Two Issues for New Investor [portfolio help, move fund to Vanguard]

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buccimane
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Two Issues for New Investor [portfolio help, move fund to Vanguard]

Post by buccimane » Tue Aug 29, 2017 10:11 am

Good morning,

1. Today I finally created a Vanguard account and transferred over $1,000 to the Roth IRA Vanguard Target Retirement 2060 fund.

While waiting for the funds to be accepted, what are the immediate next steps I should take? Here are my thoughts.
- Create a plan to reach the $5,500 maximum by April
- Start funding a small amount into company 403b. (you can see my previous post on this with related funds to explain why I'm not taking advantage of this currently) viewtopic.php?f=1&t=216207&p=3322334#p3322334

Question 2 (the bigger problem)

2. My grandmother gifted me a $10,000 John Hancock Roth IRA mutual fund with nearly 2.0% expense ratio. This was set up by my family's financial adviser 10 years ago. It now has a value of about ~$18,000. I can provide more details on this if necessary, but my main concern is how to get rid of it and move the money into a vessel that won't be paying this ridiculous %.. It appears my family's broker is also getting his cut from this fund, as this was stated on the bottom,

"If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank, registered investment adviser, financial planner, or retirement plan administrator), the fund and its related companies may pay the broker-dealer or other intermediary for the sale of fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. These payments are not applicable to Class R6 shares. Ask your salesperson or visit your financial intermediary’s website for more information."

So this question is two-fold. I am supposedly meeting with the family financial adviser in the coming weeks. Against family advice, thanks to BH, I would like to move this $. What is the smartest way to go about this, avoiding potential penalties etc., and where should I put the balance? My family swears by the adviser, so I would like to be as well versed as possible regarding my intents for this generous gift from my grandmother.

I'd be happy to answer any questions should more information be needed.

Thank you as always,

Buccimane
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bloom2708
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Re: Two Issues for New Investor

Post by bloom2708 » Tue Aug 29, 2017 10:23 am

The best way to move the account is to contact Vanguard.

Meeting with the advisor will not lead to anything. His livelyhood depends on those fees. The funds can be moved without meeting.

Transfer "in kind" if possible to Vanguard. Once there, then you can look at selling/simplifying to a 3 fund portfolio or similar.

You should get a "stepped up" cost basis, so there should not be large gains/losses to deal with. Since you inherited the funds, if you have to pay some tax to get the funds to low cost, diversified index funds, that is ok.

You can use some of the taxable to fully fund your $5,500 Roth. Even with poor options, pre-tax 403b should be considered.
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financeidiot
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Re: Two Issues for New Investor

Post by financeidiot » Tue Aug 29, 2017 10:35 am

1. Sounds like a great plan so long as you're getting your employer match (if available) for the 403b.

2. I think you've got this right, but to clarify your situation, the Roth IRA is the account type in which you're holding the mutual fund and determines how it's treated. So you don't have a "Roth IRA Vanguard Retirement Fund," you have a Vanguard Retirement Fund in a Roth IRA account. You can hold the same investments in Roth IRA, 401k, IRA, and traditional brokerage accounts, the difference is how gains and losses for these investments are taxed.

So you currently have two Roth IRA accounts, one at Vanguard, one at John Hancock. Each of those accounts is invested in one mutual fund, the Vanguard fund and the John Hancock fund. To move out of John Hancock, you have 3 tasks that will all be accomplished by rolling the John Hancock Roth IRA over to your Vanguard Roth IRA:
1. Get funds out of the John Hancock mutual fund
2. Transfer the funds to your Vanguard Roth IRA
3. Close your John Hancock Roth IRA

Closing an account is a fairly standard procedure. The hardest part will be not letting the family advisor convince you to stay at John Hancock. I'd start off by calling Vanguard and asking them to conduct the transfer for you, you could also do it yourself by following the instructions on the Vanguard website (below). That way you can cancel the event with the family advisor (who you don't have a personal relationship with) and move on with your life.

Vanguard IRA rollover instructions: https://investor.vanguard.com/account-t ... sfer-money

You may have to pay some fees for account closure at John Hancock and taxes from the inheritance (per what bloom2708 said), but it probably won't be too bad since you're young and early in your career.

