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 Post subject: Invetments & Transferring Questions
PostPosted: Wed Jul 04, 2012 8:09 pm 
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I'm looking for advice on the following three questions:

1. How long do you have till you pay taxes/penalty on transferred investments in the U.S.? Specifically in Texas? Is it 30 or 60 days for example?

I'm in the process of consolidating our mutual funds (3 companies currently: UBS, Vanguard, & Fidelity) - about $100-120K.

2. Is Vangaurd the best company to invest with? Or Fidelity? We need to look at Current Management Fees, Fees for Closing The Accounts, Fees For Opening a New Account, etc.? What else?

3. Also should we diversify and put some money in less risky investments like bonds?

I have spoken with several friends and family members. We've also consulted with a financial advisor. Just curious as to what the GRS people would say...

All constructive advice is welcome ;)

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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Thu Jul 05, 2012 3:29 am 

Joined: Mon Feb 07, 2011 6:33 pm
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Location: Illinois
1. If it is a in-kind transfer directly from one brokerage to another, there shouldn't be any tax. If you sell everything in one, withdraw and reinvest in another brokerage, the taxes would be paid next time you file your regular tax return.

2. I've only used Vanguard, but I've heard good things about Fidelity too. I think you'll be fine with either.

3. Depends on your age and risk tolerance.


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Thu Jul 05, 2012 7:43 am 

Joined: Fri May 04, 2012 2:23 pm
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1. Are you asking if you don't do an institution to institution rollover (as referred by bp as an "in-kind rollover"), cash out, how long can you hold the cash from retirement accounts without taxes penalty? 60 days. Perhaps more. The IRS, outside of an audit, has no real way to tell how long the funds were withdrawn as long as they are put back in the same calendar year. I would NOT suggest going beyond the 60 days, however.

2. I'd add Schwab and T. Rowe to the list of places to house my accounts. I have direct experience with T. Rowe and have heard good things about Schwab, especially on the ETF side.

3. I like bonds. Mainly for the small reduction in return you get for big reduction in risk/volatility. When people say buy and hold, they really mean, "buy, hold and rebalance."

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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Thu Jul 05, 2012 2:50 pm 
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Thanks bpgui & Bichon Frise.

1. My question was specifically for cashing out and reinvesting. 60 Days. Got it. Just wanted to make sure it wasn't 30 days. A friend of mine who has a masters in Tax said the following:

Quote:
"If the mutual funds aren't in some sort of special account (retirement, medical savings, education, etc.) then there isn't any tax penalty associated with taking the money out. You would just pay capital gains tax on any profits that you earned on the sales. Depending on your tax bracket, the capital gains tax rate might be 0% anyway." -Tray


2. Will check out T Rowe & Schwab. I wonder which company has the lowest fees for opening an account and managment fees...

3. As a follow-up to this number. What kind of bonds would you recommend?

Thanks again.

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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Thu Jul 05, 2012 2:59 pm 

Joined: Mon Feb 07, 2011 6:33 pm
Posts: 1149
Location: Illinois
As to #1 you're friend is correct. Is this a retirement account or just a plain old investment account? If it is retirement, why go through the hassle of cashing out? They will withhold taxes and then you'd have to come up with that out of pocket to avoid that amount being considered a withdrawal (and subject to early withdrawal taxes and penalties).

If it is a plain investment account, 30 days is somewhat accurate as that is the time frame for the wash sale rule.

I either case, a direct transfer would be easiest.

Edited for spelling and clarity.


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Thu Jul 05, 2012 6:46 pm 

Joined: Fri May 04, 2012 2:23 pm
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I agree that it is best to do a trustee to trustee rollover for retirement accounts. opposed to cashing out. The only reason to take it as a distribution is if you are in some huge pinch and think you can pull rabbit by using the money to cover your pinch, less taxes withheld and then get the money back into an account within 60 days (and you can flirt with danger further if in the same calendar year).

With regards to which bond fund, I am invested in both VBTLX and VBIRX. Obviously, I am with vanguard and if you are up in the air, you cannot go wrong if you agree with their philosophy. PS, just calculated my effective ER today, just over 0.1% for my entire portfolio. :)

You'll want to watch the potential for rising interest rates, especially with VBTLX. Bill Bernstein says to stay in short term for the time being so "you don't get egg on your face." But, it may be moderately ok to flirt with disaster for the rest of 2012 and 2013....

with the wash sale, don't forget it is the day of the sale and 30 days after the day of the sale (and technically 30 days before).

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"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Sun Jul 08, 2012 7:53 am 
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Another voice to your friend being right. But more specifically, you need to be clear about whether these are IRA/401(k) or other tax protected accounts or if they are simply regular mutual fund or brokerage accounts. In either case simply transfering to another company should not trigger any tax consequences. But there can be very good reasons to intentionally trigger taxes. For example, if you have any losses then it can be smart to take them but that is really a different issue.

