Author Topic: Transferring "in kind" to Vanguard  (Read 1457 times)

shannyeire

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Transferring "in kind" to Vanguard
« on: May 24, 2018, 11:51:32 AM »
Hoping for some help on this one. We are moving all of our managed accounts from our broker to Vanguard. Most of them were pre-tax, so rolling over is not a problem and already done. The issue we have is with the post-tax account. We hoped to do a transfer in kind to Vanguard but have discovered that Vanguard does not have any of the funds we are invested in. Is our only option to liquidate the account, take the tax hit and then deposit it into Vanguard?

Any advice would be greatly appreciated. I have learned so much from you guys recently - especially the fact we were getting screwed by our brokerage!

Thanks.

jacoavluha

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Re: Transferring "in kind" to Vanguard
« Reply #1 on: May 24, 2018, 02:13:29 PM »
Have you called Vanguard and asked? I'm sure they could tell you for sure.

They may provide helpful advice on what to do with your post tax holdings, from a tax planning perspective. How much help you get from them will probably be proportional to the size of your holdings.

Generally: Most brokerages can hold funds that aren't "their own." You may or may not be able to put more money into the fund. You may or may not be able to reinvest dividends.

shannyeire

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Re: Transferring "in kind" to Vanguard
« Reply #2 on: May 24, 2018, 02:32:30 PM »
Thank you for your reply. Three of the funds can be transferred in but are not available for purchase. One of them (the largest one - RELCX) cannot be transferred. It is not a huge account, less than $100,000.

shannyeire

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Re: Transferring "in kind" to Vanguard
« Reply #3 on: May 24, 2018, 04:33:03 PM »
Further discussion with Vanguard and we have come to the conclusion it is better to liquidate the funds with our original brokerage. Our goal is to move into lower cost funds so they would need to be liquidated at some point anyway. The expense ratio on these funds range from 1.37% to 2.16%.

PizzaSteve

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Re: Transferring "in kind" to Vanguard
« Reply #4 on: May 24, 2018, 06:00:07 PM »
Agree that it is usually best to just bite that tax bullet.  You may not be in a lower bracket in the future anyway, and the tax bill will always be there...it is just deferred, unless you plan on dying soon.  Those expense ratios are dragging your performance significantly, almost the full inflation rate.

shannyeire

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Re: Transferring "in kind" to Vanguard
« Reply #5 on: May 24, 2018, 06:28:02 PM »
Agreed on the expense ratios. We have really educated ourselves in the last six months and got really serious about FIRE. I couldn't believe the expenses ratios!! I'll write off what we have paid so far as stupid tax, but never again!

AM43

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Re: Transferring "in kind" to Vanguard
« Reply #6 on: May 25, 2018, 08:53:35 AM »
The expense ratio on these funds range from 1.37% to 2.16%.

Holy... I cant believe they have a nerve to charge that much with all other options available out there.
You did an absolutely right thing by moving your funds.
You will thank yourself later by saving tens of thousands of dollars in fees.
I used to have funds that charged from 0.6 to 0.8% ER and I got rid of them, let alone 1.37% to 2.16%.
My average ER across all funds now is about 0.08.

DavidAnnArbor

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Re: Transferring "in kind" to Vanguard
« Reply #7 on: May 27, 2018, 07:27:05 PM »
Maybe make the transition more gradual, don't sell the entire holding right away. Your marginal tax rate could be high if you sell the whole thing and have a large capital gain.

radram

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Re: Transferring "in kind" to Vanguard
« Reply #8 on: May 27, 2018, 09:03:10 PM »
Agreed on the expense ratios. We have really educated ourselves in the last six months and got really serious about FIRE. I couldn't believe the expenses ratios!! I'll write off what we have paid so far as stupid tax, but never again!

I like to think of those things as paying for an education. You paid. You got an education. There was a less expensive way to learn the lesson, but the fact that you are acting says the lesson was learned.

I agree with those that say you should at least look at your tax consequences, but yes, get out soon. This would be especially true if you are close to hitting the next tax bracket if you take it out all at once.

Look at the bright side..... with expense ratio's like you have been paying, your gains should be low :)  I did look at the one you gave, and boy was that a dooziy Expenses of 2.16%, high risk, very low reward and almost 13% held in cash. Just wow. Thank you for sharing.

My father is terrified of stocks, and had a large amount of money in his bank getting 0.01%(not a typo). The broker at the bank talked him into moving it into a managed account... for a fee, of course. 1% to the broker to buy assorted bonds and such. Account was actually down after 1 year. I looked at what was bought. A small amount was actually in a bond paying 0.75%. LESS than his fee. Fees were consuming about 40% of what was being earned. He has since fired the broker.

Keep us posted. Good luck.

shannyeire

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Re: Transferring "in kind" to Vanguard
« Reply #9 on: May 29, 2018, 10:26:37 AM »
Yes, that 2.16% one was a shocker. We have liquidated them all and are moving the cash over to Vanguard. We reckon the tax hit overall will be around 3k. Lesson learned!
« Last Edit: May 29, 2018, 10:29:04 AM by shannyeire »