Author Topic: This is NOT a market timing question, or maybe it is...  (Read 3714 times)

FIREdancer

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This is NOT a market timing question, or maybe it is...
« on: September 15, 2016, 09:42:22 AM »
I've been following the way of the Mustache for about a year and a half now.  But, I still have a large majority of my IRA money in a high fee mutual fund company, and I've finally decided to go ahead and transfer it over to my Vanguard IRA.

I'm looking at a 60-70 year investing timeline so I know what the market does today doesn't really matter.  If I happen to buy in at a low point, great, if not no biggie, I'm gonna keep investing regularly anyway.

So my stupid question is: it shouldn't matter when I transfer the IRA either, right?  Or is there a good time to transfer an IRA?

TexasRunner

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Re: This is NOT a market timing question, or maybe it is...
« Reply #1 on: September 15, 2016, 09:55:44 AM »
On a 70 year portfolio, it should have minimal impact whether the market was up 5% or down 5%.  If the market were to downturn 50%, it would do so for both your current high-expense portfolio and the new Vanguard portfolio.  Since you are rolling it over, no it won't matter at all.  If you were pulling it out and holding it, then putting back it, it could matter...  But that's market timing.  ;)

FIREdancer

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Re: This is NOT a market timing question, or maybe it is...
« Reply #2 on: September 15, 2016, 10:05:12 AM »
On a 70 year portfolio, it should have minimal impact whether the market was up 5% or down 5%.  If the market were to downturn 50%, it would do so for both your current high-expense portfolio and the new Vanguard portfolio.  Since you are rolling it over, no it won't matter at all.  If you were pulling it out and holding it, then putting back it, it could matter...  But that's market timing.  ;)

Awesome.  That's what I thought, but I just wanted to make sure I wasn't missing something.

seattlecyclone

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Re: This is NOT a market timing question, or maybe it is...
« Reply #3 on: September 15, 2016, 11:31:47 AM »
Yes, your money is invested now and will be invested afterwards, so the timing of the move really isn't that important.

The one thing to be aware of is that your money will probably be out of the market for a couple of weeks while the transfer goes through. You'll actually be better off if you can time the transfer to occur right before a market crash. That being said, there are a lot of things you can do to make a lot of money if you can time a market crash. This is one of the less lucrative ones.

FIREdancer

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Re: This is NOT a market timing question, or maybe it is...
« Reply #4 on: September 15, 2016, 12:23:29 PM »
The one thing to be aware of is that your money will probably be out of the market for a couple of weeks while the transfer goes through. You'll actually be better off if you can time the transfer to occur right before a market crash. That being said, there are a lot of things you can do to make a lot of money if you can time a market crash. This is one of the less lucrative ones.

Thanks seattlecyclone.  I wasn't sure about the logistics of how the transfer actually happens, and I was wondering about that.  So do I have this right: whenever I initiate the transfer, the amount would be whatever the dollar amount is at close that day?  And then when it finally goes through to Vanguard, it would be like buying in at close of whatever that day is (weeks later)?

seattlecyclone

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Re: This is NOT a market timing question, or maybe it is...
« Reply #5 on: September 15, 2016, 12:35:09 PM »
The one thing to be aware of is that your money will probably be out of the market for a couple of weeks while the transfer goes through. You'll actually be better off if you can time the transfer to occur right before a market crash. That being said, there are a lot of things you can do to make a lot of money if you can time a market crash. This is one of the less lucrative ones.

Thanks seattlecyclone.  I wasn't sure about the logistics of how the transfer actually happens, and I was wondering about that.  So do I have this right: whenever I initiate the transfer, the amount would be whatever the dollar amount is at close that day?  And then when it finally goes through to Vanguard, it would be like buying in at close of whatever that day is (weeks later)?

Generally, yes. I've done these transfers a couple of times and the way it has worked for me each time is you put in the request at your current brokerage, they'll liquidate everything and mail you a check for the value of your shares on that date, made out to "<New Brokerage> for the benefit of <Your Name>." You'll mail that check to the new brokerage with whatever paperwork they require to pick your investments, and they'll invest in shares at their market value when they cash the check.

Beaker

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Re: This is NOT a market timing question, or maybe it is...
« Reply #6 on: September 15, 2016, 01:44:55 PM »
Having just moved some accounts over to Vanguard recently, there are several ways to do it. I elected to have my former brokerage liquidate everything, as they would do it without fees, and then have Vanguard pull the money over. They just did it directly, not by mailing you a check. I believe this is preferable for tax-advantaged accounts, to avoid accidentally doing a withdrawal with tax/penalty consequences. This resulted in some time out of the market, about a week or so.