I have never heard of a company charging a fee to OPEN and account. I think I would avoid any firm that did so just on principle.

I'd put in a good word for T. Rowe Price. It is my preferred firm. I've also held accounts at Vanguard and Fidelity and they are both good. Vanguard has screwed up paperwork numerous times so that is a minor negative. But not enough to recommend against them.

The fees for TRP and Vanguard are very similar for your account size. Vanguard has lower fund management fees but more nuisance fees like a quarterly $10 fee and so forth. Really though, those things are in the noise if you are thinking long term.

One thing that might be of interest to you - T. Rowe Price will give you a free financial plan if you bring in $100,000 in new money. I'm not sure that you should let that sway you but if you do choose TRP then you might want to take advantage of that.


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Sun Jul 08, 2012 9:21 am 

Joined: Mon Feb 07, 2011 6:33 pm
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Location: Illinois
DoingHomework wrote:
Vanguard has lower fund management fees but more nuisance fees like a quarterly $10 fee and so forth. Really though, those things are in the noise if you are thinking long term.

Just an FYI, Vanguard now waives those fees if you have electronic delivery of statements/account docs or $x invested (can't remember the number).


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Sun Jul 08, 2012 10:38 am 

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Interestingly enough, I've had lots more paperwork screw-ups from T Rowe Price than I've had from Vanguard. Not saying that it's a bad company. In fact, I presently have accounts at both Vanguard and TRP. I'm only chiming in because I think it shows that anecdotal experiences like DH's and my own don't constitute a strong basis for selecting one company or the other.


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Mon Jul 09, 2012 6:46 pm 
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Sorry thought I replied to this thread last Friday.

More details: Two of the investments are solely in my wife's name. For some reason they were set up as my Mother-In-Law as the guardian/primary on one and her uncle as the guardian/primary on the other. She is now over 25 so I thought they immidiately and/or automatically would be removed from the account. Apparently not. And getting the Uncle down to the main city to take care of this has been a drag over the last year. We just thought it would be easier to get a check in the mail and re-invest it.

They are mutual funds that I don't think would have significant fees for withdrawing the money as the accounts have been open for a while.

1. What we're looking at now is consolidating all the funds into one fund with Vanguard. Is this not a smart idea?

2. Is there a problem with getting a physical check in the mail? And then reinvesting it? Would we pay fees?

3. What % of the fund do you think would be good to invest in Bonds/CD's/safer investments? Has anyone ever invested in church bonds?

Thanks again for all the great advice and attention to detail. ;)

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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Mon Jul 09, 2012 8:13 pm 

Joined: Fri May 04, 2012 2:23 pm
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You have not answered the fundamental question: are any of the funds in non-tax sheltered accounts?

to answer your questions below without knowing if you have tax sheltered accounts or not:

1) I wouldn't do it. With the amount of money you have, you should be able to get lower fees at vanguard by investing in admiral funds. so if you are looking at a target date fund, it can be replicated with admiral funds with lower fees. but, that comes with the pain of rebalancing. If that seems like too much, go with the target date fund.

2) It depends on what you mean by "problem." If these are non-tax sheltered accounts, you will pay taxes on any gains (short or long) or possibly write off any losses. IF these are tax sheltered accounts, you can take a distribution and you have to put it back within 60 days. I cannot attest to any fees you would pay. Some funds you are invested in may have a back end load. If there is no back end load, there should not be any fees.

3) I do not know what your target AA should be. You have not provided any information as far as goals, amounts, stomach for riding the roller coaster etc. If you have taxable investments, you will want to (I assume you will want to anyway) practice tax efficiency across ALL accounts. I don't know what church bonds are, so I wouldn't recommend them.

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"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Tue Jul 10, 2012 8:54 am 
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M(s.)(r.)(rs.) Frise gave a good answer

Why do you want to get a check in the mail. That serves no purpose but to delay and put the money at some risk (though not much). If you are talking about more than $25k or so then checks are a BAD idea. You should only use wire transfers through the Fedwire system.

Regarding having the other names on your wife's account, be careful. Changing names on accounts can constitute a taxable gift. That's generally ok between spouses but not necessarily from your wife's uncle to her. If he is merely a custodian then that is different. Vanguard nor TRP is going to give you tax advice though. They will tell you the steps you need to take to change the name but not what the consequences are.

I suspect this is not a big deal but you are giving us so little accurate information that I don't understand how we can help you at this point. Can you give direct answers to the following questions?

1. How much money is involved?

2. How much is in each existing account?

3. Where is each existing account held (at least tell us the type of institution, bank, brokerage, fund company)

4. What is the exact registration of each account? For your privacy let's say your wife is Danielle Duck, her mom is Daisy Duck, and her uncle is Uncle Scrooge. But the other exact details might matter so change as little as you need to. The little initials like JT/JTRS/FBO/UTA etc. could be important.

