Really Vanguard? 48 Cents?!

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JamalJones
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Really Vanguard? 48 Cents?!

Postby JamalJones » Thu Feb 16, 2017 9:58 pm

I set up my automatic Roth contribution at Vanguard to "Maximize your annual IRA contribution" ($5,500) each year. My investment occurs every week.

So I logged on the other day and it shows on the landing page that I can contribute 48 cents for tax year 2016. Really? Well I can't actually do that because the minimum investment is $1. And even if I could, I would exceed the allowable limit, which wouldn't be allowed!

Not the end of the world, but why didn't the Vanguard algorithm just take the additional 48 cents with my last investment of 2016? Why didn't it "maximize". Jeeze.....

Is there anyway I can contribute the remaining 48 cents somehow?
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Re: Really Vanguard? 48 Cents?!

Postby dwickenh » Thu Feb 16, 2017 10:03 pm

That is weird, but in the scheme of things, I would just forget the 48 cents as it is not worth the aggravation. Save the angst for something more worth your time is my opinion. It is kinda strange though that it worked out that way.


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BrandonBogle
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Re: Really Vanguard? 48 Cents?!

Postby BrandonBogle » Thu Feb 16, 2017 10:04 pm

I imagine you could mail in a check if Vanguard would accept that, but then postage doubles what your paying to contribute! Either way, wouldn't the IRS round to the nearest dollar, so $5499.52 would round to $5500?

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Epsilon Delta
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Re: Really Vanguard? 48 Cents?!

Postby Epsilon Delta » Thu Feb 16, 2017 10:14 pm

You should be able to contribute the $0.48 for 2016 in conjunction with a 2017 contribution.

If nothing else the contribution slips that go out with paper statements have lines for 2016, 2017 and a total. I bet they'd find a way to handle it instead of going to the trouble of bouncing it.

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obafgkm
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Re: Really Vanguard? 48 Cents?!

Postby obafgkm » Thu Feb 16, 2017 11:38 pm

Epsilon Delta wrote:You should be able to contribute the $0.48 for 2016 in conjunction with a 2017 contribution.


That might work.

Another way is to calculate beforehand for oneself how much one is contributing and determine exactly what will happen (and not assume that Vanguard is going to do things the way one thinks it should be done).

For example, I contribute once a month $525 to my IRA. Over 12 months, that is $6300. I just contribute the remaining $200 on my own. (I'm over 49).

Still another way is near the end of the year to calculate how much more one needs to get hit the maximum exactly, and adjust accordingly.

Any mechanism that automatically maximizes the contribution won't come out even unless the maximum IRA contribution is a multiple of 52 (if one contributes weekly) or 12 (if one contributes monthly).

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Re: Really Vanguard? 48 Cents?!

Postby Angelus359 » Fri Feb 17, 2017 12:12 am

obafgkm wrote:
Epsilon Delta wrote:You should be able to contribute the $0.48 for 2016 in conjunction with a 2017 contribution.


That might work.

Another way is to calculate beforehand for oneself how much one is contributing and determine exactly what will happen (and not assume that Vanguard is going to do things the way one thinks it should be done).

For example, I contribute once a month $525 to my IRA. Over 12 months, that is $6300. I just contribute the remaining $200 on my own. (I'm over 49).

Still another way is near the end of the year to calculate how much more one needs to get hit the maximum exactly, and adjust accordingly.

Any mechanism that automatically maximizes the contribution won't come out even unless the maximum IRA contribution is a multiple of 52 (if one contributes weekly) or 12 (if one contributes monthly).



Or you can just have a mechanism that understands hitting a maximum with slightly varied amounts

It's not that complex to code. Last payment of year, add a bit. Done.
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*3!4!/5!
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Re: Really Vanguard? 48 Cents?!

Postby *3!4!/5! » Fri Feb 17, 2017 12:15 am

What's the point of this thread? You contributed the exact amount, to the exact penny that you instructed Vanguard to contribute. You were free to choose any amount between $0.00 and $5500.00 and you chose precisely $5499.52.

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Re: Really Vanguard? 48 Cents?!

Postby JDDS » Fri Feb 17, 2017 12:26 am

In my experience, it's not unusual for software to be written this way. It keeps humans from scratching their head about why a random reoccurring transaction is for a different amount.

