Switching Ameriprise taxable account to Vanguard

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Topic Author
vfbs
Posts: 8
Joined: Mon Jun 09, 2014 4:39 pm

Switching Ameriprise taxable account to Vanguard

Post by vfbs »

Emergency funds: yes
Debt: no
Tax Filing Status: single
Tax Rate: 15% Federal, 2% State
State of Residence: CA
Age: 33
Desired Asset allocation: 75% stocks / 25% bonds
Desired International allocation: 30%


Taxable - mid five-figures
12.27% cash
45.71% Fidelity Advisor New Insights C (FNICX) (1.69 MER)
23.67% MFS International Diversification C (MDIGX) (2.01 MER)
18.35% ExxonMobil (XOM)
Note: the Class C back-end loads are expired


Okay, so I'd like to move all of my Ameriprise assets over to a Vanguard taxable account. Everything's been at Ameriprise for six years and I realized I should start reading about investing after seeing a Frontline report on mutual funds last year. I've read "The Bogleheads' Guide to Retirement Planning" (plus the boglehead wiki), Malkiel's "Random Walk," and Bernstein's "Investor's Manifesto" recently but I'm still nervous because of my limited knowledge and the endless variables. So far, I've picked these three funds to maybe invest in:

-Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
-Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
-Vanguard FTSE All-World ex-US Index Fund Admiral (VFWAX) or Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)


1. Are these Vanguard funds appropriate for my situation? Any good alternatives for my tax bracket and assets?

2. The 2 international funds look very similar (VFWAX, VTIAX). Is it currently a coin toss between these two indexes?

3. Any reason I should look at ETFs? I'm probably investing lump sum now and maybe will do DCA/value averaging as I learn.

4. Is transferring to Vanguard as easy as calling them and asking them to deal directly with Ameriprise?


I really have a million questions but these will get me started. Any advice is welcome, especially if you feel I'm not asking the right questions. Thanks in advance!
DDM
Posts: 13
Joined: Mon Mar 10, 2014 7:33 pm

Re: Switching Ameriprise taxable account to Vanguard

Post by DDM »

People smarter than me will undoubtedly chime in on #1-#3 but I recently helped move my mother's accounts from Ameriprise to Vanguard so I'll address #4. Start by shutting off any dividend reinvestment on your current holdings at Ameriprise then begin the transfer process with a phone call to Vanguard. They are very helpful. I don't know what the $$ cutoff is but if you have enough assets Vanguard will assign you a concierge to help with the process.

My mother's taxable account was a managed account. Ameriprise acted like it was THEIR money we were taking out. Even with the assistance of the concierge it was about a month before the assets were moved over. Frustratingly, for the first phone call (Vanguard concierge had us conferenced in with him but he took the lead) we talked to FIVE different people at Ameriprise before we found the "right" one and he said, "you can't do that" after about 45 minutes spent mostly on hold! We had to have forms mailed to us and get a "medallion signature" (like a notary but can only be done at a bank and usually only the manager can do it). The person at Ameriprise will tell you if that's required. Oh, and you'll probably be charged $100-$200 for the privilege of pulling out your assets.

What you will probably end up doing is transferring the funds "in kind". Basically the same assets are transferred to Vanguard. Use this option. You need to consider the tax consequences of selling your current holdings in terms of capital gains before buying the Vanguard funds. Getting the holdings out of Ameriprise is the most important thing right now and once at Vanguard you can start addressing the switch to your proposed AA.
Topic Author
vfbs
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Joined: Mon Jun 09, 2014 4:39 pm

Re: Switching Ameriprise taxable account to Vanguard

Post by vfbs »

Thanks DDM, that's very helpful. I only have mid five-figures in my Ameriprise account so we'll see if they give me trouble. (Plus my parents still have their money at Ameriprise.) I was expecting at least a 100 dollar closing fee. Thanks again.
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JamesSFO
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Re: Switching Ameriprise taxable account to Vanguard

Post by JamesSFO »

vfbs wrote: 1. Are these Vanguard funds appropriate for my situation? Any good alternatives for my tax bracket and assets?

Overall yes.

2. The 2 international funds look very similar (VFWAX, VTIAX). Is it currently a coin toss between these two indexes?

VTIAX is generally preferred I think others can weigh in on the fine points.


3. Any reason I should look at ETFs? I'm probably investing lump sum now and maybe will do DCA/value averaging as I learn.

Personal choice, personally I find them harder to buy/sell for an exact $ amount and require more hand holding/attention.


