Should I "Consolidate your accounts" in Vanguard?

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AHumanInterest
Posts: 9
Joined: Mon Jun 12, 2017 7:00 pm

Should I "Consolidate your accounts" in Vanguard?

Postby AHumanInterest » Mon Jun 19, 2017 12:12 am

I'm getting the following message from vanguard:
https://www.dropbox.com/s/uwva58glq23r3 ... 8.png?dl=0

What does this mean for me?
Is there any negative repercussion for converting a "Rollover IRA" into a "Traditional IRA Brokerage Account"?

mhalley
Posts: 4507
Joined: Tue Nov 20, 2007 6:02 am

Re: Should I "Consolidate your accounts" in Vanguard?

Postby mhalley » Mon Jun 19, 2017 1:27 am

A few people have had problems with the upgrade, but for most it has been no problem. Multiple previous threads.
Such as
viewtopic.php?t=206808

Here is a pro and con list.

http://www.mymoneyblog.com/vanguard-mer ... -cons.html

User avatar
celia
Posts: 6007
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Should I "Consolidate your accounts" in Vanguard?

Postby celia » Mon Jun 19, 2017 2:50 am

AHumanInterest wrote:What does this mean for me?

The displayed message is really asking if you want to "upgrade" to the new account format, while informing you that some accounts might be merged.

Is there any negative repercussion for converting a "Rollover IRA" into a "Traditional IRA Brokerage Account"?

This represents two issues.

1. In merging two accounts, the mutual fund (Rollover IRA) will be merged into a brokerage account (Traditional IRA).

2. You will also be mixing two kinds of traditional IRAs: a Rollover IRA and Traditional IRA. The Rollover is meant to hold money that came from an employer retirement account (401K, 457, 403b). The Traditional IRA is meant to hold contributions that you made directly. If you ever need to roll the Rollover IRA back to a 401K or other employer retirement plan, you may find that the employer plan only accepts rollovers from former employer plans, but not IRAs containing co-mingled funds from both employers and direct contributions. You will usually want to roll back to an employer plan if you later have a tIRA containing mostly non-deductible contributions that you want to convert.

You will not want to do it if you want different beneficiaries for the two accounts.

You will not want to do it if you have one or more Roth conversions for the year that are still eligible to recharacterize. (You can recharacterize [ie, un-do the Roth conversion] until October 15 of the year following the year of conversion.) If recently converted Roths are merged with older Roths, the funds will become co-mingled and the recharacterization will put a different amount back into the tIRA than you expect.

You will not want to do it if you have one of your mutual funds linked to your bank checking account as you will then have to re-do the links. Possibly you will have to have forms notarized for each new link.

If you are not sure what to choose, go for not merging anything. You can always change your mind later and merge two similar accounts. That will be easy to do. But it may not be easy to separate a merged account back into its two previous parts, especially if other transactions have since occurred in the merged account.

aristotelian
Posts: 1835
Joined: Wed Jan 11, 2017 8:05 pm

Re: Should I "Consolidate your accounts" in Vanguard?

Postby aristotelian » Mon Jun 19, 2017 8:11 am

If you want to stay with Vanguard, you should probably do it as they will keep pressuring you to do so. We did it and no negative consequences so far.

furwut
Posts: 1198
Joined: Tue Jun 05, 2012 8:54 pm

Re: Should I "Consolidate your accounts" in Vanguard?

Postby furwut » Mon Jun 19, 2017 8:28 am

mhalley wrote:Here is a pro and con list.

http://www.mymoneyblog.com/vanguard-mer ... -cons.html


Thanks. I too am getting occasional pings from Vanguard to consolidate. As a retiree who is spending their taxable distributions losing the feature to have these automatically transferred to my bank is annoying. Personally I do not see any benefit for consolidation and will hold out for as long as possible.


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