Author Topic: opening a vanguard account  (Read 5516 times)

helfer

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opening a vanguard account
« on: February 12, 2015, 09:07:56 AM »
I have 10k to invest and am looking to open an vanguard account...want to invest in (VTSAX).  How do I go about this?  I cannot due this through a traditional IRA due to the fact I cannot put more than 5500 into the account.  Should I open a mutual fund?  Then open an IRA later with additional savings?

BarkyardBQ

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Re: opening a vanguard account
« Reply #1 on: February 12, 2015, 09:23:21 AM »
10k is 10k, no matter where it sits in your portfolio, investing is step one, investing it in the right place is beneficial. If you can contribute 5500 to an IRA and 4500 to a taxable account, you have decreased your tax hit.

What are your other tax advantaged accounts? Are you contributing to a 401k or equivalent.

What is your Asset Allocation?

Have you considered tax efficient fund placement? http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement

If you intend to have International Equities Index it's smart to put those in a taxable account. REITS should go in a tax sheltered account. VTSAX is also pretty tax efficient, but you'll still pay more taxes than if it's in your IRA.

Everything depends on your goal and strategy, but general consensus says you should max our your tax efficient funds first, especially early in the year with any lump sum you can contribute and save anything extra as you get it to taxable accounts.
« Last Edit: February 12, 2015, 09:25:43 AM by zdravé »

helfer

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Re: opening a vanguard account
« Reply #2 on: February 12, 2015, 09:29:35 AM »
Suppose I should have provided more information. 
- I am 27
-My Gross income does not allow me to benefit from tax deduction using IRA
-I am currently contributing to a 401k (almost maxed) and an ESPP.
- New investor, just started reading MMM.
- I do intend to have internation equities index
« Last Edit: February 12, 2015, 09:33:10 AM by helfer »

seattlecyclone

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Re: opening a vanguard account
« Reply #3 on: February 12, 2015, 09:41:45 AM »
Have you already made a 2014 IRA contribution? If not, you can do both a 2014 and 2015 contribution right now to get yourself up to the minimum for VTSAX. If you have already done a 2014 IRA contribution, you could always just put $5,500 in an IRA for 2015 and invest in the investor shares version of the total stock index fund, with the plan to upgrade to admiral shares next year. The extra 0.12% expense ratio on $5,500 will cost you a whole $6.60 over the course of a year. Don't sweat it.

mskyle

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Re: opening a vanguard account
« Reply #4 on: February 12, 2015, 09:54:13 AM »
Opening a Vanguard account is super easy. Just go to the site, click on "personal investor" and then "open a new account." You'll need to have your bank information handy to make the initial deposit. The website really walks you through the process and if you have trouble you can call or chat for help, and you can save your progress and come back to it if it asks for info you don't have.. Do consider putting part of the money in an IRA or Roth IRA though... it's not just about this year's taxable income, it's also about taxes on your earnings in the account.

Leanthree

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Re: opening a vanguard account
« Reply #5 on: February 12, 2015, 09:56:16 AM »
You can always invest in VTSMX until you get the minimum for the Admiral shares in an IRA and then exchange into the Admiral shares. It is the same thing but with a slightly higher fee so that Vanguard can keep their profit margin while offsetting the smaller amount invested.

kc86

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Re: opening a vanguard account
« Reply #6 on: February 12, 2015, 09:58:45 AM »
Until tax day you can make contributions for 2014.  Make sure you request that it be counted as 2014. 

VTSMX is the $3,000 minimum Total Stock Market Fund and you will probably need to start in that fund until both of your deposits equal $10,000.  It is very easy to exchange vanguard to vanguard funds on the website and takes just one day for the transaction to happen.

helfer

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Re: opening a vanguard account
« Reply #7 on: February 12, 2015, 10:23:46 AM »
Have you already made a 2014 IRA contribution? If not, you can do both a 2014 and 2015 contribution right now to get yourself up to the minimum for VTSAX. If you have already done a 2014 IRA contribution, you could always just put $5,500 in an IRA for 2015 and invest in the investor shares version of the total stock index fund, with the plan to upgrade to admiral shares next year. The extra 0.12% expense ratio on $5,500 will cost you a whole $6.60 over the course of a year. Don't sweat it.

I did not know this, I'm going to use this strategy for both years...I have not made a contribution.  Thank you for the advice all

skyrefuge

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Re: opening a vanguard account
« Reply #8 on: February 12, 2015, 10:32:46 AM »
-My Gross income does not allow me to benefit from tax deduction using IRA

So what type of IRA are you planning to contribute to?

Even if your gross income is too high to contribute to a Traditional IRA and take the tax deduction, you still might be able to do it, since the income limit is based on your MAGI, not your gross income.

If your MAGI is still too high, then you should contribute to a Roth IRA rather than a non-deductible Traditional IRA, either normally, or through the back door if your MAGI is also too high for direct Roth IRA contributions.

helfer

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Re: opening a vanguard account
« Reply #9 on: February 12, 2015, 10:45:36 AM »
-My Gross income does not allow me to benefit from tax deduction using IRA

So what type of IRA are you planning to contribute to?

Even if your gross income is too high to contribute to a Traditional IRA and take the tax deduction, you still might be able to do it, since the income limit is based on your MAGI, not your gross income.

If your MAGI is still too high, then you should contribute to a Roth IRA rather than a non-deductible Traditional IRA, either normally, or through the back door if your MAGI is also too high for direct Roth IRA contributions.

I was planning on contributing to a traditional, my MAGI would still be too high for deduction.  I will have to do direct roth contribution.  I was under the impression it was beneficial to contribute to a traditional over a Roth due to the fact my tax bracket is so high currently and I do not expect that income after retirement
« Last Edit: February 12, 2015, 10:57:23 AM by helfer »

skyrefuge

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Re: opening a vanguard account
« Reply #10 on: February 12, 2015, 10:55:24 AM »
I am planning on contributing to a Traditional IRA.

Why? Because you discovered that you will be allowed to take a tax deduction on the contributions? Gimme something here!

If not, contributing to a Roth IRA will be more beneficial to you than making non-deductible contributions to a Traditional IRA.

helfer

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Re: opening a vanguard account
« Reply #11 on: February 12, 2015, 10:58:26 AM »
I am planning on contributing to a Traditional IRA.

Why? Because you discovered that you will be allowed to take a tax deduction on the contributions? Gimme something here!

If not, contributing to a Roth IRA will be more beneficial to you than making non-deductible contributions to a Traditional IRA.

Edited previous post, sorry misunderstood what you were getting at.