Opened Schwab Roth--Interesting and Quick Story

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Opened Schwab Roth--Interesting and Quick Story

Postby lloydbraun » Thu Dec 27, 2012 6:08 pm

My wife and I just "applied" for Schwab Roth IRAs because we can start investing in $100 increments in low-cost index funds. Vanguard's minimums are too high for us although I have my 403B funds in all Vanguard funds. Anyway, I set up both accounts and within a day received a voice mail from a Schwab investment expert saying that there were just a couple of issues that needed to be dealt with before my account could be activated. I called back and the guy, who was very nice, said that everything looks good but wanted to know if I knew how I planned to invest my money and if I needed any investment advice. I explained that I'm investing in their Intermediate Bond Index fund (.29 ER) in order to start a housing downpayment fund because of the federal government's allowances regarding the one time Roth withdrawal for housing purchases. At that point he said, "It sounds like you know what you're doing, is there anything else I can do for you?" I'm writing this to point out that (1.) there was nothing wrong with my account, the guy just wanted to try to sell me something and (2.) nobody called my wife even though both accounts were setup at the same time and will be funded from the same joint checking account. I'm assuming the latter is because my wife makes significantly less than I do (when applying you have to check a box indicating your salary range).

I have no problem with this as I was well prepared and I like the fact that Schwab offers access to solid index funds for only $100 per month for those of us who do not have 1-3K to immediately open Vanguard accounts. However, the experience was a good reminder of some of the perils Bogle and the rest of you warn younger investors about and it's important to keep in mind if any of your friends or family who make over 50K per year open funds with Schwab.
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby Easy Rhino » Thu Dec 27, 2012 7:14 pm

maybe his only issue with your account was that he wasn't managing it? :) But to be honest a courtesy call when opening a new account seems okay. I remember getting them at Fidelity. Not sure about WellsTrade (although I did get a call after doing more acitivy at a local branch of the bank, the rep was recommending I talk to "their guy" that did investments at that location... sigh)
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby Karamatsu » Thu Dec 27, 2012 7:26 pm

I think it's in how you look at it. He may not have been trying to sell you something so much as to see if you do, indeed, need any help. When I first set up my account with Schwab, I did it in person (no web back then), and indeed there was a short conversation with one of their staff. His advice: a balanced portfolio of no-load mutual funds with age in bonds. So, not so much sales pressure as an offer of some guidelines. Actually if I'd stuck with those guidelines instead of being drawn into the dot-com thing I'd probably be much better off, though it was quite a ride while it lasted!
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby Majormajor78 » Thu Dec 27, 2012 7:30 pm

When I opened two accounts at TD Ameritrade a couple of years I recieved a nearly identical call. He wanted to know if I knew what I wanted to invest in, if I was interested in portfolio guidance or wanted a DIY approach. When I said DIY he asked if I knew how to access their research materials, learning center, Morningstar Instant X-Ray, understood their order interface, ect. Quite friendly and a soft touch, no hard sales pitch at all. To be honest I was more annoyed that he didn't give me any ammo to moan and groan about how evil brokers are :annoyed .
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby lloydbraun » Thu Dec 27, 2012 7:31 pm

I think both of you are probably correct. He didn't push anything and was very pleasant, but I think it's important in those situations to always know what you're buying and why you're buying it. I know I'm preaching to the choir here! My only real issue was that there was nothing wrong with the account, someone from sales just wanted to talk to me even though I didn't request any help/advice (that's why I have this forum and the books of Bogle and Ferri!).
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby RyeWhiskey » Thu Dec 27, 2012 7:56 pm

lloydbraun wrote:I think both of you are probably correct. He didn't push anything and was very pleasant, but I think it's important in those situations to always know what you're buying and why you're buying it. I know I'm preaching to the choir here! My only real issue was that there was nothing wrong with the account, someone from sales just wanted to talk to me even though I didn't request any help/advice (that's why I have this forum and the books of Bogle and Ferri!).


I think that's standard procedure over there, or anywhere other than Vanguard for that matter. I opened a brokerage account with Schwab a while ago and recently added a checking account in order to get the universal ATM refunds. Both times I was asked what I was investing in and if I needed any help - I said I didn't and that was the end of that. Now if I had not known anything about what I was doing, I imagine that having that question put forward from the get-go might have been quite helpful indeed. I guess the real issue isn't whether or not they are asking if we want help, but rather what is the kind of help they will actually provide.
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby Calm Man » Thu Dec 27, 2012 8:17 pm

I too once received such a call from Schawb when I set u an account there ( I now have only Vanguard). I viewed it as helpful. I doubt Schwab looked at an account putting in $100 a month and smelled big AUM fees so I would give them the benefit of the doubt here.
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby tainted-meat » Thu Dec 27, 2012 9:30 pm