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buccimane
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Re: Two Issues for New Investor

Post by buccimane » Tue Aug 29, 2017 10:40 am

financeidiot wrote:
Tue Aug 29, 2017 10:35 am
1. Get funds out of the John Hancock mutual fund
2. Transfer the funds to your Vanguard Roth IRA
3. Close your John Hancock Roth IRA
Thank you for your responses. Now as a follow up, after researching more, would it make sense to keep the $1000 in Vanguard and build that Roth IRA account up to meet the $5,500 maximum, and then move the ~$18,000 to Charles Schwab and create a three fund portfolio in a traditional brokerage (or would a different option be more wise) account? I would like to split up investments across multiple platforms should something catastrophic happen.
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Valuethinker
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Re: Two Issues for New Investor

Post by Valuethinker » Tue Aug 29, 2017 11:18 am

buccimane wrote:
Tue Aug 29, 2017 10:40 am
financeidiot wrote:
Tue Aug 29, 2017 10:35 am
1. Get funds out of the John Hancock mutual fund
2. Transfer the funds to your Vanguard Roth IRA
3. Close your John Hancock Roth IRA
Thank you for your responses. Now as a follow up, after researching more, would it make sense to keep the $1000 in Vanguard and build that Roth IRA account up to meet the $5,500 maximum, and then move the ~$18,000 to Charles Schwab and create a three fund portfolio in a traditional brokerage (or would a different option be more wise) account? I would like to split up investments across multiple platforms should something catastrophic happen.
Because of the way US mutual funds are structured, if the fund management company goes broke your assets are preserved and moved to a new manager. That's very different than a bank account, say. Only if there was spare cash in the account is there any risk-- you are not covered by the US FDIC as you would be with a bank, but there is an industry scheme I believe. Nonetheless it's not a good idea to keep large amounts of cash with any fund manager.

The risk of a Madoff type scenario is also controlled by US mutual fund rules-- Madoff Investments did not have to adhere to these (it was a hedge fund). It would be difficult or impossible for a large mutual fund to systematically misstate its Net Asset Value and to use incoming client money to fund withdrawals (without adjusting the NAV per unit/ share appropriately) which is known as "Ponzi Scheme Fraud" (for the Italian American who invented it).

So the real risk is if a company like Vanguard was hacked and its computer systems brought down- -and that disruption would presumably only last a few days, until they brought the backup online. That is a risk for any financial services company.

The other risk is that your identity with that firm is hacked. That's a real concern, and I don't know what the legal position is on that (I am not US based).

Splitting between 2 firms is really about risk control on those 2 latter risks. Over to you whether you want the hassle. A lot of people here seem to keep a second account at Fidelity.

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BL
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Re: Two Issues for New Investor

Post by BL » Tue Aug 29, 2017 11:34 am

Is or is not the gift Roth IRA a Roth? Is it an inherited Roth IRA or was the amount contributed based on your having earnings? Is it in a normal brokerage account, or is it in a Roth account? Have the paperwork in front of you and give Vanguard a call about rolling it over to a new Roth or perhaps the same Roth. A rollover has nothing to do with the 5500 contributions you can make for each calendar year.

I think it would be foolish to spread yourself so thin as to open two small accounts. Maybe when you get 1/2 million $ it might be time to think about; however you may end up with two brokerages due to other reasons. It might be possible to set up two Roths for you at Vanguard (or similar low-cost brokerage) if you wish to keep them separate. If indeed they are two different types of accounts, you may have to keep them separate.

Either a balanced fund like Target Date or a 3-fund portfolio would work. Target Date would be just fine for quite a while.
Last edited by BL on Tue Aug 29, 2017 11:39 am, edited 1 time in total.

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buccimane
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Re: Two Issues for New Investor

Post by buccimane » Tue Aug 29, 2017 11:39 am

BL wrote:
Tue Aug 29, 2017 11:34 am
Is or is not the gift Roth IRA a Roth? Is it an inherited Roth IRA or was the amount contributed based on your having earnings? Is it in a normal brokerage account, or is it in a Roth account?
I'll have to check on that, because at the time I received it, I was 12 y/o with obviously no reported earnings.
BL wrote:
Tue Aug 29, 2017 11:34 am
If indeed they are two different types of accounts, you may have to keep them separate.
If I come to find that it is an IRA not a Roth, wouldn't I need to transfer it into two accounts at Vanguard as to not go over the $5,500 maximum? And follow up on that, if it were needed to be placed in two accounts, what would you suggest the other one (besides Roth) to be?
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BL
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Re: Two Issues for New Investor

