Author Topic: Roth IRA from Betterment to Vanguard  (Read 1527 times)

chaskavitch

  • Pencil Stache
  • ****
  • Posts: 671
  • Age: 33
  • Location: Fort Collins, CO
Roth IRA from Betterment to Vanguard
« on: March 23, 2016, 08:12:08 AM »
I totally jumped on the Betterment wagon in 2014 and transferred all of my long term savings and active Roth IRA over to them.  This was absolutely a step in the right direction, because I was moving it away from my parents' "investment advisor".  He's a nice guy, but they are stuck in a "guaranteed 7% return" fund for 10 years, with 2% fees and a huge penalty for pulling out.  Ouch. 

Anyway, I finally realized that paying Betterment's fees on top of the fees of all the funds they split my money into was dumb.  This week I completed the transfer of my Roth IRA to Vanguard into some lovely Total Stock Market Index Fund Admiral Shares (VTSAX), hooray!  It makes me glad that I qualify for the Admiral shares, too :)

Next task: convincing my husband that at our income level, it is totally worth it to contribute to tIRAs instead of Roth IRAs.

wkumtrider

  • 5 O'Clock Shadow
  • *
  • Posts: 94
Re: Roth IRA from Betterment to Vanguard
« Reply #1 on: June 06, 2016, 06:34:23 AM »
I know this is an old thread, but what did it cost you in taxes to transfer your ROTH IRA to Betterment from your advisor?  I want to move my ROTH IRA from my advisor to Vangaurd, but not sure how to calculate the taxes.

Thanks.

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: Roth IRA from Betterment to Vanguard
« Reply #2 on: June 06, 2016, 08:28:22 AM »
I know this is an old thread, but what did it cost you in taxes to transfer your ROTH IRA to Betterment from your advisor?  I want to move my ROTH IRA from my advisor to Vangaurd, but not sure how to calculate the taxes.

Thanks.

There should be no taxes due. You should leave the money inside the Roth. Since it goes from Roth to Roth, there is no taxable event. You are just changing the IRA custodian and what you are invested in. You can change investments inside an IRA at any time without tax consequences.

wkumtrider

  • 5 O'Clock Shadow
  • *
  • Posts: 94
Re: Roth IRA from Betterment to Vanguard
« Reply #3 on: June 06, 2016, 09:33:30 AM »
Thank you forummm, good to know.  I think I was confused with rolling over a 401K to a Roth IRA, which I had done in the past.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1767
Re: Roth IRA from Betterment to Vanguard
« Reply #4 on: June 06, 2016, 11:06:52 AM »
If you want to change the type as you make the transfer, you can owe tax.  For example, a Traditional 401(k) where you want a Roth IRA would be taxed, as you experienced before.  But starting with a Roth IRA, you will keep it intact as a Roth IRA, and no tax would be due.

In the future if you have a Traditional 401(k) and convert it to a Roth IRA, it's added to your income.  So if you convert $10,000 then you owe tax on $10,000 worth of additional income.  So on your tax form you might have the median salary of $52,000 and the conversion would mean you pay tax on $52k + $10k = $62,000.