Leaving Vanguard. Need advice for funds at Schwab or Fidelity (for IRA)

[Unionville]

I'm financially independent and live off my investments, but am trying to decide what funds should be in my IRA (distribution in 10 years).  I prefer No Load and reasonably low expense/fees.

Here is my current IRA breakdown in a Vanguard fund.

Vanguard Total Bond Index $130,000
Vanguard Intermediate Term $83,000
Vanguard Total International $174,000
Vanguard Target Retirement Income $185,000
Total About $570,000

I've been with Vanguard for 20 years, but I've decided to leave, because of a continuing series of pretty bad customer service experiences over the last few years. My research leads me to believe Schwab and Fidelity might be reasonable options - I also like that both offices are in walking distance from my house and have 24/7 service.

I would be happy to simplify the funds into 1-3 kinds. I'd like recommendations on which funds at Schwab or Fidelity I should look at. I'm a medium conservative investor. I'd be happy with an IRA  with 30% low risk. I'm not sure what direction to go.  Thx!

[MDM]

Other than Vanguard, Boglehead-style may interest you.

[Unionville]

Other than Vanguard, Boglehead-style may interest you.

Thanks - that's really interesting.

[MustacheAndaHalf]

Here is my current IRA breakdown in a Vanguard fund.

Vanguard Total Bond Index $130,000
Vanguard Intermediate Term $83,000
Vanguard Total International $174,000
Vanguard Target Retirement Income $185,000
Total About $570,000

Vanguard mutual funds can only be bought and sold through Vanguard.  So if you move these to Schwab or Fidelity, the trading costs will be very high ($20 per trade or maybe $50 per buy & sell).  It's a hassle for Fidelity and Schwab to transact everything through Vanguard.

One way around that is with ETFs.  For example, Vanguard Total Bond ETF (BND) and Vanguard Total International ETF (VXUS).  I don't think there's a "retirement income" ETF, but maybe you could buy Vanguard Total Stock Market (VTI) instead - with a mix of bonds.

Another way is to sell everything and transfer the cash, then buy funds specific to the broker you use.  At Fidelity you'd buy Fidelity mutual funds, etc.  If you strongly prefer mutual funds, you might risk holding cash for the duration of the transfer.

I personally prefer ETFs over mutual funds, so that would be my choice in this situation.  And actually, our situations have overlap - I've also been a Vanguard customer 20 years, where I've had all my investments until mid 2020.  I opened an Interactive Brokers account, then a Schwab account... and now most of my assets are at Schwab.  I was so surprised when I called Schwab's customer service line... and they picked up.  In general Schwab hold times are very short, and always less than Vanguard's.  Same $0/trade for ETFs, too.

[Unionville]

Here is my current IRA breakdown in a Vanguard fund.

Vanguard Total Bond Index $130,000
Vanguard Intermediate Term $83,000
Vanguard Total International $174,000
Vanguard Target Retirement Income $185,000
Total About $570,000

Vanguard mutual funds can only be bought and sold through Vanguard.  So if you move these to Schwab or Fidelity, the trading costs will be very high ($20 per trade or maybe $50 per buy & sell).  It's a hassle for Fidelity and Schwab to transact everything through Vanguard.

One way around that is with ETFs.  For example, Vanguard Total Bond ETF (BND) and Vanguard Total International ETF (VXUS).  I don't think there's a "retirement income" ETF, but maybe you could buy Vanguard Total Stock Market (VTI) instead - with a mix of bonds.

Another way is to sell everything and transfer the cash, then buy funds specific to the broker you use.  At Fidelity you'd buy Fidelity mutual funds, etc.  If you strongly prefer mutual funds, you might risk holding cash for the duration of the transfer.

I personally prefer ETFs over mutual funds, so that would be my choice in this situation.  And actually, our situations have overlap - I've also been a Vanguard customer 20 years, where I've had all my investments until mid 2020.  I opened an Interactive Brokers account, then a Schwab account... and now most of my assets are at Schwab.  I was so surprised when I called Schwab's customer service line... and they picked up.  In general Schwab hold times are very short, and always less than Vanguard's.  Same $0/trade for ETFs, too.

Thanks for the tips.

Also, I don't plan on rebuying Vanguard through the other companies.  (I assumed the fees would be high).  I'm researching the in-house funds at these new companies - thinking that would be the lowest fees/approach. 

[FLBiker]

If you use ETFs, you can be company-agnostic -- you could theoretically use one company for your US stocks, one for ROW stocks, etc.  Personally, I don't know that I would bother, but you could.

If I were you, regardless, I'd have Vanguard convert my mutual funds to ETFs before transferring them (I believe it's called "journaling over") because as was pointed out it will be much easier to sell those ETFs and rebuy what you want than to sell the funds.  And that process should be free at Vanguard.  I did something similar when I moved my IRA from Vanguard.  I was perfectly happy with Vanguard, but I moved to Canada and Vanguard doesn't do business with US citizens living in Canada.  I'm happy to hear that Schwab's customer service is good -- I shifted my IRA to TD Ameritrade, and they were recently acquired by Schwab.

[Sibley]

The two that I use by choice are Vanguard and Fidelity. Schwab is my current 401k, and I am REALLY displeased with them. They claim that they can't not send me all the spam paper mail, despite literally no one else in the company getting it. I also don't like the fund offerings as much, and the expense ratios seem higher than Fidelity or Vanguard.