Post by BL » Tue Aug 29, 2017 11:48 am

buccimane wrote:
Tue Aug 29, 2017 11:39 am
BL wrote:
Tue Aug 29, 2017 11:34 am
Is or is not the gift Roth IRA a Roth? Is it an inherited Roth IRA or was the amount contributed based on your having earnings? Is it in a normal brokerage account, or is it in a Roth account?
I'll have to check on that, because at the time I received it, I was 12 y/o with obviously no reported earnings.
BL wrote:
Tue Aug 29, 2017 11:34 am
If indeed they are two different types of accounts, you may have to keep them separate.
If I come to find that it is an IRA not a Roth, wouldn't I need to transfer it into two accounts at Vanguard as to not go over the $5,500 maximum?
I added above that a rollover is not the same as contributions., so that doesn't matter. What does matter is the type of account. It sounds like she gifted it to you. I don't think you can "gift" any kind of IRA, so it may not even be a Roth IRA. That is the first thing you need to know; what type of account is it? If it is in a taxable account, there may be 1099 tax statements sent to someone each year. Do you get paperwork, or have access online to this account? Someone must have the paperwork to see exactly what it is called. The fund in it has nothing to do with what type of account it is. It probably has high ERs so it is worthwhile getting rid of it, either before or after you set it up at V.

You will want to set up e-statements to be sure there are no low-account charges at V. Then there should be no costs except the very low ERs of most Vanguard funds.

Yes, you do not mix any types of accounts: traditional IRA, Roth IRA, regular taxable brokerage accounts are all separate accounts. (If you pay the tax, you can convert a traditional to a Roth IRA.)

Don't meet with adviser. You will probably get talked or guilted into staying. Then it will be even more difficult to divorce/leave him/her in the future as you will get more tangled up friendly while your costs keep building up. Appreciate that he has taken care of the wonderful gift from your grandmother and move on. When this is all over, and the money is safe, you could even send him a nice thank-you note.
Last edited by BL on Tue Aug 29, 2017 11:59 am, edited 2 times in total.

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Youngblood
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Re: Two Issues for New Investor

Post by Youngblood » Tue Aug 29, 2017 11:50 am

OP, is the money you received from your Grandmother a gift or inherited?
"I made my money by selling too soon." | Bernard M. Baruch

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buccimane
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Re: Two Issues for New Investor

Post by buccimane » Tue Aug 29, 2017 12:04 pm

Youngblood wrote:
Tue Aug 29, 2017 11:50 am
OP, is the money you received from your Grandmother a gift or inherited?
My apologies, my memory was shady for a moment. I believe she gifted me $10k, and my mother set me up with a Roth IRA custodial account with her as the custodian. Currently figuring out what steps need to be taken to put me in full control.
BL wrote:
Tue Aug 29, 2017 11:48 am
Yes, you do not mix any types of accounts
So it seems since they are both Roth IRA's that I should be able to rollover the Hancock one to Vanguard.

Please bear with me as I try to answer most of your questions.
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financeidiot
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Re: Two Issues for New Investor

Post by financeidiot » Tue Aug 29, 2017 12:24 pm

buccimane wrote:
Tue Aug 29, 2017 12:04 pm
Youngblood wrote:
Tue Aug 29, 2017 11:50 am
OP, is the money you received from your Grandmother a gift or inherited?
My apologies, my memory was shady for a moment. I believe she gifted me $10k, and my mother set me up with a Roth IRA custodial account with her as the custodian. Currently figuring out what steps need to be taken to put me in full control.
BL wrote:
Tue Aug 29, 2017 11:48 am
Yes, you do not mix any types of accounts
So it seems since they are both Roth IRA's that I should be able to rollover the Hancock one to Vanguard.

Please bear with me as I try to answer most of your questions.
So the good news is the transfer should not be a problem.

The bad news is receiving a Roth IRA as a gift (not inheritance) may complicate things. The concept behind Roth IRAs and IRAs is to either pay all taxes on income up front (Roth IRA) or delay them long into the future (traditional IRA). The key qualification to deposit to a Roth IRA or traditional IRA account is to have income. So, if you want to donate $5,500 per year to a Roth IRA account, you must have a minimum of $5,500 in income. This means that at 12 years old, for your parents to "gift" $1,000 to your Roth IRA, you would have needed to have earned and paid taxes on $1,000 in income. Over time, and as you earned money, you could have invested the full $10,000 in the Roth IRA. However, your grandmother or parents cannot "gift" you a Roth IRA unless it is through an inheritance.