4. Is transferring to Vanguard as easy as calling them and asking them to deal directly with Ameriprise?

As answer yes, but you will need a medallion signature probably.
VGSailor
Posts: 155
Joined: Fri Mar 11, 2011 4:48 pm

Re: Switching Ameriprise taxable account to Vanguard

Post by VGSailor »

http://www.ameriprise.com/content/files ... T-FORM.PDF

If you've paid for a plan/whatever for the year, you can get a pro-rated refund back by filling out the form.

Good luck!
Topic Author
vfbs
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Joined: Mon Jun 09, 2014 4:39 pm

Re: Switching Ameriprise taxable account to Vanguard

Post by vfbs »

Okay, thank you JamesSFO. I feel like I read in the wiki(?) that VTIAX was now preferred since it held Canadian stock too. It's possible I'm making that up.

VGSailor, I'll download that form so I'll have it ready. Thanks!
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Duckie
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Re: Switching Ameriprise taxable account to Vanguard

Post by Duckie »

vfbs wrote:I feel like I read in the wiki(?) that VTIAX was now preferred since it held Canadian stock too.
Both VFWAX and VTIAX hold Canada, but VTIAX has international small caps and VFWAX doesn't.
Topic Author
vfbs
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Joined: Mon Jun 09, 2014 4:39 pm

Re: Switching Ameriprise taxable account to Vanguard

Post by vfbs »

Duckie wrote:
vfbs wrote:I feel like I read in the wiki(?) that VTIAX was now preferred since it held Canadian stock too.
Both VFWAX and VTIAX hold Canada, but VTIAX has international small caps and VFWAX doesn't.
Yes, I overlooked the VTIAX small caps in the wiki. Thanks Duckie.
Khanmots
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Re: Switching Ameriprise taxable account to Vanguard

Post by Khanmots »

Worth pointing out that when I went from Ameriprise to Vanguard I was unable to obtain a medallion (I've never had a physical bank...)

I wound up having Ameriprise mail me a check directly and then I sent that to Vanguard. That actually went through rather quickly and painlessly (and somehow they didn't charge me account closure fees... oversight on their part? I didn't ask!). Of course I did have some capital gains to pay by going this route, and all sorts of fun figuring out what to do with the Roth monies to ensure they stayed Roth. Got it all taken care of though. Depending on your exact situation this might be something to consider if the Medallion is a hardship (I wasn't driving 600 miles to get one...)
Topic Author
vfbs
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Joined: Mon Jun 09, 2014 4:39 pm

Re: Switching Ameriprise taxable account to Vanguard

Post by vfbs »

DDM wrote:What you will probably end up doing is transferring the funds "in kind". Basically the same assets are transferred to Vanguard. Use this option. You need to consider the tax consequences of selling your current holdings in terms of capital gains before buying the Vanguard funds.
I checked the IRS site and it looks like I pay 0 percent for capital gains in 2014 (I have approx. 40k in long-term assets and my fifteen percent income tax rate). Is that right? Or should I absolutely talk to a CPA first?
Topic Author
vfbs
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Joined: Mon Jun 09, 2014 4:39 pm

Re: Switching Ameriprise taxable account to Vanguard

Post by vfbs »

Khanmots wrote:Worth pointing out that when I went from Ameriprise to Vanguard I was unable to obtain a medallion (I've never had a physical bank...)

I wound up having Ameriprise mail me a check directly and then I sent that to Vanguard. That actually went through rather quickly and painlessly (and somehow they didn't charge me account closure fees... oversight on their part? I didn't ask!). Of course I did have some capital gains to pay by going this route, and all sorts of fun figuring out what to do with the Roth monies to ensure they stayed Roth. Got it all taken care of though. Depending on your exact situation this might be something to consider if the Medallion is a hardship (I wasn't driving 600 miles to get one...)
Luckily, I still have a physical bank (if needed). I almost switched to USAA recently which would've been a much worse drive.
eschaef
Posts: 170
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Re: Switching Ameriprise taxable account to Vanguard

Post by eschaef »

FWIW, I was able to obtain a Medallion signature from a Chase branch, even though my only account with them is a credit card.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Switching Ameriprise taxable account to Vanguard

Post by dbr »

vfbs wrote:
DDM wrote:What you will probably end up doing is transferring the funds "in kind". Basically the same assets are transferred to Vanguard. Use this option. You need to consider the tax consequences of selling your current holdings in terms of capital gains before buying the Vanguard funds.
I checked the IRS site and it looks like I pay 0 percent for capital gains in 2014 (I have approx. 40k in long-term assets and my fifteen percent income tax rate). Is that right? Or should I absolutely talk to a CPA first?
What does "checked the IRS site" mean? What you should do is fill out a dummy tax return for this year and see what you get.

