Transferring Roth IRA from Scottrade to Vanguard

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Sladuuch
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Joined: Mon Jan 10, 2011 9:42 pm

Transferring Roth IRA from Scottrade to Vanguard

Post by Sladuuch » Mon Jan 10, 2011 10:01 pm

Hello everyone! First post and all.

I have a question about a Roth IRA for my wife. We're both very young and we set up a Roth IRA for her with Scottrade last year. However, for various reasons, we're not happy with Scottrade and would like to move it to Vanguard. Right now I'm trying to start the process to move her it over and I just received an email reply from a Vanguard rep, who said, "There are no minimums required to purchase ETFs; however, you would need to establish a money market sweep account, which requires a $3,000 initial minimum investment."

I have a few questions:

1. What is a money market sweep account and why do we need it? I'm a bit confused by this, as her current Scottrade IRA doesn't work this way; we just deposit money in the account and then use it to purchase investments. Is the MMS account a separate thing or what?

2. My Wife's existing Roth IRA has about ≈$400 worth of shares in VTI in it (don't laugh too much, we're pretty young :P ), which is obviously lower than the $3,000 minimum. We have cash ready to make up the difference, but how should we do this: deposit the cash in the Scottrade IRA and then transfer it to vanguard? Or transfer it first and then fund the transferred account?

3. Since we already own some VTI, which the new IRA will be principally invested in (unless people here think that's really stupid, of course :) ), will we be able to transfer that to the new IRA, even though it's below the $3,000 minimum? Or will we have to sell it all, transfer $3,000 worth of cash, and use that to buy all-new shares?

Thanks, everyone!

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SHL
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Post by SHL » Tue Jan 11, 2011 11:02 am

I'm thinking of doing the same thing and am also finding it a bit confusing.

Apparently, with Vanguard, you have a mutual fund account to hold Vanguard funds, a brokerage account to hold anything else, and a money market account to hold cash. :confused

Guess I'll phone the Big V and let them try to explain it all to me.

I'm a little slow, but eventually I catch on. :happy
Stephen

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gotherelate
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Re: Transferring Roth IRA from Scottrade to Vanguard

Post by gotherelate » Tue Jan 11, 2011 11:57 am

Sladuuch wrote: 1. What is a money market sweep account and why do we need it?

2. ...deposit the cash in the Scottrade IRA and then transfer it to vanguard? Or transfer it first and then fund the transferred account?

3. Since we already own some VTI,...will we be able to transfer that to the new IRA, even though it's below the $3,000 minimum? Or will we have to sell it all, transfer $3,000 worth of cash, and use that to buy all-new shares?

Thanks, everyone!
1. A sweep account is needed in a brokerage account (which is where you will hold ETFs at Vanguard) to hold money that is the result of sell transactions, and that is waiting to be used for buy transactions. I don't know why Scottrade would not require one.

2. & 3. You may need to ask a Vanguard rep. I was able to transfer in kind shares of individual stocks and an ETF when I moved my IRAs from Schwab to Vanguard.

Good luck.
-Grandpa | I'd rather see where I'm going than see where I've been.

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CABob
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Post by CABob » Tue Jan 11, 2011 1:31 pm

As far as I know, all brokerage accounts (where you can buy stocks or ETFs) have to have some provision for holding cash. Typically it is where you first deposit money to open the account, it is where money goes when you sell something. and it is a place where distributions such as dividends go when issued. This cash portion can be a money market mutual fund or something like a bank account and my depend on the policies of the broker.
Scottrade has such a provision even if it does not currently hold any cash. I'm not exactly sure how VBS handles this for a small account. I suggest you talk to Vanguard.
Bob

Topic Author
Sladuuch
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Post by Sladuuch » Wed Jan 12, 2011 3:20 pm

All right, I just got off the phone with a Vanguard lasy and here are the results:

1. Vanguard holds the cash portion of your account in a Money Market Sweep account. Apparently Scottrade either doesn't do this, or does it under the hood but hides it from you.

2. Since the existing Scottrade Roth IRA already had Vanguard ETFs in it, it was exempt from the $3,000 minimum and we were able to initiate the transfer without issue.

3. We were able to keep the existing shares because they're Vanguard funds.

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anthau
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Post by anthau » Thu Jan 13, 2011 10:33 am

Granted, it's tangential to the OP's question, but here's how Scottrade sweeps.
Best, | | Anth

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