In short, unless you inherited the Roth IRA from your grandmother or your parents matched contributions to your Roth IRA with your income from ages 12 to now, it's unlikely you should be able to have so much invested in the Roth IRA.

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CABob
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Re: Two Issues for New Investor

Post by CABob » Tue Aug 29, 2017 12:37 pm

buccimane wrote:
Tue Aug 29, 2017 12:04 pm
Youngblood wrote:
Tue Aug 29, 2017 11:50 am
OP, is the money you received from your Grandmother a gift or inherited?
My apologies, my memory was shady for a moment. I believe she gifted me $10k, and my mother set me up with a Roth IRA custodial account with her as the custodian. Currently figuring out what steps need to be taken to put me in full control.
It is very important that you determine exactly what type of account this is and who owns it. I'm not sure that there is such a thing as a Roth custodial account but perhaps others can clarify. Did you have any earned income when the account was created? You would need to have earned income in order for an IRA to be established. $10K would have been too much to contribute to a Roth IRA in a single year.
Bob

cas
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Re: Two Issues for New Investor

Post by cas » Tue Aug 29, 2017 12:42 pm

buccimane wrote:
Tue Aug 29, 2017 12:04 pm
Youngblood wrote:
Tue Aug 29, 2017 11:50 am
OP, is the money you received from your Grandmother a gift or inherited?
My apologies, my memory was shady for a moment. I believe she gifted me $10k, and my mother set me up with a Roth IRA custodial account with her as the custodian. Currently figuring out what steps need to be taken to put me in full control.
It is going to be really important to clear up the haziness about the exact nature and origins of this account. What you having been describing so far makes it sound like some rather unpleasant IRS penalties and paperwork may be entering the picture. Since your memory is hazy, and you were only 12 when all this happened, maybe everything will turn out to be ok. But it is very important to clear this up before starting to mix this account with any other account.

Here's the problem:

-In order for contributions to be put into a Roth IRA (or a traditional IRA) for a particular person, that particular person has to have had earned income in the year of the contribution. And the Roth contribution can not exceed the amount of the earned income.

-Now ... it *is* allowed that if a child or young adult does have some amount of earned income, a parent or grandparent may let the child keep their earned money, but then the parent/grandparent gifts an allowed amount into a Roth IRA (that is set up in the name of the child). But this scenario doesn't seem to apply to your case because you said you had no earned income.

-In addition, something seems off because $10,000 is over the allowed annual maximum that can be contributed in one year to a Roth IRA. (Although perhaps a 2 year contribution was made all at one time in between January and tax day in April, for the prior year and the current year. *If* you had enough earned income both years, this would be allowed. But you say that you didn't have the earned income.) ((Edit: financeidiot, in his/her post above, also has a possible scenario: perhaps your grandmother gifted you $10,000 when you were 12 (just as cash, held in some sort of regular taxable account, no Roth IRA involved), and your mother gradually put that $10,000 into a Roth IRA in later years when you *did* have earned income.)

-There are some pretty unpleasant, ongoing (every year) IRS penalties for contributions that are made to a Roth IRA when the person wasn't eligible to make the contributions, so it is important to clear this up sooner rather than later.

Alternatively, if your grandmother died in the year that you were 11/12 (did she?), she could have potentially left *her* Roth IRA (or a $10,000 portion of it) to you as an inherited Roth IRA. (I have practically zero knowledge in this area, but since you were a minor, I would think a custodial account would likely enter the picture.) But, if this in an inherited Roth IRA, the IRS requires you to take RMDs (required minimum distributions) from it every year. (They won't be taxable, since they are Roth, but you would need to take them.) Having you been getting RMDs annually from this account? If it is an inherited IRA, and you haven't been taking the RMDs, I think IRS penalties also enter the picture. If this is an inherited Roth IRA, I think the exact wording of the Roth IRA account would indicate that it was inherited (I don't know the exact wording. )

Or so goes my understanding of the matter. (Now to press submit and see if 12 other people have said the same thing better than I did while I was busy composing...)

