Does cost basis rollover during an IRA rollover and strategies involved?

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yarnandthread
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Joined: Fri Dec 08, 2017 12:04 pm

Does cost basis rollover during an IRA rollover and strategies involved?

Post by yarnandthread » Thu Jun 14, 2018 7:13 am

I have ONLY Vanguard ETFs in a ROTH IRA at Schwab and those ETFs were acquired since 2015. I want to do an "in kind" transfer of the ROTH IRA at Schwab to Vanguard. I already have a ROTH IRA at Vanguard and already have the exact same ETFs in the Vanguard account. My question is should I transfer and ADD the ROTH IRA to my pre-existing Vanguard ROTH IRA or should I put it in a new and separate account at Vanguard? Pros and cons for both options?

Will the cost basis from Schwab transfer over as well? If I transfer and ADD the assets to the existing ROTH IRA will the cost basis from Schwab be accurately incorporated into the same existing ETFs that I already own? Will this potentially lead to messing up my existing accurate cost basis in those ETFs if it doesn't work right (adding ETF shares from Schwab account without cost basis information to the existing shares already at Vanguard causes the Vanguard software to now not be able to calculate my cost basis for any of the shares including my old shares prior to the transfer of assets)?

If I transfer the ROTH IRA to a new and separate account the cost basis mess up concern wouldn't be an issue, but I have to have yet another account which isn't as desirable.

I know for retirement accounts cost basis really shouldn't matter, but I would like to have it if possible. Thank you for any thoughts.

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vineviz
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Re: Does cost basis rollover during an IRA rollover and strategies involved?

Post by vineviz » Thu Jun 14, 2018 7:38 am

yarnandthread wrote:
Thu Jun 14, 2018 7:13 am
I know for retirement accounts cost basis really shouldn't matter, but I would like to have it if possible. Thank you for any thoughts.
When brokerage firms transfer assets in-kind, they pass along any cost basis information they have and they do so at the level of tax lots (100 shares purchased 3/1/2011 at $12.50, 27 shares purchased 12/30/2011 at $13.11, etc.).

So moving the assets from different brokerage firms into the same account should not cause you to lose any data associated with them.

Plus, if you print out (or have already kept) the old transaction receipts then EVEN IF there is a glitch in the transfer, the new brokerage will be able (and should be willing) to manually update the cost basis and purchase dates in their systems after the fact.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

NoHeat
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Re: Does cost basis rollover during an IRA rollover and strategies involved?

Post by NoHeat » Thu Jun 14, 2018 8:05 am

You track basis only if some but not all of the account might be taxed upon withdrawal. I’m aware of two situations, for retirement accounts.

After-tax contributions to an account.
This is probably the biggest situation. In a traditional IRA, non deductible contributions should be tracked; if you don’t you will pay tax on them twice. I track this basis with a Form 8606 every year, and the cumulative amounts for all such accounts are tracked as a total. I do not track basis of individual securities, and I don’t see why the broker or bank would, either.

Unqualified distribution.
If you withdraw too early from a Roth contribution, that might be another situation.
https://www.fool.com/knowledge-center/d ... n-ira.aspx

I don’t know of another reason to track basis for a retirement account.

ryman554
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Re: Does cost basis rollover during an IRA rollover and strategies involved?

Post by ryman554 » Thu Jun 14, 2018 8:32 am

yarnandthread wrote:
Thu Jun 14, 2018 7:13 am
I know for retirement accounts cost basis really shouldn't matter, but I would like to have it if possible. Thank you for any thoughts.
Why?

As you said, it doesn't matter for tax reasons.

Are you trying to compute an IRR? You need cash in, not cost basis, since the cost basis drops as dividends are distributed.

Are you tracking growth of a particular fund? Again, see dividend distribution as getting in the way of said plan, plus we all know tracking growth religiously is the first step down the dark path of chasing growth and market timing.

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