I was receiving a stipend for work in college. It was $3000. One semester there was 8 payments, equal ones of $375. The following semester there were to be 9 payments; they gave me 9 equal payments of $333.33. I'd like my 3 extra pennies please, as that's why my contract states. Meh, not worth anybody's time.

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Re: Really Vanguard? 48 Cents?!

Postby red5 » Fri Feb 17, 2017 4:33 am

This past January I contributed $5,500 to my money market account and from there invested in a few different mutual funds and ETFs. In the process I received a $0.03 dividend while some of that money waited in the money market fund.

I thought I would make an attempt to invest that $0.03 into my Total US Stock fund (VTSAX) even though the page clearly states one can only invest $1.00 or more. I made sure to estimate how many shares I would receive since anything below .0005 shares would round to 0 shares. I pulled the trigger and that night the investment went through.

So perhaps you can invest that $0.48. Give it a try.

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Re: Really Vanguard? 48 Cents?!

Postby cherijoh » Fri Feb 17, 2017 6:07 am

BrandonBogle wrote:I imagine you could mail in a check if Vanguard would accept that, but then postage doubles what your paying to contribute! Either way, wouldn't the IRS round to the nearest dollar, so $5499.52 would round to $5500?


What has the IRS got to do with anything? He said it is a Roth which isn't reported on your taxes.

The issue is how much went into the account.

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Re: Really Vanguard? 48 Cents?!

Postby cherijoh » Fri Feb 17, 2017 6:22 am

JamalJones wrote:Not the end of the world, but why didn't the Vanguard algorithm just take the additional 48 cents with my last investment of 2016? Why didn't it "maximize". Jeeze.....


Seriously?

The answer is quite simple - because then they wouldn't have been following your instructions! Your intention may have been to maximize your contribution, but your instructions were to take a fixed amount each week. Which is clearly what they did! Jeeze ... imagine that!

If you had set your contribution a penny higher per week higher, I believe that the Vanguard would have caught that the final contribution would have been too much and would have cut you off at $5500 for the year. That is what my employer does with my 401k contributions. My final pay period always ends up with a smaller withholding for 401k.

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Re: Really Vanguard? 48 Cents?!

Postby jhfenton » Fri Feb 17, 2017 6:47 am

red5 wrote:This past January I contributed $5,500 to my money market account and from there invested in a few different mutual funds and ETFs. In the process I received a $0.03 dividend while some of that money waited in the money market fund.

I thought I would make an attempt to invest that $0.03 into my Total US Stock fund (VTSAX) even though the page clearly states one can only invest $1.00 or more. I made sure to estimate how many shares I would receive since anything below .0005 shares would round to 0 shares. I pulled the trigger and that night the investment went through.

So perhaps you can invest that $0.48. Give it a try.

You can invest $0.03 in a fund. I do it all the time. But buying with a bank transfer requires a $1.00 minimum.

But, the OP should be able to throw in last year's $0.48 with a contribution for this year. You can make them on the same screen and they get added together.

My employer's payroll software does it right, but it means my biweekly contribution varies by a penny. Each week the algorithm needs to divide the remaining balance by the remaining number of periods, not just divide once and set it.

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Re: Really Vanguard? 48 Cents?!

Postby BrandonBogle » Fri Feb 17, 2017 7:35 am

cherijoh wrote:
BrandonBogle wrote:I imagine you could mail in a check if Vanguard would accept that, but then postage doubles what your paying to contribute! Either way, wouldn't the IRS round to the nearest dollar, so $5499.52 would round to $5500?


What has the IRS got to do with anything? He said it is a Roth which isn't reported on your taxes.

The issue is how much went into the account.


The sum of his Roth contributions (i.e. his basis) that he can withdraw penalty-free anytime after 5 years is something he will need to report when making those withdrawals if before 59.5 years of age.

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Re: Really Vanguard? 48 Cents?!

Postby cherijoh » Fri Feb 17, 2017 7:45 am

BrandonBogle wrote:
cherijoh wrote:
BrandonBogle wrote:I imagine you could mail in a check if Vanguard would accept that, but then postage doubles what your paying to contribute! Either way, wouldn't the IRS round to the nearest dollar, so $5499.52 would round to $5500?


What has the IRS got to do with anything? He said it is a Roth which isn't reported on your taxes.