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buccimane
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Re: Two Issues for New Investor

Post by buccimane » Tue Aug 29, 2017 1:34 pm

cas wrote:
Tue Aug 29, 2017 12:42 pm
-In addition, something seems off because $10,000 is over the allowed annual maximum that can be contributed in one year to a Roth IRA. (Although perhaps a 2 year contribution was made all at one time in between January and tax day in April, for the prior year and the current year. *If* you had enough earned income both years, this would be allowed. But you say that you didn't have the earned income.)

Thank you for your post. I will be on later tonight to clarify exactly what this account is, and how it has come to be. I do know I did not have legitimate earned income until 3-4 years after receiving the sum.

Clearly I have a lot of ground to make up getting my financial prowess together :sharebeer
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financeidiot
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Re: Two Issues for New Investor

Post by financeidiot » Tue Aug 29, 2017 2:07 pm

Depending on what you find you'll see how good your financial "advisor" has been for your mother and grandmother in helping them set up this account. It'll all work out. :sharebeer

raamakoti
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Re: Two Issues for New Investor

Post by raamakoti » Tue Aug 29, 2017 7:20 pm

OP - read books by Peter Lynch
Read Berkshire Hathaway letters to share holders

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Re: Two Issues for New Investor

Post by LadyGeek » Tue Aug 29, 2017 9:39 pm

This thread is now in the Investing - Help with Personal Investments forum (portfolio help).
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buccimane
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Re: Two Issues for New Investor

Post by buccimane » Wed Aug 30, 2017 7:31 am

financeidiot wrote:
Tue Aug 29, 2017 2:07 pm
Depending on what you find you'll see how good your financial "advisor" has been for your mother and grandmother in helping them set up this account. It'll all work out. :sharebeer
Ok, so what I found out is that it is in fact a Roth IRA. My mother is the custodian, and there is now ~16,000 in it. I called John Hancock to take the necessary steps to remove my mother as custodian. Once this is complete I am a little nervous about the next steps..
cas wrote:
Tue Aug 29, 2017 12:42 pm
What you having been describing so far makes it sound like some rather unpleasant IRS penalties and paperwork may be entering the picture.
No one remembers how the $ was put into the Roth IRA, and I am not currently in contact with the financial adviser who set it up. Will I be safe to move it into my Vanguard account?
A man convinced against his will is of the same opinion still

financeidiot
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Re: Two Issues for New Investor

Post by financeidiot » Wed Aug 30, 2017 9:06 am

The question is if the money should be in a Roth IRA account or a taxable brokerage account. Wait to do the transfer until you know if the funds qualify to be in a Roth IRA in the first place, otherwise you'll just create more work for yourself.

There should be records of transactions and deposits into the Roth IRA account on John Hancock's website in the account's transaction history. Your mother should be able to access them or you should be able to access them once you have control of the account. If the John Hancock website is not helpful, you should contact the financial advisor who helped set it up and see if you can get any records from of these transaction from your grandmother/parents. Try to get anything regarding why this account was set up the way it was in writing.

Next, compare the deposits against your earned income for the years in which it was deposited (this is based on your annual tax filings). If you don't have those handy, the Social Security Website (ssa.gov/myaccount) keeps a record of your taxable income earned each year based on tax returns filed under your social security number. You can use this to determine how much money you should have been able to contribute each year. If a deposit was made in a year you had no taxable income, or a year in which the deposit was greater than your taxable income, you will owe penalties on that amount.

If you have ineligible contributions (it sounds like you will) read this guide on rectifying them (http://www.rothira.com/penalties-inelig ... s-roth-ira). However, it may make sense to get professional help for a fee to get this right. You're going to owe a 6% penalty to the IRS on the ineligible contributions for each year they are left in the Roth IRA. I believe (but am not sure) that you may also pay a 10% early withdrawal penalty when you withdraw the early contributions. You may be able to recharacterize some ineligible contributions as contributions for this year and only pay the 6% annual penalty instead of the additional withdrawal penalty. You could be losing a lot of the money in your account, but keep in mind those funds weren't supposed to be there anyway and your returns are inflated by preferential tax treatment you were ineligible for.

Finally, if you are paying substantial amounts in penalties, you could explore legal action against the financial advisor who set this up, though it's probably more headache and cost than the penalties you'll owe to the IRS. Better to take your lumps and learn early in life.

cas
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Re: Two Issues for New Investor

Post by cas » Wed Aug 30, 2017 10:55 am

buccimane wrote:
Wed Aug 30, 2017 7:31 am
No one remembers how the $ was put into the Roth IRA, and I am not currently in contact with the financial adviser who set it up. Will I be safe to move it into my Vanguard account?
If it were me, I would leave it where it is until you can figure out when contributions were made and how much they were. I suspect John Hancock (or whoever is the institution that is the custodian for this Roth IRA) is likely to be more obliging about helping you research this if you still have an account with them. Do you have access to a website that might give transaction history? Or a statement with a phone number?

