Good time to transfer Beneficiary IRA to Vanguard?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Glacier5
Posts: 2
Joined: Wed Aug 02, 2017 9:23 pm

Good time to transfer Beneficiary IRA to Vanguard?

Post by Glacier5 »

Hello Bogleheads,

I'm new here and could use your advice and knowledge. I have been studying Bogleheads ("Bogelheads Guide to Investing") and Vanguard for months, but I do lack the confidence to DIY. I have accounts at Vanguard and at Wells Fargo. I do have a Vanguard VPAS, but I would like to get your insight.

I have a Wells Fargo beneficiary IRA (spousal). It is worth about 150k. It has 19 mutual funds average around .70% ER in addition to a 1% AUM fee. I know from reading books and reading this website, they are making at least 2% from my funds. From my research I would make more money in the long term by transferring the IRA to Vanguard. I am wondering is this the right time to do it, because the stock market is at an all time high. Is there any strategy I need to be thinking about that I don't know? Also, I can let my VPAS handle this, but he will put 10% of my money in International bonds He also would put some of the funds into short and intermediate bonds. Is this ok? If I did the simple 3 funds strategy, I would need to re-balance. Would there be anything else I would need to do? Are there any special considerations because this is a Beneficiary IRA? I would appreciate any thoughts of wisdom.

Thank you,
Glacier 5
Jack FFR1846
Posts: 13251
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Good time to transfer Beneficiary IRA to Vanguard?

Post by Jack FFR1846 »

Do the transfer. Your question to yourself should be "do I like throwing $3k in the toilet every year or would you rather, for some reason, keep that in your account?

Once it's transferred over, put it into the funds needed for your preferred 3 fund. If you don't want the spend the 15 minutes a year (what I do) rebalancing on your birthday (what I do), then put it into a target date fund that most closely matches your desired AA. From what I've seen, that's pretty much what PAS seems to do. They work with you to figure out the AA that fits, then they buy individual funds to pretty much match one of the target date funds.

Notice I didn't mention if the market is high or low or sideways. That doesn't matter.
Bogle: Smart Beta is stupid
User avatar
flamesabers
Posts: 1824
Joined: Fri Mar 03, 2017 12:05 pm
Location: Rochester, MN

Re: Good time to transfer Beneficiary IRA to Vanguard?

Post by flamesabers »

Welcome to the forum! :beer

With an average ER of 0.70% and a 1% AUM on top of that, I highly recommend transferring your IRA right away to Vanguard or to another broker that won't charge you such insane fees. Regardless of the state of the stock market, nobody knows exactly when the next bear market will be or how severe it will be. It could be tomorrow or it could be several years or more in the future. What is certain is you're losing a lot of money by leaving your IRA where it currently is.

Why would your VPAS put 10% of your money in international bonds? Are you putting your IRA in a lifestrategy or target retirement fund? As for whether this allocation is okay, it really depends on what your desired asset allocation is.
Avo
Posts: 1099
Joined: Wed Jun 11, 2008 2:21 am
Location: California

Re: Good time to transfer Beneficiary IRA to Vanguard?

Post by Avo »

Welcome to the forum!

No matter what is happening with the market, the best time to stop paying high fees is always now.

The only question is whether it would be cheaper to sell at Wells Fargo, or transfer "in kind" and sell at Vanguard. You would need to ask both WF and Vanguard for the total costs of selling everything to be sure.

You are paying for VPAS advice. I would take it. Here at bogleheads, we will argue endlessly about things like whether int'l bonds are needed or not, but this is a very minor issue. Just take the VPAS advice and don't look back.

If you want to continue to learn more and ultimately DIY, that's fine too, of course, and a little cheaper. But for now, you seem like you would be better off using the service that you are paying for.
Spirit Rider
Posts: 13977
Joined: Fri Mar 02, 2007 2:39 pm

Re: Good time to transfer Beneficiary IRA to Vanguard?

Post by Spirit Rider »

Anytime should be as good as any other. The only risk is market rise while you are out of market. However, that could occur at any level of the market.

The primary consideration with an Inherited IRA is that any change of custodian must normally be done by trustee->trustee transfer. A distribution is irrevocable and can not be rolled over.

However, as a spousal IRA, you can always assume ownership. So, you can do a distribution followed by a rollover to an owned IRA. However, this would preclude future penalty-free distributions before 59 1/2.

A relevant question, are you >= age 59 1/2. If so, there is no benefit to maintaining it as an Inherited IRA. You would be better off taking ownership. Your beneficiaries would then be able to use their own life expectancies.
aristotelian
Posts: 8919
Joined: Wed Jan 11, 2017 8:05 pm

Re: Good time to transfer Beneficiary IRA to Vanguard?

Post by aristotelian »

Do the transfer. Do not pay another dime to Wells Fargo. Once the funds are transferred you can figure out what to invest in. Vanguard is just the custodian -- you can invest in whatever you want through them.
Topic Author
Glacier5
Posts: 2
Joined: Wed Aug 02, 2017 9:23 pm

Re: Good time to transfer Beneficiary IRA to Vanguard?

Post by Glacier5 »

Thank you so much for your warm welcome and good advice! This IRA looks like it needs to be transferred ASAP. But Spirit Rider made a very good point about the Beneficiary IRA. I am under 59 1/2 by more than 10 years. The financial advisor kept the IRA as a Spousal IRA, so I could tap into the money without penalty. So are there any considerations I need to know of before I transfer the Beneficiary IRA? I just want to understand the process. I do have a trust, if I need to do trustee to trustee transfer.
letsgobobby
Posts: 12073
Joined: Fri Sep 18, 2009 1:10 am

Re: Good time to transfer Beneficiary IRA to Vanguard?

Post by letsgobobby »

Deleted
Last edited by letsgobobby on Fri Oct 25, 2019 1:02 am, edited 1 time in total.
Spirit Rider
Posts: 13977
Joined: Fri Mar 02, 2007 2:39 pm

Re: Good time to transfer Beneficiary IRA to Vanguard?

Post by Spirit Rider »

Glacier5 wrote:Thank you so much for your warm welcome and good advice! This IRA looks like it needs to be transferred ASAP. But Spirit Rider made a very good point about the Beneficiary IRA. I am under 59 1/2 by more than 10 years. The financial advisor kept the IRA as a Spousal IRA, so I could tap into the money without penalty. So are there any considerations I need to know of before I transfer the Beneficiary IRA? I just want to understand the process. I do have a trust, if I need to do trustee to trustee transfer.
The trustee->trustee transfer refers to the type of transfer between the two IRAs. IRAs are in fact trusts behind the scenes, but this is not something you ever deal with. This has nothing to do with any other trust you might have.

In order to maintain the account as an Inherited IRA, the transfer must be by trustee-trustee transfer. This means the assets must be transferred directly between the two IRAs. This can be done by check mailed to you to forward to the new IRA custodian, but the check must be payable to the new custodian.

If the check were payable to you and cashed by you, it would be treated as a distribution. While this could be indirectly rolled over by a spouse to an owned IRA, you would have irrevocably lost the Inherited IRA.
Post Reply