The issue is how much went into the account.


The sum of his Roth contributions (i.e. his basis) that he can withdraw penalty-free anytime after 5 years is something he will need to report when making those withdrawals if before 59.5 years of age.


So are you suggesting (in your original post) that he round it up to $5500 if he made a withdrawal? IMO that would be unethical.

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Re: Really Vanguard? 48 Cents?!

Postby Mako » Fri Feb 17, 2017 8:00 am

If someone instructed Vanguard to take $X from their account and instead they took out $X+1 the person would be on this board screaming for blood and declaring incompetence. Rightfully.

But they apparently did exactly what you asked.

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Re: Really Vanguard? 48 Cents?!

Postby The Wizard » Fri Feb 17, 2017 8:16 am

obafgkm wrote:...Any mechanism that automatically maximizes the contribution won't come out even unless the maximum IRA contribution is a multiple of 52 (if one contributes weekly) or 12 (if one contributes monthly).

Not true.
It's easy to write an algorithm that tracks YTD contributions and tweaks the next contrib up or down by a penny to hit the desired total amount exactly on the last contrib of the year...
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Re: Really Vanguard? 48 Cents?!

Postby The Wizard » Fri Feb 17, 2017 8:18 am

*3!4!/5! wrote:What's the point of this thread? You contributed the exact amount, to the exact penny that you instructed Vanguard to contribute. You were free to choose any amount between $0.00 and $5500.00 and you chose precisely $5499.52.

No, he chose $5500.00...
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Re: Really Vanguard? 48 Cents?!

Postby Jack FFR1846 » Fri Feb 17, 2017 8:26 am

By comparison, I do something similar with Fidelity, erring on the side of making sure the max is reached before I hit December. The last contribution is always whatever is needed to hit the max....even when it was 3 cents.
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Re: Really Vanguard? 48 Cents?!

Postby BrandonBogle » Fri Feb 17, 2017 8:36 am

cherijoh wrote:
BrandonBogle wrote:
cherijoh wrote:
BrandonBogle wrote:I imagine you could mail in a check if Vanguard would accept that, but then postage doubles what your paying to contribute! Either way, wouldn't the IRS round to the nearest dollar, so $5499.52 would round to $5500?


What has the IRS got to do with anything? He said it is a Roth which isn't reported on your taxes.

The issue is how much went into the account.


The sum of his Roth contributions (i.e. his basis) that he can withdraw penalty-free anytime after 5 years is something he will need to report when making those withdrawals if before 59.5 years of age.


So are you suggesting (in your original post) that he round it up to $5500 if he made a withdrawal? IMO that would be unethical.


Actually, I asked that as a question after first saying to mail the $0.48 in.

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Re: Really Vanguard? 48 Cents?!

Postby Runner01 » Fri Feb 17, 2017 8:58 am

Could be worse. I chose the option to contribute the maximum to my HSA on my employer's benefits administration website and at the end of the year it was over funded by 16 cents.

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Re: Really Vanguard? 48 Cents?!

Postby The Wizard » Fri Feb 17, 2017 9:09 am

Runner01 wrote:Could be worse. I chose the option to contribute the maximum to my HSA on my employer's benefits administration website and at the end of the year it was over funded by 16 cents.

Not a problem.
You could be three times that overfunded and it still rounds to the proper whole dollar amount when talking to the IRS...
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Re: Really Vanguard? 48 Cents?!

Postby Angelus359 » Fri Feb 17, 2017 9:17 am

The Wizard wrote:
*3!4!/5! wrote:What's the point of this thread? You contributed the exact amount, to the exact penny that you instructed Vanguard to contribute. You were free to choose any amount between $0.00 and $5500.00 and you chose precisely $5499.52.

No, he chose $5500.00...


One option isn't a number. It's simply maximum.
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Re: Really Vanguard? 48 Cents?!

Postby The Wizard » Fri Feb 17, 2017 9:33 am

Angelus359 wrote:
The Wizard wrote:
*3!4!/5! wrote:What's the point of this thread? You contributed the exact amount, to the exact penny that you instructed Vanguard to contribute. You were free to choose any amount between $0.00 and $5500.00 and you chose precisely $5499.52.

No, he chose $5500.00...


One option isn't a number. It's simply maximum.