5. ARE THESE TAXABLE OR TAX DEFFERED ACCOUNTS??? We have asked you this many times and you keep ignoring the question it seems.

6. What kind of paperwork is Uncle Scrooge being slow about? Medallion guarantee? Notarization? Some kind of court appearance?

Answer these directly and I think the folks here will be much more helpful!


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Tue Jul 10, 2012 9:38 am 
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Thanks Bichon Frise and DoingHomework for the advice… The Uncle is just a custodian/guardian. We claim it on our tax return. Perhaps we should consult our CPA before making the final decision tax wise. ;)

Bichon Frise wrote:
1) I wouldn't do it. With the amount of money you have, you should be able to get lower fees at vanguard by investing in admiral funds. so if you are looking at a target date fund, it can be replicated with admiral funds with lower fees. but, that comes with the pain of rebalancing. If that seems like too much, go with the target date fund.


What is the advantage of an admiral fund verses a mutual fund please?

Bichon Frise wrote:
2) It depends on what you mean by "problem." If these are non-tax sheltered accounts, you will pay taxes on any gains (short or long) or possibly write off any losses. IF these are tax sheltered accounts, you can take a distribution and you have to put it back within 60 days. I cannot attest to any fees you would pay. Some funds you are invested in may have a back end load. If there is no back end load, there should not be any fees.


Not tax sheltered accounts. Perhaps there won’t be any fees after all.

Bichon Frise wrote:
3) I do not know what your target AA should be. You have not provided any information as far as goals, amounts, stomach for riding the roller coaster etc. If you have taxable investments, you will want to (I assume you will want to anyway) practice tax efficiency across ALL accounts. I don't know what church bonds are, so I wouldn't recommend them.


Here's the financial picture.

- Wife is 29 and I'm 30.
- We have one child.
- We have no debt. While we do live in our own apartment we also do not pay rent or utilities.
- I have a 401k through work with a balance of about $27K.
- We have a little over 7k cash in our E-fund.
- We have about 13k cash between checking, savings purchases, savings baby, savings car repairs, savings medical expenses, savings travel, savings husband school, savings travel, & savings little one college.
- We have not added to the mutual funds in past 6 months as we’re building up our E-fund and E-E-Funds (Other savings).

Church bonds are bonds issued by churches or religious institutions. My grandparents and parents have invested in these with a bit of success over the last few years.


DoingHomework wrote:
Can you give direct answers to the following questions?

1. How much money is involved? 2. How much is in each existing account?


The total mutual fund accounts will be approximately $108K - $43K, $33K, and $32K. The two smaller ones are the ones we don’t have control over at the moment and under family members names. That is before any withdrawals, transfers, etc.

DoingHomework wrote:
3. Where is each existing account held (at least tell us the type of institution, bank, brokerage, fund company)


UBS – mutual fund – 43K
Vanguard – mutual fund – 33K
Fidelity – mutual fund – 32K

DoingHomework wrote:
4. What is the exact registration of each account? For your privacy let's say your wife is Danielle Duck, her mom is Daisy Duck, and her uncle is Uncle Scrooge. But the other exact details might matter so change as little as you need to. The little initials like JT/JTRS/FBO/UTA etc. could be important.


Her name on the accounts is her maiden name (which we changed to her maiden married name on her social and id) this year – So let’s say her maiden name is Erika Smith. Mom’s name is the same Mary Smith. Uncles name is different Tim Jones.

DoingHomework wrote:
5. ARE THESE TAXABLE OR TAX DEFFERED ACCOUNTS??? We have asked you this many times and you keep ignoring the question it seems.


I believe they are all taxable accounts. I know UBS is. The other two I’d have to double check. I assume they are since we claim them each year for our taxes.

DoingHomework wrote:
6. What kind of paperwork is Uncle Scrooge being slow about? Medallion guarantee? Notarization? Some kind of court appearance?


Mr. Jones lives in another city. He would have to drive 3-4 hours to change the account into my wife’s name. He’s willing to do it just is incredibly busy as he is a public servant and cares for my wife’s grandmother. We haven’t actually asked him to switch the account over to her name only yet.

Hope this helps clear the water.

Edit: Updated in Red.

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Last edited by Eagle on Tue Jul 10, 2012 12:32 pm, edited 1 time in total.

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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Tue Jul 10, 2012 10:15 am 

Joined: Mon Feb 07, 2011 6:33 pm
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Location: Illinois
Admiral funds are a class of Vanguard mutual funds. They just have higher minimums and lower fees.


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Tue Jul 10, 2012 10:39 am 
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Eagle wrote:
Here's the financial picture.

