Author Topic: Vanguard clarification: Prime Money Market Fund/Settlement Fund  (Read 3233 times)

mrteacher

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Vanguard clarification: Prime Money Market Fund/Settlement Fund
« on: September 21, 2016, 04:50:33 PM »
Hi all,

I think I found the answer to my question, but I'd like to check.

I've had a Vanguard account (through which I've been funding my Roth) since 2009. I am able to transfer money directly from my savings account into VFIFX (Target Retirement 2050). To this day, I am still able to make contributions directly to VFIFX.

A friend of mine opened up an account at the beginning of this year and simultaneously had a Money Market/Settlement fund opened for him, into which he must transfer money from his checking account before he can plop it into his Roth IRA investment vehicle of choice.

Is this a new operating procedure for Vanguard? Does the settlement fund simply exist to serve as a 'holding place' for your money? What are the advantages to this system -- in other words, why did Vanguard begin this new wrinkle for new accounts?

Thank you!

Nick_Miller

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Re: Vanguard clarification: Prime Money Market Fund/Settlement Fund
« Reply #1 on: September 21, 2016, 06:18:47 PM »
I noticed this change too.

However I don't understand why the change was made or what purpose the settlement fund serves. Maybe someone else will pipe up!

dragoncar

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Re: Vanguard clarification: Prime Money Market Fund/Settlement Fund
« Reply #2 on: September 22, 2016, 01:25:14 AM »
It's some regulatory bullshit they sent out a letter explains it but I didn't give a crap

BlueHouse

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Re: Vanguard clarification: Prime Money Market Fund/Settlement Fund
« Reply #3 on: September 22, 2016, 04:52:16 AM »
I have multiple funds and accounts with vanguard. Some I deposit directly into (after tax brokerage accounts)
When I opened up a Roth, I had to do what you've described. Roth deposits have to go to traditional Ira account (non deductible for me) then move to the sweep account, then the Roth IRA is set to ONLY accept funds from the sweep account.

I thought it was to separate brokerage from retirement and pretax from post tax, but I could be wrong. It could be simply because I set up the Roth most recently 

fattest_foot

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Re: Vanguard clarification: Prime Money Market Fund/Settlement Fund
« Reply #4 on: September 22, 2016, 08:47:00 AM »
I had a Vanguard account already, but opened a tIRA after the brokerage account change.

So when I make a contribution to my tIRA, it defaults to the brokerage account, but I can still change it to go directly to the fund I want.

It's strange that all these accounts are slightly different for all of us. I'm just glad I can still do it directly, as I'd hate to have to log in every day to check to see if it's available for transfer.

mskyle

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Re: Vanguard clarification: Prime Money Market Fund/Settlement Fund
« Reply #5 on: September 22, 2016, 11:44:24 AM »
This is so weird how different it is for everyone! I opened a taxable mutual fund account with Vanguard in May 2008* but it was migrated to a brokerage account a couple years ago (I don't think I asked for this, it seemed non-optional). Ever since that happened I've had a settlement fund, but then the settlement fund changed recently, so now I have $36 in one money market fund (the old settlement fund, currently holding my last dividend payout) and $0 in another one (the new settlement fund). But I can buy funds directly, still - definitely in the taxable account and also in my tIRA, at least as recently as March (last time I put money in the IRA).

* I'm not exactly the world's luckiest investor...

Scandium

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Re: Vanguard clarification: Prime Money Market Fund/Settlement Fund
« Reply #6 on: September 22, 2016, 01:09:12 PM »
I have a taxable brokerage account with Vanguard, and I can transfer funds directly from my bank to the funds (VTSAX etc). Don't need to use the sweep/MM account. I did this as late as my paycheck transfer 2 weeks ago.

Mine was converted to the brokerage option when I thought I'd buy some ETFs, vs just funds (though I ended up not doing that anyway). Is this a difference of taxable vs IRAs? Or brokerage vs not?

mrteacher

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Re: Vanguard clarification: Prime Money Market Fund/Settlement Fund
« Reply #7 on: September 22, 2016, 04:31:51 PM »
It's reassuring to see that many out there are similarly confused.

As far as I can tell there are no disadvantages other than not being able to transfer money in one fell swoop; the advantage, I suppose, is that if you wanted to invest, say, $10,000 but not all in the same place, you could make the full $10,000 transfer and then dole it out among your Vanguard investment vehicles from the MM/Sweep account.

Hmm. I still don't get why they are making people transition and having it as the default signup option..

sobezen

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Re: Vanguard clarification: Prime Money Market Fund/Settlement Fund
« Reply #8 on: September 22, 2016, 04:49:48 PM »
Yes this is requirement now and when I did a rollover they required the money market fund too.  It just creates another step and IMO slows things down.

On a related sidenote, does anyone have good experiences dealing with Vanguards customer service?  I've been dealing with them for the last eight years and each time I call I have an unpleasant experience.  The operators are rude, do not acknowledge when they put you on hold, rush to hang up, and often times do not know much about the products or even the online portal.  Dealing with Vanguard customer service has not been enjoyable and it is often frustrating.  Anyone have similar experiences?

Scandium

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Re: Vanguard clarification: Prime Money Market Fund/Settlement Fund
« Reply #9 on: September 22, 2016, 07:59:26 PM »

I suppose, is that if you wanted to invest, say, $10,000 but not all in the same place, you could make the full $10,000 transfer and then dole it out among your Vanguard investment vehicles from the MM/Sweep account.

But you can already do that. I do it every time. Invest $x from my bank account, next option is  set percentages to each fund.

I don't see the point. Is this one of these stupid regulation things to prevent market rush? Don't see how it would work, but when did that ever matter..
« Last Edit: September 23, 2016, 10:32:28 AM by Scandium »

BlueHouse

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Re: Vanguard clarification: Prime Money Market Fund/Settlement Fund
« Reply #10 on: September 23, 2016, 04:19:50 AM »
I should add that I did discuss the brokerage / non-brokerage acct with vanguard and they said that if I have anything other than vanguard funds in an account (including ETFs) then it has to be a brokerage acct. that seemed like a plausible explanation to me until I said "well, I'm only going to have vg funds" and the response was that they were going to do it anyway. No skin off my back and offers me more flexibility (I think!).