Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

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peseta
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Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by peseta » Fri Jan 04, 2019 10:35 am

Like many on this board, I've done backdoor Roth contributions at Vanguard the past few years. Prior to this year, my funds were available to convert in my traditional IRA account within 24 hours.

Also like many on this board, I was essentially forced to change my IRA accounts into Vanguard IRA brokerage accounts last year. I was led to believe by Vanguard that this wouldn't change anything from a practical perspective. However, when I began the backdoor process this year, I learned this wasn't the case.

Yesterday, I made my usual nondeductible traditional IRA contribution, with an EBT as I've always done. When I logged onto my account today, that money had posted to my traditional IRA. However, the system would not allow me to convert it to my Roth.

The reason (confirmed by a helpful Vanguard rep): a seven-day hold. I suspect this may be an SEC requirement of some sort. See here: https://investor.vanguard.com/investing ... ement-fund

According to the rep, the hold affects brokerage accounts, but not their mutual fund accounts. I wish I knew this in advance. Not the end of the world that I have to wait a week, but oh well. Just wanted to make sure others were aware.

I saw a few threads on the general Vanguard push to switch to brokerage accounts, but my quick review didn't reveal any discussion of this specific issue (apologies if I missed it).

peseta

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queso
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Re: Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by queso » Fri Jan 04, 2019 11:04 am

A-ha! Thanks for posting this. I assumed something was just slower this year with my bank transfer (electronic), but this explains it. My previous BDR conversions were all done the next day, but Vanguard still lists my funds as unavailable even though I moved them on 1/3. I just checked by clicking a couple links deeper than I did last time and it says they won't be available until 1/9.

Thanks!

cas
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Re: Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by cas » Fri Jan 04, 2019 12:33 pm

In amongst the 10,000 posts in the last week on Roth conversions/backdoor Roths, there was another post where another couple of people were having this same issue. I think. I can't find it again among the 10,000 other posts with similar words in their titles.

In any case, those people found that the issue is *not* the 7 day hold. It is the 1 day necessary for the funds to settle in the brokerage account.

Try the Roth conversion again tomorrow, and (according to that prior post), it should work.

cas
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Re: Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by cas » Fri Jan 04, 2019 12:49 pm

Aha. Found the other thread.

"Roth conversion went bad.." viewtopic.php?t=267716

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peseta
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Re: Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by peseta » Fri Jan 04, 2019 3:21 pm

cas wrote:
Fri Jan 04, 2019 12:33 pm
In amongst the 10,000 posts in the last week on Roth conversions/backdoor Roths, there was another post where another couple of people were having this same issue. I think. I can't find it again among the 10,000 other posts with similar words in their titles.

In any case, those people found that the issue is *not* the 7 day hold. It is the 1 day necessary for the funds to settle in the brokerage account.

Try the Roth conversion again tomorrow, and (according to that prior post), it should work.
Thanks, Cas. I'll give it a try tomorrow and report back. Appreciate it.

peseta

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peseta
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Re: Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by peseta » Sun Jan 06, 2019 9:53 pm

Cas was indeed correct (and the Vanguard rep was wrong). I was able to complete the process over the weekend. Thanks, all!

peseta

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queso
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Re: Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by queso » Mon Jan 07, 2019 9:00 am

Maybe it depends on the bank? I have Wells Fargo and my funds still aren't available and are still listed as not being available until 1/9.

Whakamole
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Re: Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by Whakamole » Mon Jan 07, 2019 1:16 pm

Just FYI, there's no hold if the money is already in a taxable brokerage account. With Vanguard's Federal MM fund paying competitive rates (2.3% right now), it may be better to transfer the money at the end of the year going forward, so there won't be a delay due to check/EBT processing.


DaftInvestor
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Re: Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by DaftInvestor » Mon Jan 07, 2019 1:58 pm

peseta wrote:
Fri Jan 04, 2019 3:21 pm
cas wrote:
Fri Jan 04, 2019 12:33 pm
In amongst the 10,000 posts in the last week on Roth conversions/backdoor Roths, there was another post where another couple of people were having this same issue. I think. I can't find it again among the 10,000 other posts with similar words in their titles.

In any case, those people found that the issue is *not* the 7 day hold. It is the 1 day necessary for the funds to settle in the brokerage account.

Try the Roth conversion again tomorrow, and (according to that prior post), it should work.
Thanks, Cas. I'll give it a try tomorrow and report back. Appreciate it.

peseta
Worked for me too - although took 2 business days before I was able to Convert (versus 1 like last year). I did the deposit into traditional on Jan 2 - then the conversion on January 4th.

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queso
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Re: Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by queso » Thu Jan 10, 2019 10:24 am

Was finally able to complete this today. Funds didn't show up in the money market until the 9th and then it took another day for the Roth conversion to process and for them to show up in my Roth account. Then I had to exchange them for VFIAX (couldn't do VTSAX due to wash sale issues from last month's tax harvesting) this morning so technically I won't be back in the market until tomorrow. Next year I'll do the bank transfer in December so it should only take 2 days (1 day to move into Roth, 1 day to exchange) rather than 7-8.

stocknoob4111
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Re: Heads up: one week delay at Vanguard to do backdoor Roth using EBT/check if you've switched to brokerage accounts

Post by stocknoob4111 » Thu Jan 10, 2019 3:36 pm

Two different reps from VG confirmed to me that officially there is a 7 day hold on all funds deposited into an IRA. However the system allowed me to convert to Roth funds that settled 1/8 so not quite sure what the policy is.

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