be my next area to change)
No car loans
Only big expense right now is putting my wife through college but it hasn't gotten TOO expensive....yet.

MJS_79

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #1 on: March 01, 2014, 02:01:43 PM »
One quick note.  I do also have the option to roll my IRA in to my companies retirement program.  It is a family owned business and I was offered the option to roll it over in which case I would not pay any fees for consultation or transactions.  The company pays all of the fees of the program so there is no cost to employees. 

Frankies Girl

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #2 on: March 01, 2014, 04:09:35 PM »
The friend adviser wasn't actually that good of a friend if he never touched base with you and got that account growing. I'd imagine that the funds were in some nice high expense ratios as well, and that's definitely not a "friendly" move either. That's very poor service to you, but great for him and his company. I wouldn't actually talk directly to him about it - just contact Vanguard and have them initiate the roll. If he calls you or anything, just tell him that it's nothing personal, just that you're trying to take a more active roll in your retirement and his company wasn't a good fit for you, and that you prefer not to discuss it any further (if you want to keep the friendship).

As far as moving an account, it is really, really easy. Filling out some forms, get it notarized (or sig guarantee) and send them off, and they take care of the rest. Sometimes it can be done online if you're lucky. Vanguard is a great company, and you'll probably be very happy with your accounts there. From what I understand, they are a more individual investor DIY vs. customer service orientated company (nothing wrong with that).

Sounds like you are doing pretty well tho, so congrats. :)

We'd probably need a bunch more info on the company retirement program to make any informed guesses. I'd be concerned that it sounds a bit like a pension maybe? In which case I'd be more concerned because smaller companies (especially family run) can be more likely to go out of business and take your money with them. It would require more research on your part to figure out exactly what the program entails, and what it means if you leave the company or if they get bought out or go under.

MJS_79

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #3 on: March 01, 2014, 04:33:13 PM »
I agree 100% on the fact that, as an advisor, he should have done a better job of explaining where I was.  That fact has weighed on my mind heavily in the past couple months.  It's one of the big reasons I started looking at different options in the first place.
As far as the company I work for, it has been in business for 37 years and has been growing quite substantially over the last couple years.  My retirement plan through my company is with John Hancock and it is a normal 401k in which I am 100% vested.  My uncle, who owns the business now, basically offered for me to just roll my IRA over to John Hancock and even though it would be under the business account, it would still be 100% in my name.  But since the company pays all of the expenses for the retirement plan, Id get to consult our advisor for free as well as make all of my trades for free under that plan.  My only reservation with doing it that way is that I feel that my uncle will most likely be selling the company in the next 5 years.  And as of right now I think it will just be sold to a larger company and I will be "just another employee" so I'd probably end up moving my money anyways. 
I think I like the idea of Vanguard, though.  It does make me a little nervous that I would be more accountable for my decisions but I feel like there is enough information out there that I should be able to feel confident in my choice. 

I appreciate your input.  I think hearing that my feelings on the IRA situation are valid will make it easier for me to make the transition.

aj_yooper

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #4 on: March 01, 2014, 04:57:06 PM »
+1 on your awakening and your excellent financial position!  And, Frankies Girl said it right: move it to a place like Vanguard and have them do the deed. 

Now it's time to start your financial education.  I like Rick Ferri (All About Asset Allocation) and William Bernstein (Four Pillars of Investing).  Rick Ferri also has a blog and writes for *Forbe's magazine.
« Last Edit: March 03, 2014, 08:40:35 AM by aj_yooper »

Vjklander

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #5 on: March 01, 2014, 05:59:30 PM »
Be aware, the inherited IRA most likely requires you to go by the original owners birthday for MRDs etc.  If you don't take a required MRD the penalty is 50%. 

MJS_79

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #6 on: March 01, 2014, 06:21:37 PM »
I did a quick search for the mrd, or rmd.  (I think it's the same thing)  it looks like it would apply if the original owner would have been 70.5 years old.  Is this correct?  It was from my aunt and she would only be 61 this year.   Is this something Vanguard would go over with me while making the transition?  I don't want to be hit with a huge fee if I can avoid it. 

aj_yooper

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #7 on: March 01, 2014, 06:29:23 PM »
If it is a Roth IRA, as you indicated in OP, then, no mandatory distribution.  That applies to a traditional IRA.   The beauty of a Roth!

