The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Bootlip on August 21, 2017, 09:13:20 AM
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I have a few questions with regards to setting up a tIRA with Vanguard...
1.) Can I set up automatic deposits from my paycheck into a tIRA and set it to buy ETF's? If so how does that work being that ETF's have to be purchased in whole shares? Does it buy what shares it can and put any leftover into some sort of cash holding within my account?
2.) Last question. Lets say I'm buying VTI in my tIRA and reach a balance >10,000. If I sell it all to buy the same dollar amount of VTSAX with this trigger a taxable event? Is there any downside to doing this?
Thank you for the help!
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#2 isn't a question.
#3 you can buy/sell/trade within your IRA without a taxable event
I don't do #1 automatically, so I don't know the answer to that one.
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https://investor.vanguard.com/etf/etf-vs-mutual-fund?lang=en (https://investor.vanguard.com/etf/etf-vs-mutual-fund?lang=en)
There is no automatic investment option for ETFs.
So long as you don't withdraw the money, any trading you do in an IRA does not trigger a taxable event.
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I seen that on Vanguards site already. Then when I called to ask all these questions to a real person over the phone it was a young guy who didn't sound confident in any answer he gave me. He told me I could do auto deposits buying ETF's. He also said if I buy ETF's within my tIRA then later sell them and buy mutual funds id owe capital gains tax on the ETF's I sold. None of it sounded correct so I came here to ask.
Thanks for all the help so far.
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If you put in $5500 this year, you can buy VTSMX at a .15% expense ratio. You can do so using automatic investments and purchases. You can do the same thing next year. Once the balance exceeds $10,000, Vanguard will convert it to VTSAX at .04%. Over two years, your fee is between $16 and $20.
You can make auto contributions the same but cannot make auto investments in an ETF at .04% expense ratio. You will have to log in and make purchases and will have a cash balance after each purchase. The cost of the ETF will be between $4.50 and $7.
In other words, you saved a whopping $11 to $13 over two years by going with ETFs.