I'm not qualified to give trustworthy advice on how to deal with this if there are ineligible contributions, but... I remember a thread recently that was about cleaning up a mess with ineligible Roth contributions that seems somewhat applicable. Especially scroll down and look for the advice by Alan S. : "Roth, Taxes, and Mistakes" viewtopic.php?t=225041

Part of Alan S's reply is this:
Form 5329 automatically will apply excess contributions to later years if you are eligible and did not make contributions in those later years. The 6% excise tax stops for the amount that can be assigned. Accordingly, you need to figure out if any of the former excess contributions can be assigned to 2015, 2016 or 2017 and that depends on your tax situation in those years. You should not remove a prior excess if it can be assigned to a later year up to the current year. Once this situation is clarified, I will be able to indicate what needs to be done with those 2012-2014 excess contributions, and how it should be reported. Note that many CPAs do NOT know how to handle this correctly.
So it sounds like there is hope that, if you handle it correctly, you may manage to be able to keep most of the funds in the Roth IRA and that possibly the 6% annual penalties may have ended a couple of years after you started having earned income (but were not making any Roth contributions).

Google-ing "Roth excess contributions Alan S. site:bogleheads.org" may generate additional relevant reading.

I'm not finding any threads with your exact situation (ineligible/excess Roth contributions made as a gift to you when you were a minor), so you may want to start a new thread with a title something like "My grandparents may have gifted contributions into my Roth IRA when I was 12 and had no earned income. How do I fix it?" and hope Alan S. sees it. Or maybe other people will have suggestions on how to figure out what contributions were made when.

But ... First thing to do is try to get records of the contributions into this account. Maybe everything will turn out to be ok.

Good luck.

(If it makes you feel any better (in a misery loves company kind of way), I was once in a MOOC (massive open online course) on financial planning, and, in the section on IRAs, one of the grad student TAs had made a video about how his grandparents had gifted money into a Roth for him when he was young, and how much he appreciated that gift now that 15 years had passed and a lot of tax-free compounding had gone on. He was active in the discussion forums promoting this idea of Roth IRAs for youngsters. Somehow the subject of earned income being needed for the youngster came up, and suddenly it became very, very silent on his end of the conversation. I don't know for certain, but I suspect that maybe he didn't know about the earned-income requirement and suddenly realized he was in the same predicament that you might be in.)

retiredjg
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Re: Two Issues for New Investor

Post by retiredjg » Wed Aug 30, 2017 11:07 am

buccimane wrote: 2. My grandmother gifted me a $10,000 John Hancock Roth IRA mutual fund with nearly 2.0% expense ratio.
Are you sure she gave you a Roth IRA? Perhaps you mean you inherited it? I don't think a person can just give a Roth IRA away. Edited to add...I see this has already been addressed.

It appears my family's broker is also getting his cut from this fund, as this was stated on the bottom,
You can be sure of that the advisor got something somewhere along the line and might still be getting a little something.

I am supposedly meeting with the family financial adviser in the coming weeks.
Why? If you want to move the money, there is no reason to have a meeting. In fact, having the meeting is likely to be a mistake.

Against family advice, thanks to BH, I would like to move this $. What is the smartest way to go about this, avoiding potential penalties etc., and where should I put the balance? My family swears by the adviser, so I would like to be as well versed as possible regarding my intents for this generous gift from my grandmother.
You do not need anybody's approval and you don't need to be well versed. You are NOT going to win any argument with any of them, including the advisor. If it is your money and if you have decided to move it, you don't have to explain why. All you have to say is "I have decided." Then stop talking.

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buccimane
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Re: Two Issues for New Investor

Post by buccimane » Wed Aug 30, 2017 11:58 am

retiredjg wrote:
Wed Aug 30, 2017 11:07 am
buccimane wrote: 2. My grandmother gifted me a $10,000 John Hancock Roth IRA mutual fund with nearly 2.0% expense ratio.
Are you sure she gave you a Roth IRA? Perhaps you mean you inherited it? I don't think a person can just give a Roth IRA away. Edited to add...I see this has already been addressed.