Regardless of that distinction, properly designed software would properly toggle weekly contributions between $105.76 and $105.77 over the course of the year to achieve the exact amount to the penny by New Year's Eve.

Vanguard just chooses not to spend a few extra man-hours in their IT department to get this right.
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Re: Really Vanguard? 48 Cents?!

Postby blaugranamd » Fri Feb 17, 2017 10:46 am

At 7% over 30 years this comes out to about $3.65 in today's dollars. I hope you have at least one friend at the end who is willing to spot you $4 right before you die to keep your final balance out of the red.

8-) :P

All jokes aside, IMO, let it go. Better to be $0.48 under the contribution limit then to accidentally be over by $0.48 and have to fill out all the annoying return on excess contributions forms for essentially nothing. The amount of time put in to figuring out how to get $0.48 into this account was already not worth it by the time you finished typing your post.
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Re: Really Vanguard? 48 Cents?!

Postby ArkF » Fri Feb 17, 2017 10:53 am

I also have my Vanguard IRA set to contribute the max each year. The way my contributions have worked is that they evenly divide up the yearly amount into the required increment, then tack all the extra change onto the first payment of the year. So when I was getting paid every other week, the first contribution of the year would be $211.75, then the rest of the year they would all be $211.53. That all just happened automatically, I didn't have to specify anything with the extra 22 cents.

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Re: Really Vanguard? 48 Cents?!

Postby BrandonBogle » Fri Feb 17, 2017 11:41 am

While I am happy that people are contributing to their IRAs and making sure it happens, I am actually surprised by how many posters are using periodic contributions. I always do just one contribution at the max for the year and thought the automatic contributions were the minority. I'm glad to hear it does provide value to many more people than I thought (even if it is limited in its calculations on how to provide that value!).

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Re: Really Vanguard? 48 Cents?!

Postby PandaBear » Fri Feb 17, 2017 11:49 am

The way I do it is that I contribute 450 each month and an extra 100 in January. I have that set up as automatic so I don't have to worry about it.

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Re: Really Vanguard? 48 Cents?!

Postby jhfenton » Fri Feb 17, 2017 12:10 pm

BrandonBogle wrote:While I am happy that people are contributing to their IRAs and making sure it happens, I am actually surprised by how many posters are using periodic contributions. I always do just one contribution at the max for the year and thought the automatic contributions were the minority. I'm glad to hear it does provide value to many more people than I thought (even if it is limited in its calculations on how to provide that value!).

It's nice if you have the money at the start of the year. We don't, without putting a serious dent in our emergency funds or incurring capital gains to sell securities in our taxable brokerage. Double Roth IRA contributions are cash-flowed biweekly.
The Wizard wrote:
Runner01 wrote:Could be worse. I chose the option to contribute the maximum to my HSA on my employer's benefits administration website and at the end of the year it was over funded by 16 cents.

Not a problem.
You could be three times that overfunded and it still rounds to the proper whole dollar amount when talking to the IRS...

I've always wondered about contributing an extra $0.49, not that the software would let me. There would be nothing to report. :beer

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Re: Really Vanguard? 48 Cents?!

Postby Rainmaker41 » Fri Feb 17, 2017 12:22 pm

BrandonBogle wrote:While I am happy that people are contributing to their IRAs and making sure it happens, I am actually surprised by how many posters are using periodic contributions. I always do just one contribution at the max for the year and thought the automatic contributions were the minority. I'm glad to hear it does provide value to many more people than I thought (even if it is limited in its calculations on how to provide that value!).


Having $5,500 of surplus cash at the start of 2017 presupposes the choice to *not* invest that cash as it was earned in 2016. I contribute $250 semimonthly (except December) to my Roth IRA not to Dollar Cost Average, but rather to Lump Sum... as soon as I am paid the money in question. My 403b contribution rate is similarly based on overall cash-flow (but does not reach $18k for the year).

However, if one fills up 2016's 401k and IRA through cash-flow with surplus cash still left-over, then it becomes a choice between:

investing the $5,500 of surplus cash-flow in a taxable account over the course of 2016

or

accumulating the $5,500 over 2016, holding it in cash until January 2017, and then making the 2017 IRA contribution.