Frankies Girl

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #8 on: March 01, 2014, 06:32:40 PM »
I did a quick search for the mrd, or rmd.  (I think it's the same thing)  it looks like it would apply if the original owner would have been 70.5 years old.  Is this correct?  It was from my aunt and she would only be 61 this year.   Is this something Vanguard would go over with me while making the transition?  I don't want to be hit with a huge fee if I can avoid it.

In my experience, Vjklander is incorrect. I have an inherited traditional IRA, and the rules are they go off of your age (not the person that left it to you) and life expectancy to figure the RMD. You can obviously take more, but that's how the calculate the minimum. The amounts are considered regular income (as far as I can tell) for the purposes of IRS reporting.

And transferring inherited IRAs is not a big deal. You tell Vanguard when you're transferring that it is an inherited IRA, they set up the account to be that designation, and then just check that they will calculate and send the money whatever date you choose to distribute the RMD. They'll walk you through the steps and it's not going to be a problem.


Quote
non-spousal IRA heirs must withdraw a minimum amount each year, starting by Dec. 31 of the year after the IRA owner died...

To calculate this distribution, you take the balance on Dec. 31 of the previous year and divide it by the inheritor’s life expectancy, as listed in the IRS’ “Single Life Expectancy” table. (You can find the table in IRS Publication 590, “Individual Retirement Arrangements (IRAs)...
http://www.forbes.com/sites/deborahljacobs/2013/05/01/inherited-ira-rules-what-you-need-to-know/

MJS_79

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #9 on: March 02, 2014, 08:54:27 AM »
Thank you all for your advice as well as your positive attitudes.  I will be making the "jump" this week.  I'll be doing some research before I call Vanguard and decide where to invest the money once its there.  I may be seeking more advice as far as how to invest my girls funds once I make the change.  Right now they are in a Roth IRA as well and I don't know if there are any advantages to changing them to a different style account.  Also, I dont know if it would be smart of me to jump directly in to the total stock fund at Vanguard or if I should wait for a correction in the market since it has made large gains recently. 

I'm also going to be diving in to some financial books and really educating myself on getting rich ....slowly :)   
It makes me sick to realize how much more money I would have if I had made these changes 5 years ago but I need to let go of all that and realize today is the 2nd best day to start taking charge of my future. 

aj_yooper

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #10 on: March 02, 2014, 09:02:54 AM »
Regret is part of the education.  Press on!


Frankies Girl

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #11 on: March 02, 2014, 09:04:31 AM »
Thank you all for your advice as well as your positive attitudes.  I will be making the "jump" this week.  I'll be doing some research before I call Vanguard and decide where to invest the money once its there.  I may be seeking more advice as far as how to invest my girls funds once I make the change.  Right now they are in a Roth IRA as well and I don't know if there are any advantages to changing them to a different style account.  Also, I dont know if it would be smart of me to jump directly in to the total stock fund at Vanguard or if I should wait for a correction in the market since it has made large gains recently. 

I'm also going to be diving in to some financial books and really educating myself on getting rich ....slowly :)   
It makes me sick to realize how much more money I would have if I had made these changes 5 years ago but I need to let go of all that and realize today is the 2nd best day to start taking charge of my future.

The sentence I bolded up there is something I wanted to point out is kind of marketing timing. No one will ever be able to tell when there's going to be a pull back, so if you leave your money on the sidelines for too long waiting/hoping for a real downturn, then you're missing out on growth. I wouldn't think a few weeks is going to make a big difference, but don't wait around too long (like months/years) since you'll end up missing out and the short term ups and downs aren't what you're after.

http://jlcollinsnh.com/stock-series/
This is a great series - definitely check it out as part of your research/education.

mandies

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #12 on: March 03, 2014, 08:39:19 AM »
I had a brief but costly foray into Edward Jones, and my parents had a much more costly foray into Edward Jones for years with their nest egg.