It appears my family's broker is also getting his cut from this fund, as this was stated on the bottom,
You can be sure of that the advisor got something somewhere along the line and might still be getting a little something.

I am supposedly meeting with the family financial adviser in the coming weeks.
Why? If you want to move the money, there is no reason to have a meeting. In fact, having the meeting is likely to be a mistake.
Yes, someone above mentioned that this can all be transferred on my end. I am moving forward with their instruction.
Against family advice, thanks to BH, I would like to move this $. What is the smartest way to go about this, avoiding potential penalties etc., and where should I put the balance? My family swears by the adviser, so I would like to be as well versed as possible regarding my intents for this generous gift from my grandmother.
You do not need anybody's approval and you don't need to be well versed. You are NOT going to win any argument with any of them, including the advisor. If it is your money and if you have decided to move it, you don't have to explain why. All you have to say is "I have decided." Then stop talking.
While I do not need approval, I would like to explain what I am doing as a new investor with a generous gift from their parent, my grandmother. While what you are saying may be factual, it severely lacks understanding of how relationships work. I never said there will be an argument, because there won't be. The important takeaway is this is not money I earned myself, therefore I should be able to explain to concerned parties the steps I am taking to hopefully secure my financial independence in the future.
A man convinced against his will is of the same opinion still

retiredjg
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Re: Two Issues for New Investor

Post by retiredjg » Wed Aug 30, 2017 12:32 pm

buccimane wrote: While I do not need approval, I would like to explain what I am doing as a new investor with a generous gift from their parent, my grandmother. While what you are saying may be factual, it severely lacks understanding of how relationships work. I never said there will be an argument, because there won't be. The important takeaway is this is not money I earned myself, therefore I should be able to explain to concerned parties the steps I am taking to hopefully secure my financial independence in the future.
That is reasonable. It sounded to me like you were saying that you wanted to explain to and convince the advisor. When people do this, advisors are particularly skilled at turning the discussion around and making the client feel like an idiot because you cannot possibly know as much as they do. You can't win no matter which approach you take. Better to just say "I have decided..." and not even explain why because that opens the door for them to explain how wrong you are.

I certainly "get" that you want your parents to understand that you intend to be a good steward for your grandmother's generous gift. And I didn't mean "argument" as in a hostility, but as taking an opposing position in a discussion.

But do realize, no matter how reasonably you approach this and no matter how much you know, you will never convince them that you know more than their trusted advisor who has specialized training, and some fancy certification or two, and years and years of experience. You just won't.

The best you will be able to do is explain that you believe that costs matter and that your approach, while different from theirs, is a reasonable one. For that, if you have not already seen it, I'd refer you to Chapter 9 ("Costs Matter") of the Bogleheads' Guide to Investing, Second edition.


I think your biggest challenge is this Roth issue. At age 12, you certainly could have had an income, but $10K? Or $5k split between 2 years? That sounds somewhat unlikely since you don't recall having an income at all. You certain have to consider whether your parents may have made a mistake 10 years ago. And if so, what you can and/or should do about that. Or is it even your mistake to fix? It's an interesting situation.

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Re: Two Issues for New Investor

Post by pkcrafter » Wed Aug 30, 2017 12:34 pm

buccimane, I agree that if you are going to transfer this account, which is the best thing to do, you should not speak with the advisor. The ensuing discussion will only be about why you should not move. It's fine to tell the family what you intend to do.

Something else you should before moving is ask the Hancock advisor how your grandmother was able to transfer a Roth IRA to your name when you did not have income. It isn't a legal move, so see what he says. Tell the advisor you would like to have your name recorded as owner if it isn't already. Is it possible she named you as inheritor upon her death? That is a different situation.

When you've got it all straightened out, call Vanguard and tell them you would like to do a direct custodian to custodian transfer. They will provide the paperwork and initiate the transfer directly.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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buccimane
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Re: Two Issues for New Investor

Post by buccimane » Wed Aug 30, 2017 1:04 pm

retiredjg wrote:
Wed Aug 30, 2017 12:32 pm
I think your biggest challenge is this Roth issue. At age 12, you certainly could have had an income, but $10K? Or $5k split between 2 years? That sounds somewhat unlikely since you don't recall having an income at all. You certain have to consider whether your parents may have made a mistake 10 years ago. And if so, what you can and/or should do about that. Or is it even your mistake to fix? It's an interesting situation.