In other words, the cash surplus was created in 2016, and it is a question of whether one wants the $5,500 in the market sooner or in an IRA more.
Last edited by Rainmaker41 on Fri Feb 17, 2017 12:31 pm, edited 2 times in total.
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Re: Really Vanguard? 48 Cents?!

Postby AllenSmith » Fri Feb 17, 2017 12:30 pm

i cant believe i read this thread. its 48cents, who cares?

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Re: Really Vanguard? 48 Cents?!

Postby BrandonBogle » Fri Feb 17, 2017 1:46 pm

jhfenton wrote:It's nice if you have the money at the start of the year. We don't, without putting a serious dent in our emergency funds or incurring capital gains to sell securities in our taxable brokerage. Double Roth IRA contributions are cash-flowed biweekly.

Rainmaker41 wrote:Having $5,500 of surplus cash at the start of 2017 presupposes the choice to *not* invest that cash as it was earned in 2016. I contribute $250 semimonthly (except December) to my Roth IRA not to Dollar Cost Average, but rather to Lump Sum... as soon as I am paid the money in question. My 403b contribution rate is similarly based on overall cash-flow (but does not reach $18k for the year).


Thank you. That helps clarify/widen my understanding. In my case, we get an annual bonus (not guaranteed, but not missed yet) in March, so with that check, I make my IRA contributions. Before that, I was not a Boglehead (and thus, hadn't tweaked my numbers efficiently) and was way overpaying my tax during the year and getting a large refund at year's end that mostly funded my Roth. That then dipped in the emergency fund until I could rebuild it.

Either way, the point stands that either I didn't invest that money soon enough (saving it through the year along our emergency fund or to uncle Sam until I file), or I get an influx that funds it. Not all would have that setup. Thanks :)

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Re: Really Vanguard? 48 Cents?!

Postby *3!4!/5! » Fri Feb 17, 2017 3:55 pm

AllenSmith wrote:i cant believe i read this thread. its 48cents, who cares?
I assume that partly the OP wanted to share a laugh about a silly message urging them to contribute $0.48 to their IRA.

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Re: Really Vanguard? 48 Cents?!

Postby *3!4!/5! » Fri Feb 17, 2017 4:09 pm

Rainmaker41 wrote:
BrandonBogle wrote:While I am happy that people are contributing to their IRAs and making sure it happens, I am actually surprised by how many posters are using periodic contributions. I always do just one contribution at the max for the year and thought the automatic contributions were the minority. I'm glad to hear it does provide value to many more people than I thought (even if it is limited in its calculations on how to provide that value!).


Having $5,500 of surplus cash at the start of 2017 presupposes the choice to *not* invest that cash as it was earned in 2016. I contribute $250 semimonthly (except December) to my Roth IRA not to Dollar Cost Average, but rather to Lump Sum... as soon as I am paid the money in question. My 403b contribution rate is similarly based on overall cash-flow (but does not reach $18k for the year).

However, if one fills up 2016's 401k and IRA through cash-flow with surplus cash still left-over, then it becomes a choice between:

investing the $5,500 of surplus cash-flow in a taxable account over the course of 2016

or

accumulating the $5,500 over 2016, holding it in cash until January 2017, and then making the 2017 IRA contribution.

In other words, the cash surplus was created in 2016, and it is a question of whether one wants the $5,500 in the market sooner or in an IRA more.


This kind of analysis really doesn't make sense to me. I spend most of the year maxing out 401a, 403b, 457, HSA, so the money I contribute to IRAs in January was typically earned the previous December, or maybe a little earlier. For these extremely short terms, e.g. one month, it's entirely appropriate to leave it in cash. Also my bank account balance typically fluctuates between about $0 and $10k, so annual IRA contributions are within that fluctuation. If you get too concerned about cash drag you end up needing to liquidate 0.001 shares to buy a pencil.

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Re: Really Vanguard? 48 Cents?!

Postby The Wizard » Fri Feb 17, 2017 4:24 pm

Rainmaker41 wrote:...or

accumulating the $5,500 over 2016, holding it in cash until January 2017, and then making the 2017 IRA contribution.

In other words, the cash surplus was created in 2016, and it is a question of whether one wants the $5,500 in the market sooner or in an IRA more.

I think you're missing the point.
Let's say someone has $20,000 in the total stock market fund VTSAX in their taxable personal account.
On the first trading day of the year, it's pretty simple to do a sideways transfer of $5500 of VTSAX from there into your Roth IRA, assuming that person expects earned income that year...
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Re: Really Vanguard? 48 Cents?!