You can also elect to have Vanguard do an in-kind transfer - basically pull over the assets in the account over directly. So you owned X shares of Fund A before, now you still have them, just in Vanguard. Then you would have to direct Vanguard to sell those shares (probably incurring some sales fee) and buy new shares. The time out of the market would be however long that sell-then-buy transaction takes - maybe a day or two? If your old brokerage charges transaction fees too, I would probably go with that option.

Edit to add: This can be done on the phone as mentioned later, but you can frequently do the whole thing online. I believe you get at it via the My Accounts -> Open Account button, but that's from memory.
« Last Edit: September 15, 2016, 03:32:33 PM by Beaker »

Spork

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Re: This is NOT a market timing question, or maybe it is...
« Reply #7 on: September 15, 2016, 02:31:43 PM »
I think I've made 4 of these now...  When I've done it, I just called Vanguard and told them what I wanted to do.  Have your account information for the "from" IRA in hand.  In all but one case*, they did a 3 way call with me, them and the other financial entity.  They speak the right language to each other and every now and then you pipe up with a "yes" or a SSN or a PIN.  When you hang up, it's all in the works and it just happens in a week or two.

*one case was more complicated and required the whole damn thing to be done on paper, complete with a Medallion Signature Guarantee.  Hopefully that won't be the case for you.

triangle

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Re: This is NOT a market timing question, or maybe it is...
« Reply #8 on: September 15, 2016, 05:11:43 PM »
My transfer took nearly two weeks to complete, that was after doing the 3-way call as @Spork mentioned. So if you have a 10-20-30 years of 401K contributions saved and compounded in your 401K the timing can be a big deal. If you are just starting out and have a relatively small balance it matters a lot less.

I was about to transfer mine over in August 2015 but the market dropped 5+% in a couple of days which caused me to delay until volatility cooled. As I feared the market would rebound during the interim and cost me more than a years worth of contributions while the check was in the mail.

seattlecyclone

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Re: This is NOT a market timing question, or maybe it is...
« Reply #9 on: September 15, 2016, 06:18:35 PM »
They just did it directly, not by mailing you a check. I believe this is preferable for tax-advantaged accounts, to avoid accidentally doing a withdrawal with tax/penalty consequences.

I expressed a concern about exactly this the last time I did a transfer, but the representative assured me that there were no 60-day rollover concerns when they make the check out to the new brokerage "for the benefit" of you, because the money was never in a form where you could have deposited it into your checking account. You're just acting as a courier for the trustee-to-trustee transfer which has no built-in time limit.

ender

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Re: This is NOT a market timing question, or maybe it is...
« Reply #10 on: September 15, 2016, 06:22:55 PM »
My transfer took nearly two weeks to complete, that was after doing the 3-way call as @Spork mentioned. So if you have a 10-20-30 years of 401K contributions saved and compounded in your 401K the timing can be a big deal. If you are just starting out and have a relatively small balance it matters a lot less.

I was about to transfer mine over in August 2015 but the market dropped 5+% in a couple of days which caused me to delay until volatility cooled. As I feared the market would rebound during the interim and cost me more than a years worth of contributions while the check was in the mail.

Similar thing happened to me, transferred when I was able, got excited about a market drop, but then over the ridiculously long time period it took Fidelity to mail a check to Vanguard me so I could mail it to Vanguard who then took their sweet time processing it, the market went up around 5%.

C'est la vie :)

FIREdancer

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Re: This is NOT a market timing question, or maybe it is...
« Reply #11 on: September 16, 2016, 08:15:52 AM »
Thank you all for sharing your experiences!  It's nice to hear how it all works from people who have done it before.

@Spork and @Beaker: I think I will try to do it over the phone or online.  Thanks for the info.

@triangle: Thanks for the tip.  I do have about 10 year's worth of investing in my account, but I didn't fully fund the IRA those years because that was through college and grad school, so it doesn't amount to a giant stash, and I'm still looking at about 10-15 years of accumulation to FIRE, so I'm not too concerned.

@ender: After these reassuring responses I feel better about getting this done, so "C'est la vie" is right.  If I luck out with when the transfer goes through that'll be awesome, if not, meh :-)

FIREdancer

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Re: This is NOT a market timing question, or maybe it is...
« Reply #12 on: September 19, 2016, 12:36:46 PM »
OK, now I'm at a loss for how to transfer my IRA.  My current company requires a medallion signature guarantee stamp before they will start the transfer.  I've called 4 or 5 banks around town and none of them offer this service.  Anyone know any other places besides a bank that would do this?