[cool7hand]

+1 on switching to Vanguard ETFs at Schwab. It's what we do.

[Turtle]

The two that I use by choice are Vanguard and Fidelity. Schwab is my current 401k, and I am REALLY displeased with them. They claim that they can't not send me all the spam paper mail, despite literally no one else in the company getting it. I also don't like the fund offerings as much, and the expense ratios seem higher than Fidelity or Vanguard.

What are the chances that your 401k balance is above some unknown threshold that theirs may not be?  That would be one hypothesis for the extra mail, obnoxious as it is.

[cool7hand]

The two that I use by choice are Vanguard and Fidelity. Schwab is my current 401k, and I am REALLY displeased with them. They claim that they can't not send me all the spam paper mail, despite literally no one else in the company getting it. I also don't like the fund offerings as much, and the expense ratios seem higher than Fidelity or Vanguard.

What are the chances that your 401k balance is above some unknown threshold that theirs may not be?  That would be one hypothesis for the extra mail, obnoxious as it is.

We're with Schwab. We find their fees competitive. We do not receive any spam, nor have we ever. In 15 years.

[lutorm]

We just rolled my wife's IRA over from Vanguard to Fidelity. We did it as the mutual funds, and when we wanted to make changes we sold all of them and bought Fidelity funds. There's a transaction fee, but $50 doesn't matter much for a single transaction of ~$100k. I guess it would have been smarter to convert them to the ETFs first, though.

Fidelity has a series of zero-fee index funds (e.g FZROX) that seem ideal for a retirement account.

[Unionville]

We just rolled my wife's IRA over from Vanguard to Fidelity. We did it as the mutual funds, and when we wanted to make changes we sold all of them and bought Fidelity funds. There's a transaction fee, but $50 doesn't matter much for a single transaction of ~$100k. I guess it would have been smarter to convert them to the ETFs first, though.

Fidelity has a series of zero-fee index funds (e.g FZROX) that seem ideal for a retirement account.

Thanks for the info.  Q: I don't understand the reason to convert MF to ETF's before transferring. What is involved in doing that?  Why does it help the transfer?  As far as I understand ETF are just 'funds of funds.' 

[ATtiny85]

We just rolled my wife's IRA over from Vanguard to Fidelity. We did it as the mutual funds, and when we wanted to make changes we sold all of them and bought Fidelity funds. There's a transaction fee, but $50 doesn't matter much for a single transaction of ~$100k. I guess it would have been smarter to convert them to the ETFs first, though.

Fidelity has a series of zero-fee index funds (e.g FZROX) that seem ideal for a retirement account.

Just for completeness for the quick skimmer of this thread.

The Fido zero fee funds are NOT suitable for taxable accounts. They are not transferable like a lot of other funds and ETFs. So if something happens in the future, either on the account holder’s side or Fido, it could cause tax issues if one wants or needs to change brokerages.

Again, in tax free or tax deferred, no problem.

[FLBiker]

Thanks for the info.  Q: I don't understand the reason to convert MF to ETF's before transferring. What is involved in doing that?  Why does it help the transfer?  As far as I understand ETF are just 'funds of funds.'

I did it for two reasons.  1) My new brokerage allowed commission free trading on ETFs, but NOT on MF's belonging to another brokerage.  And 2) as an expat, I can't hold some (any?) American MFs, but ETFs are fine.  If your new brokerage allows you to hold another brokerages MFs AND you're OK with whatever fees are associated with trading that, you could keep them as MFs.

[MustacheAndaHalf]

We just rolled my wife's IRA over from Vanguard to Fidelity. We did it as the mutual funds, and when we wanted to make changes we sold all of them and bought Fidelity funds. There's a transaction fee, but $50 doesn't matter much for a single transaction of ~$100k. I guess it would have been smarter to convert them to the ETFs first, though.

Fidelity has a series of zero-fee index funds (e.g FZROX) that seem ideal for a retirement account.

Thanks for the info.  Q: I don't understand the reason to convert MF to ETF's before transferring. What is involved in doing that?  Why does it help the transfer?  As far as I understand ETF are just 'funds of funds.'

At Schwab and Fidelity, the cost to sell ETFs is $0/trade.  But a Vanguard mutual fund costs $50 or $75 per transaction.  There is a very large difference in fees.

https://www.schwab.com/pricing
https://www.fidelity.com/trading/commissions-margin-rates

ETFs are not "funds of funds" - they typically hold stocks.  The name "ETF" stands for "Exchange Traded Fund", meaning they trade on public markets along with stocks.  Anywhere you can buy stock for $0/trade, you can buy ETFs for $0/trade.  Here's the list of the largest ETFs, #1 being "SPDR S&P 500 ETF Trust" (SPY) with $343 billion in assets.

https://etfdb.com/compare/market-cap/

[Sandi_k]

Here are the equivalent MFs at the low-cost brokerages...

[lutorm]

I did it for two reasons.  1) My new brokerage allowed commission free trading on ETFs, but NOT on MF's belonging to another brokerage.  And 2) as an expat, I can't hold some (any?) American MFs, but ETFs are fine.  If your new brokerage allows you to hold another brokerages MFs AND you're OK with whatever fees are associated with trading that, you could keep them as MFs.

I've looked into (2) since we're anticipating leaving the US at some point, and Fidelity told me there is no problem holding, selling, or reinvesting dividends of, mutual funds. The only thing you must be a US resident for is to outright buy them.