I think you're looking WAY too much into this. It sounds like it was just a courtesy call...... No need to be upset. :confused
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby MoneyMythsSolved » Thu Dec 27, 2012 9:38 pm

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Re: Opened Schwab Roth--Interesting and Quick Story

Postby Alan S. » Thu Dec 27, 2012 10:44 pm

MoneyMythsSolved wrote:
lloydbraun wrote:I explained that I'm investing in their Intermediate Bond Index fund (.29 ER) in order to start a housing downpayment fund because of the federal government's allowances regarding the one time Roth withdrawal for housing purchases. At that point he said, "It sounds like you know what you're doing, is there anything else I can do for you?"


The one time withdrawal (regarding $10,000 for first time home purchase) refers to a Traditional IRA.

When you have a Roth IRA, you can always withdraw whatever contributions you've made, at any time, any age, and for any reason. You could contribute $5,000 for 10 years in a row, and withdraw $50,000 tax/penalty free in Year 11. As long as the earnings are left intact, there are zero tax consequences. Of course, all of this is moot if you're age 59.5 and the Roth IRA is open for 5 years.**

What concerns me is that the guy on the other end of the phone should've pointed this out, if he was actually paying attention to the course you were taking. Or, he could've just been having an off day - it is RMD/Tax season after all.

**Source: IRS Publication 590: You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s)


To clarify, the qualified first home distribution can apply to either a TIRA or a Roth IRA, but in different ways.

For a TIRA distribution, it will waive the early withdrawal penalty up to 10,000 lifetime.
For a Roth IRA, it will waive the early withdrawal penalty if you distribute conversions under 5 years. It will also allow earnings to be distributed tax free if you elect the first home option on Form 8606 and have held your Roth for at least 5 years, or allow earnings to be distributed penalty free even if you have not held your Roth for 5 years.

It's really a very complex set of rules with odd matching of tax and penalty waivers, one requiring 5 years and others not. Since you only have a 10,000 lifetime limit for all these situations combined, it takes some planning on knowing whether to trigger the first home exception or not. If you show it on Form 8606 or 5329, you have exhausted the limit you show. You won't need it if you have enough regular contributions in your Roth. I doubt you could find a phone rep at any firm that could fully explain this and in most cases, an IRA owner who could absorb it without serious study. It is by far the most complex of the IRA rules that apply to Roth IRAs. It's one of those issues that a phone rep really should recommend that the IRA owner discuss it with his/her tax advisor.
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby MoneyMythsSolved » Thu Dec 27, 2012 10:50 pm

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Re: Opened Schwab Roth--Interesting and Quick Story

Postby lloydbraun » Thu Dec 27, 2012 11:48 pm

Thanks guys, I knew the difference. I should have prefaced it by saying that if for some reason my fund doesn't grow to 10K in contributions but does grow to 10K with earnings, my goal is to take out 10K sometime after 5 years if my wife and I decide we're ready for a house.
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby rixer » Fri Dec 28, 2012 10:53 am

TAINTED-MEAT wrote:I think you're looking WAY too much into this. It sounds like it was just a courtesy call...... No need to be upset. :confused

I agree. Not everybody has good knowledge on investing and they just wanted to let you know that they had advisers available if needed. I don't see anything wrong with telling your clients what services you offer. Would you like fries with that?
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby Peter Foley » Fri Dec 28, 2012 11:24 am

I have had a Schwab account for years. I get a call about once a quarter to check up and see if I need any help with anything. I have never had a product pushed at me. They have made recommendations about things I might want to consider, a line of credit when we were purchasing a house for cash was one example, Rorh conversions was another, and suggesting that my daughter might wish to check out their mortage rates if she refinances was a thind (I brought up the topic of refinancing, not the account rep.). The tone of all our conversation has been "Schawb has a number of services, if you want to take advantage of them I can probably help." One of the reasons I have stayed with them is they are not pushy.
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Re: Opened Schwab Roth--Interesting and Quick Story

Postby porcupine » Fri Dec 28, 2012 2:08 pm

lloydbraun wrote:[...]I have no problem with this as I was well prepared and I like the fact that Schwab offers access to solid index funds for only $100 per month for those of us who do not have 1-3K to immediately open Vanguard accounts. However, the experience was a good reminder of some of the perils Bogle and the rest of you warn younger investors about and it's important to keep in mind if any of your friends or family who make over 50K per year open funds with Schwab.

If I was Schwab, I would fire the guy :oops: unless he pointed out the one thing Schwab has that, to my knowledge, neither Fidelity nor Vanguard has. A VPN token that you can request so that your login is that little bit more secure.

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