TexasRunner

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Re: This is NOT a market timing question, or maybe it is...
« Reply #13 on: September 19, 2016, 12:57:33 PM »
OK, now I'm at a loss for how to transfer my IRA.  My current company requires a medallion signature guarantee stamp before they will start the transfer.  I've called 4 or 5 banks around town and none of them offer this service.  Anyone know any other places besides a bank that would do this?

I thought you had to receive that from the "depositing into" institution.  Maybe call them up and ask?

FIREdancer

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Re: This is NOT a market timing question, or maybe it is...
« Reply #14 on: September 19, 2016, 01:17:22 PM »
OK, now I'm at a loss for how to transfer my IRA.  My current company requires a medallion signature guarantee stamp before they will start the transfer.  I've called 4 or 5 banks around town and none of them offer this service.  Anyone know any other places besides a bank that would do this?

I thought you had to receive that from the "depositing into" institution.  Maybe call them up and ask?

I don't think it matters where you get it from, as long as they participate in the program, but that's the problem I can't find anywhere that does it.  And the closest office of the company I'm leaving is hundreds of miles away.  The company I'm moving to is Vanguard and I don't think they even have local offices.

TexasRunner

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Re: This is NOT a market timing question, or maybe it is...
« Reply #15 on: September 19, 2016, 01:25:36 PM »
OK, now I'm at a loss for how to transfer my IRA.  My current company requires a medallion signature guarantee stamp before they will start the transfer.  I've called 4 or 5 banks around town and none of them offer this service.  Anyone know any other places besides a bank that would do this?

I thought you had to receive that from the "depositing into" institution.  Maybe call them up and ask?

I don't think it matters where you get it from, as long as they participate in the program, but that's the problem I can't find anywhere that does it.  And the closest office of the company I'm leaving is hundreds of miles away.  The company I'm moving to is Vanguard and I don't think they even have local offices.

There is a BogleHeads thread about it here:  https://www.bogleheads.org/forum/viewtopic.php?t=146329

Looks like it is pretty darn hard to do.  Best of luck...

FIREdancer

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Re: This is NOT a market timing question, or maybe it is...
« Reply #16 on: September 19, 2016, 01:28:51 PM »
OK, now I'm at a loss for how to transfer my IRA.  My current company requires a medallion signature guarantee stamp before they will start the transfer.  I've called 4 or 5 banks around town and none of them offer this service.  Anyone know any other places besides a bank that would do this?

I thought you had to receive that from the "depositing into" institution.  Maybe call them up and ask?

I don't think it matters where you get it from, as long as they participate in the program, but that's the problem I can't find anywhere that does it.  And the closest office of the company I'm leaving is hundreds of miles away.  The company I'm moving to is Vanguard and I don't think they even have local offices.

There is a BogleHeads thread about it here:  https://www.bogleheads.org/forum/viewtopic.php?t=146329

Looks like it is pretty darn hard to do.  Best of luck...

Thanks, PriestTheRunner.  I think I might just try to pressure my bank again.  Unfortunately I only use one brick and mortar bank anymore and I only keep a month or so of expenses there, so it's not quite as powerful if I threaten to move to another bank.  Mustachian people problems :-/

Beaker

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Re: This is NOT a market timing question, or maybe it is...
« Reply #17 on: September 19, 2016, 02:31:26 PM »
We had to do that for one of my wife's accounts, due to a slight difference in the name. Our regular Wells Fargo had it, but we do happen to use the flagship branch in our city.

FIREdancer

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Re: This is NOT a market timing question, or maybe it is...
« Reply #18 on: September 19, 2016, 08:01:23 PM »
OK, now I'm at a loss for how to transfer my IRA.  My current company requires a medallion signature guarantee stamp before they will start the transfer.  I've called 4 or 5 banks around town and none of them offer this service.  Anyone know any other places besides a bank that would do this?

Update:  Long story short Vanguard is awesome and I don't need the medallion signature guarantee after all.  It's going to take a couple extra weeks because my current company is difficult, but at least I can get it done!

TexasRunner

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Re: This is NOT a market timing question, or maybe it is...
« Reply #19 on: September 20, 2016, 07:32:57 AM »
Update:  Long story short Vanguard is awesome and I don't need the medallion signature guarantee after all.  It's going to take a couple extra weeks because my current company is difficult, but at least I can get it done!
Awesome!  Glad it could get settled.