I agree, but unfortunately if I do not fix it nothing will be done.
pkcrafter wrote:
Wed Aug 30, 2017 12:34 pm
Something else you should before moving is ask the Hancock advisor how your grandmother was able to transfer a Roth IRA to your name when you did not have income. It isn't a legal move, so see what he says. Tell the advisor you would like to have your name recorded as owner if it isn't already. Is it possible she named you as inheritor upon her death? That is a different situation.
I remember receiving a check from my grandmother for $10,000. Then my parents took over from there- meaning handing it over to the financial adviser. I am in the process of transferring into my name.

And to clarify for everyone else that responded, there is no way I had reported income until at least 3 years after the account was set up. I had a dog walking "business" that was $ throughout the neighborhood, obviously unreported.

I have e-mailed the adviser who set this all up to hopefully provide me with an understanding of what the .... went on 10 years ago so I can give some more information to you all. :oops: I'll bump the thread when I have more to give- thank you all!!
A man convinced against his will is of the same opinion still

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Re: Two Issues for New Investor

Post by pkcrafter » Wed Aug 30, 2017 1:25 pm

buccimane,

The answer to the Roth may be here.

http://www.kiplinger.com/article/saving ... -roth.html

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

retiredjg
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Re: Two Issues for New Investor

Post by retiredjg » Wed Aug 30, 2017 1:57 pm

buccimane wrote:I remember receiving a check from my grandmother for $10,000. Then my parents took over from there- meaning handing it over to the financial adviser. I am in the process of transferring into my name.
So this was set up by a past (not your current) advisor. And it is at John Hancock. If it has always been at John Hancock, there should be records available for the deposit or all the deposits. I'd be careful not to move this IRA until all those records are found and you fully understand what happened.

It is possible that the advisor spread the deposits over several years and used what income you had to justify it. The limit in 2007 apparently was $4k (if that Kiplinger link is correct). If someone put more than $4k into a Roth IRA for you, it seems the IRS would have caught that and notified your mother (custodian). Also, I would think that any advisor would know what the limit was - I can't imagine that the advisor or John Hancock would put $10k into an IRA when the limit was $4k.

Anyway, the whole point being you will need to know exactly how much and when the deposit(s) were made in order to get this straight. Once you have that information, I don't think the fix is that difficult.

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buccimane
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Re: Two Issues for New Investor [portfolio help, move fund to Vanguard]

Post by buccimane » Thu Oct 12, 2017 8:14 am

OP Update Here:

I had the adviser switch the Roth IRA into my name only, removing my mother as the custodian. The new statement only contains my name but still has lists me as a Minor. I am worried about this is because the roth was funded at a time when I wasn't earning any significant income (~14y/o). I am scheduling a meeting to sit down with the adviser to see what is going on. In regards to the post above, I will look into how it was dispersed when I can get in contact with JH. In the meantime, does anyone know why I might still be listed as a minor even though I am 24?
pkcrafter wrote:
Wed Aug 30, 2017 1:25 pm
The answer to the Roth may be here.

http://www.kiplinger.com/article/saving ... -roth.html
I did take a look at the article above, however there was a total of $10,000 contributed. I don't recall the exact numbers from ~10 years ago, but it is highly unlikely I earned more than $3000 any of the years prior to turning 16.


As always, I appreciate all of the help from you all!
A man convinced against his will is of the same opinion still

krow36
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Re: Two Issues for New Investor [portfolio help, move fund to Vanguard]

Post by krow36 » Thu Oct 12, 2017 1:28 pm

buccimane wrote:
Thu Oct 12, 2017 8:14 am
OP Update Here:
I had the adviser switch the Roth IRA into my name only, removing my mother as the custodian. The new statement only contains my name but still has lists me as a Minor. I am worried about this is because the roth was funded at a time when I wasn't earning any significant income (~14y/o). I am scheduling a meeting to sit down with the adviser to see what is going on. In regards to the post above, I will look into how it was dispersed when I can get in contact with JH. In the meantime, does anyone know why I might still be listed as a minor even though I am 24?
Is it possible that your mother has kept old statements that would shed light on how/when the $10,000 was moved into the custodial Roth IRA? If not, I guess you'll have to get the info from JH. I would also ask JH why your Roth is now labelled "Minor"--seems like an oversight to me.

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