Postby Rainmaker41 » Fri Feb 17, 2017 4:31 pm

Ok. Here's how it works for me.

I start the year with my minimum cash reserve plus whatever balances in retirement accounts. Each month, I get income. All income I have other than that budgeted for expenses or short-term savings/special purchase needs is cash-flowed into retirement accounts. I can't fill a Roth IRA at the start of the year without using my minimum allowed cash reserve. If I had more income, the net increase beyond hypothetical increased expenses would be allocated to increased 403b payroll withholding.

I would have to earn considerably more before I got to the point that I had surplus cash-flow over a year beyond the sum of my expenses and the cumulative IRA & 401k contribution limits. To The Wizard's point, in that case I would presumably invest in taxable, transferring shares to IRA at the start of the year. My point is, that isn't an option for me given my annual cashflow for now. If I wanted to invest in taxable, I would necessarily have to reduce my contributions to tax-advantaged, which I have no reason to do.
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Re: Really Vanguard? 48 Cents?!

Postby JamalJones » Fri Feb 17, 2017 7:01 pm

jhfenton wrote:
red5 wrote:This past January I contributed $5,500 to my money market account and from there invested in a few different mutual funds and ETFs. In the process I received a $0.03 dividend while some of that money waited in the money market fund.

I thought I would make an attempt to invest that $0.03 into my Total US Stock fund (VTSAX) even though the page clearly states one can only invest $1.00 or more. I made sure to estimate how many shares I would receive since anything below .0005 shares would round to 0 shares. I pulled the trigger and that night the investment went through.

So perhaps you can invest that $0.48. Give it a try.

You can invest $0.03 in a fund. I do it all the time. But buying with a bank transfer requires a $1.00 minimum.

But, the OP should be able to throw in last year's $0.48 with a contribution for this year. You can make them on the same screen and they get added together.

My employer's payroll software does it right, but it means my biweekly contribution varies by a penny. Each week the algorithm needs to divide the remaining balance by the remaining number of periods, not just divide once and set it.


jhfenton,

Thank you, that did it! I called Vanguard earlier this morning and they took care of it. Now I have an even $5,500 for 2016. I'll make sure to monitor my contribution summary more carefully this year!

Didn't expect I'd have a few people get so wound up about this :D

Anyway, thanks again guys, always appreciated!
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Re: Really Vanguard? 48 Cents?!

Postby livesoft » Fri Feb 17, 2017 7:09 pm

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Re: Really Vanguard? 48 Cents?!

Postby knpstr » Fri Feb 17, 2017 8:00 pm

$0.48 off of max a year for 30 years at 8% CAGR is...

$58.73 you'll be missing out on in nest egg size, if this error was repeated over 30 years.

Forget about it.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

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in_reality
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Re: Really Vanguard? 48 Cents?!

Postby in_reality » Sat Feb 18, 2017 2:37 am

knpstr wrote:$0.48 off of max a year for 30 years at 8% CAGR is...

$58.73 you'll be missing out on in nest egg size, if this error was repeated over 30 years.

Forget about it.


To be more conservative, perhaps you should estimate it at $0.99 which would be the maximum error possible. Not that it changes anything but it's a potential $132.

Anyway, it seems to have been solved per the OP viewtopic.php?f=1&t=211306&p=3244615#p3244218
[60% US _ 26% DEV _ 14% EM] | (-16% LC _ +8% MC _ +8% SC) | [47% FND/VAL _ 40% MKT _ 7% MOM _ 6% REIT] | (+/- 5% or *25% rebalancing bands)

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Youngblood
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Re: Really Vanguard? 48 Cents?!

Postby Youngblood » Sat Feb 18, 2017 6:07 am

AllenSmith wrote:i cant believe i read this thread. its 48cents, who cares?


Herein lies the truth.
"I made my money by selling too soon." | Bernard M. Baruch

tigermilk
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Re: Really Vanguard? 48 Cents?!

Postby tigermilk » Sat Feb 18, 2017 6:42 am

Youngblood wrote:
AllenSmith wrote:i cant believe i read this thread. its 48cents, who cares?


Herein lies the truth.

Yes. First world problems


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