- Wife is 29 and I'm 30.
- We have one child.
- We have no debt. We also do not pay rent or utilities.
- I have a 401k through work with a balance of about $27K.
- We have a little over 7k cash in our E-fund.
- We have about 13k cash between checking, savings purchases, savings baby, savings car repairs, savings medical expenses, savings travel, savings husband school, savings travel, & savings little one college.
- We have not added to the mutual funds in past 6 months as we’re building up our E-fund and E-E-Funds (Other savings).

Church bonds are bonds issued by churches or religious institutions. My grandparents and parents have invested in these with a bit of success over the last few years.

The total mutual fund accounts will be approximately $108K - $43K, $33K, and $32K. The two smaller ones are the ones we don’t have control over at the moment and under family members names. That is before any withdrawals, transfers, etc.

UBS – mutual fund – 43K
Vanguard – mutual fund – 33K
Fidelity – mutual fund – 32K


Ok, I think I'd get away from UBS but it's not an emergency. The other two, Vanguard and Fidelity, are both good. I'm not sure I'd have a preference. What you might want to do is research the "perks" that each offers to see if anything appeals to you. Fidelity I think people like because they can get a free AMEX card or something. You might throw T. Rowe Price in the mix as well because if you moved all those accounts to them they will give you some free financial planning. But, I really don't think you can go wrong with V, F, or TRP so just research each yourself and pick the one that appeals to you most.

Eagle wrote:
DoingHomework wrote:
4. What is the exact registration of each account? For your privacy let's say your wife is Danielle Duck, her mom is Daisy Duck, and her uncle is Uncle Scrooge. But the other exact details might matter so change as little as you need to. The little initials like JT/JTRS/FBO/UTA etc. could be important.


Her name on the accounts is her maiden name (which we changed to her maiden married name on her social and id) this year – So let’s say her maiden name is Erika Smith. Mom’s name is the same Mary Smith. Uncles name is different Tim Jones.


I'm still confused. Is the account registered as Erika Smith or as Tim Jones FBO Erika Smith. Is there some place that has a UTA and a date after it? Does Time Jones' name appear as TTEE?

This is important information because...

If this is a custodial account under the Uniform Transfers (or Gifts) to Minors Act (UTMA/UGMA) then, as long as your wife has reached the age of majority, which she has if she is 29, then she can control the account without the custodian. She should be able to go to your bank, get a Medallion guarantee from an officer, and send that along with proof of age to UBS/Fidelity/Vanguard, and get the name on the account changed. She might not be able to add you in one step. They might want to put it solely in her name then make it joint in a separate action. But the current company holding the account should be able to help with that. It is also highly unlikely they will transfer it until the name is changed. Transfers usually must be between identically registered accounts only.

If these are trust accounts under a custom trust then you and Vanguard etc will need to look at the trust documents to determine if a name change is authorized. In that case you might need the trustee's signature.

Eagle wrote:

I believe they are all taxable accounts. I know UBS is. The other two I’d have to double check. I assume they are since we claim them each year for our taxes.


It sounds like they are taxable. That means you don't need to worry about penalties and time limits but you will pay capital gains taxes on any gains if you choose to liquidate before transferring.

If you do choose to liquidate, I would definitely NOT suggest having a check mailed to you. Use Fedwire. It will cost you a bit but is far more secure.

Bear in mind also that if a check is issued, it will be in the name of exactly the way the account is registered. If you do not get the names fixed first then the check could be in Tom Jones' name FBO Erika Smith. It could be hard to deposit a check made out that way!

Eagle wrote:
Mr. Jones lives in another city. He would have to drive 3-4 hours to change the account into my wife’s name. He’s willing to do it just is incredibly busy as he is a public servant and cares for my wife’s grandmother. We haven’t actually asked him to switch the account over to her name only yet.


There should be no reason for him to travel. You should be able to take care of the entire transfer by mail. He might need to get a signature guarantee or notarization but that is it. We have done this several times .

Also, see above, if this is an UGMA account and she has reached the age of majority she can probably do this without his involvement although you should inform him as a courtesy if he is the custodian.

A couple of things to consider:

First, we've done transfers as part of our trust administration and our attorney's staff handled it for free. It's the kind of thing paralegals can do in many states. Assuming it is legal for paralegals to process paperwork in Texas, you might consider hiring a paralegal to take care of the paperwork for you. It's just a thought. I don't think you need a lawyer for this but if you don't understand the paper work then paying for a couple of hours of a paralegal's time to explain things or file everything for you might be worth it just to save the headaches.

Second, most fund companies will give you a "transfer concierge" to help you transfer money in as long as it is of a substantial amount. You should qualify with $100k. Now, that won't work with Vanguard or Fidelity since you are already there with part of the money but if you call and say you are thinking of moving elsewhere with $100k+ because they will help you do the move, I bet F or V will offer you help.

Good luck.


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