You can't really recoup any of money you've lost already to exorbitant load fees and expense ratios, but now you have the education and knowledge to move your money to Vanguard ASAP. The sooner the better, as the fees only keep adding up the longer you stay at a Merrill Lynch/Edward Jones-type place.

My Dad was worried about the uncomfortable talk separating from his financial advisor of 10+ years, but the advisor didn't fight hard -- more like he realized my father had gotten education, and didn't even offer to compete with the Vanguard approach saving him a LOT more money. He just said that my Dad was "paying for the great advice" (which wasn't great advice after all), but if he didn't want to any more, that was fine.

MissPeach

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #13 on: March 03, 2014, 02:56:34 PM »
To the OP. It sounds like you already decided on Vanguard. I wouldn't put the money into something like John Hancock. I used to admin a 401K at a smallish company and they usually get hit pretty hard in fees. A lot of it is hidden or in the form of the funds they offer. Even if you get free trades, many people I know in that situation aren't happy with them because it takes a few days sometimes to put them in.

dragoncar

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #14 on: March 03, 2014, 06:54:46 PM »
Sounds like you already got and took good advice.  But I just wanted to say you have some impressive savings for your salary!

MJS_79

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #15 on: March 05, 2014, 04:05:58 PM »
Sounds like you already got and took good advice.  But I just wanted to say you have some impressive savings for your salary!

Haha, thanks.....I think.  I know my salary isn't much, but it's just a base.  I usually make more but it depends on the year.  Last year was a good year, which allowed me to finally pay my house off.
I've read a bunch of the links in the thread and I know most of it all says to put 100% of the money in to the Total Stock Market Index Fund but is that REALLY good advice with stocks at an all time high? 
I've got all my ducks in a row and I'm going to be calling Vanguard in the next day or so.  I'll definitely get some advice from them on where to invest.  My account right now looks like this:
60% Mutual funds, 25% Stocks and 15% cash (the cash is from selling off the bonds I talked about in the first post.  For some reason they aren't invested yet...go figure)
 
Does this sound solid (other than the cash) or should I divide it up any differently?  Thanks in advance for any advice, I'll be updating once I've made the leap!

Vjklander

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #16 on: March 26, 2014, 07:49:36 AM »
I did a quick search for the mrd, or rmd.  (I think it's the same thing)  it looks like it would apply if the original owner would have been 70.5 years old.  Is this correct?  It was from my aunt and she would only be 61 this year.   Is this something Vanguard would go over with me while making the transition?  I don't want to be hit with a huge fee if I can avoid it.

In my experience, Vjklander is incorrect. I have an inherited traditional IRA, and the rules are they go off of your age (not the person that left it to you) and life expectancy to figure the RMD. You can obviously take more, but that's how the calculate the minimum. The amounts are considered regular income (as far as I can tell) for the purposes of IRS reporting.

And transferring inherited IRAs is not a big deal. You tell Vanguard when you're transferring that it is an inherited IRA, they set up the account to be that designation, and then just check that they will calculate and send the money whatever date you choose to distribute the RMD. They'll walk you through the steps and it's not going to be a problem.


Quote
non-spousal IRA heirs must withdraw a minimum amount each year, starting by Dec. 31 of the year after the IRA owner died...

To calculate this distribution, you take the balance on Dec. 31 of the previous year and divide it by the inheritor’s life expectancy, as listed in the IRS’ “Single Life Expectancy” table. (You can find the table in IRS Publication 590, “Individual Retirement Arrangements (IRAs)...
http://www.forbes.com/sites/deborahljacobs/2013/05/01/inherited-ira-rules-what-you-need-to-know/

My apologies!!!!!  You are quite correct ... I meant to say "Be aware, the inherited IRA most likely requires you to go by your birthday, not the original owners birthday for MRDs etc.  If you don't take a required MRD the penalty is 50%."  Must have been a nasty Vicodin moment ....
Vjk

TomTX

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Re: Merrill Lynch IRA roll over tooooo...???
« Reply #17 on: March 26, 2014, 06:56:16 PM »
Go to Vanguard, keep expenses low.