A quick question is after you add the 40K to your taxable income are you still the 15% bracket? Sometimes people forget this. If you are no longer in the 15% bracket it matters by how much you are over.

When in doubt it might make sense to consult a CPA.

It is plausible that the extra tax may not be a lot.
Topic Author
vfbs
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Joined: Mon Jun 09, 2014 4:39 pm

Re: Switching Ameriprise taxable account to Vanguard

Post by vfbs »

dbr wrote:
vfbs wrote:
DDM wrote:What you will probably end up doing is transferring the funds "in kind". Basically the same assets are transferred to Vanguard. Use this option. You need to consider the tax consequences of selling your current holdings in terms of capital gains before buying the Vanguard funds.
I checked the IRS site and it looks like I pay 0 percent for capital gains in 2014 (I have approx. 40k in long-term assets and my fifteen percent income tax rate). Is that right? Or should I absolutely talk to a CPA first?
What does "checked the IRS site" mean? What you should do is fill out a dummy tax return for this year and see what you get.

A quick question is after you add the 40K to your taxable income are you still the 15% bracket? Sometimes people forget this. If you are no longer in the 15% bracket it matters by how much you are over.
I was just looking at the 2014 capital gains rates (http://www.irs.gov/taxtopics/tc409.html). Yes, I'm still in the fifteen percent bracket if it's my projected income plus the capital gains (~12k).
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Switching Ameriprise taxable account to Vanguard

Post by dbr »

vfbs wrote:
dbr wrote:
vfbs wrote:
DDM wrote:What you will probably end up doing is transferring the funds "in kind". Basically the same assets are transferred to Vanguard. Use this option. You need to consider the tax consequences of selling your current holdings in terms of capital gains before buying the Vanguard funds.
I checked the IRS site and it looks like I pay 0 percent for capital gains in 2014 (I have approx. 40k in long-term assets and my fifteen percent income tax rate). Is that right? Or should I absolutely talk to a CPA first?
What does "checked the IRS site" mean? What you should do is fill out a dummy tax return for this year and see what you get.

A quick question is after you add the 40K to your taxable income are you still the 15% bracket? Sometimes people forget this. If you are no longer in the 15% bracket it matters by how much you are over.
I was just looking at the 2014 capital gains rates (http://www.irs.gov/taxtopics/tc409.html). Yes, I'm still in the fifteen percent bracket if it's my projected income plus the capital gains (~12k).
You are probably good to go then as the tax cost of selling is likely zero. I still believe in actually running a dummy tax return to make any tax decision.
Topic Author
vfbs
Posts: 8
Joined: Mon Jun 09, 2014 4:39 pm

Re: Switching Ameriprise taxable account to Vanguard

Post by vfbs »

dbr wrote:
vfbs wrote:
dbr wrote:
vfbs wrote:
DDM wrote:What you will probably end up doing is transferring the funds "in kind". Basically the same assets are transferred to Vanguard. Use this option. You need to consider the tax consequences of selling your current holdings in terms of capital gains before buying the Vanguard funds.
I checked the IRS site and it looks like I pay 0 percent for capital gains in 2014 (I have approx. 40k in long-term assets and my fifteen percent income tax rate). Is that right? Or should I absolutely talk to a CPA first?
What does "checked the IRS site" mean? What you should do is fill out a dummy tax return for this year and see what you get.

A quick question is after you add the 40K to your taxable income are you still the 15% bracket? Sometimes people forget this. If you are no longer in the 15% bracket it matters by how much you are over.
I was just looking at the 2014 capital gains rates (http://www.irs.gov/taxtopics/tc409.html). Yes, I'm still in the fifteen percent bracket if it's my projected income plus the capital gains (~12k).
You are probably good to go then as the tax cost of selling is likely zero. I still believe in actually running a dummy tax return to make any tax decision.
I think I'll take your advice. Thanks dbr.
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retiredjg
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Re: Switching Ameriprise taxable account to Vanguard

Post by retiredjg »

Remember, it is only the long term capital gains that will be taxed at 0%. Any short term gains will be taxed at 15%.
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