Not choosing Vanguard for kid's Roths due to minimums?

[DesertGator]

Hi all- I have accounts with Vanguard, Fidelity and Schwab so I am familiar with them and their offerings. All retirement is at Vanguard and I am a big fan of the company & follower of the 3 fund portfolio concept.

My teens are ready to set up Roths, and I'd prefer to go with Vanguard (investment will be 100% single fund portfolio - US Stock Index). However, Vanguard has a $3000 minimum for all but a couple active starter funds (not to mention a $1000 account minimum as well). Looks like you can't buy Vanguard ETF's in Vanguards Roth or Traditional IRAs.

They will each start out with $1000 and it may be a few years before getting the balances to $3000. Should I just open their Roth at Fidelity, which has no minimums and use their low-cost US Stock index fund and be done with it?

I considered Schwab, and they have an similar index fund as well, but the kids already have Schwab checking accounts, and I'm worried they will find it too easy/tempting to move money from the retirement side to the spending side. Having the retirement account with a different company seems like a good idea.

I feel like for the long term I'd want them at Vanguard, and worry that starting them somewhere else is likely to make that company their long term home.

Thoughts?

[mhalley]

Fidelity and Schwab are fine. Alternatively, they could use td funds that have 1k minimum. Instead of 100% stocks they would be 90/10, close enough, unless you are totally against intl. You CAN buy etfs in Vanguard iras, where did that misinformation come from? You can use etfs in vanguard iras, but I prefer the simplicity of mf myself.

[bumbojumbo]

I bought Vanguard ETFs in a Vanguard Roth.

You might already know this, but there has to be earned income to contribute to a Roth.

[DesertGator]

Fidelity and Schwab are fine. Alternatively, they could use td funds that have 1k minimum. You can buy etfs in iras, where did that info come from? You can use etfs in vanguard iras, but I prefer the simplicity of mf myself.

When I go into my Vanguard Traditional IRA it only let's me buy/exchange for mutual funds. If I type in any Vanguard ETF ticker it doesn't find it. The label for the field says "mutual funds".

[DesertGator]

I bought Vanguard ETFs in a Vanguard Roth.

You might already know this, but there has to be earned income to contribute to a Roth.

The kids have earned income above what they would contribute.

Interesting that you can trade ETF's in the Roth, that changes everything; I could not find any clarification of this initially on the Vanguard site. I can't buy or exchange for ETF's in my Vanguard traditional IRA & assumes this applied to a Roth as well.

Thanks!

[KyleAAA]

Schwab and Fidelity are both good choices, but you can buy ETFs in Vanguard IRAs. It needs to be a brokerage account which is what you’d get if you opened a new account today. You may have one of the old mutual-fund-only accounts, which I don’t think they will even let you open anymore.

FWIW I have my taxable investments at Fidelity and don’t see any reason to prefer Vanguard.

[mhalley]

That means you have the legacy mf only account. All new accounts are brokerage accounts. If you like, you can upgrade your account to a brokerage account. Many threads on the pros and cons here.
Review of the account
https://www.mymoneyblog.com/vanguard-me ... -cons.html
I think this is a link to upgrade

https://personal.vanguard.com/us/hnwnes ... dacctmaint

[HomeStretch]

I like and use both Vanguard and Fidelity.

Fidelity worked better for my college student for a Roth IRA and cash management account (CMA) for several reasons:
1. No minimums as you posted
2. Easy to immediately transfer funds from my account to student’s accounts by phone with CS rep
3. CMA has a no-fee ATM card
4. Senior year, student applied for own Fidelity 2% Visa card. Low limit but more importantly builds credit history. Fidelity Rep said having Fidelity accounts played a part in the approval.

[dru808]

Fidelity and Schwab are fine. Alternatively, they could use td funds that have 1k minimum. You can buy etfs in iras, where did that info come from? You can use etfs in vanguard iras, but I prefer the simplicity of mf myself.

When I go into my Vanguard Traditional IRA it only let's me buy/exchange for mutual funds. If I type in any Vanguard ETF ticker it doesn't find it. The label for the field says "mutual funds".

Did you transition to a brokerage account? You’re probably stuck in the old mutual fund account. If you set up for the kids, their only option will be a brokerage account that will allow etfs.

[mortfree]

VTI all the way.

Or VT

Let them open their accounts and it will allow for purchase of ETFs as others have said here (brokerage platform)

[nix4me]

Use ETFs. VTI or VOO

[yogesh]

I would suggest M1 Finance:
- Banking
- Debit Card
- Automated Savings
- Automated Investment

[02nz]

Hi all- I have accounts with Vanguard, Fidelity and Schwab so I am familiar with them and their offerings. All retirement is at Vanguard and I am a big fan of the company & follower of the 3 fund portfolio concept.

My teens are ready to set up Roths, and I'd prefer to go with Vanguard (investment will be 100% single fund portfolio - US Stock Index). However, Vanguard has a $3000 minimum for all but a couple active starter funds (not to mention a $1000 account minimum as well). Looks like you can't buy Vanguard ETF's in Vanguards Roth or Traditional IRAs.

They will each start out with $1000 and it may be a few years before getting the balances to $3000. Should I just open their Roth at Fidelity, which has no minimums and use their low-cost US Stock index fund and be done with it?

I considered Schwab, and they have an similar index fund as well, but the kids already have Schwab checking accounts, and I'm worried they will find it too easy/tempting to move money from the retirement side to the spending side. Having the retirement account with a different company seems like a good idea.

I feel like for the long term I'd want them at Vanguard, and worry that starting them somewhere else is likely to make that company their long term home.

Thoughts?

First, the statement that "all but a couple of active starter funds" have $3K minimums is incorrect. All of Vanguard's target retirement date funds, which are index-based, have $1K as the minimum. An excellent choice for your kids' Roth IRAs.

Second, it seem like you have some sort of emotional commitment or attachment to Vanguard. Maybe it's because of Jack Bogle. My advice - don't. I'm a huge admirer of Bogle, but Vanguard the company is just another company, particularly in this day and age of low-cost investing. In my experience (including Vanguard, Fidelity, Schwab, Merrill Edge, and Chase You Invest), as a brokerage operation Vanguard takes dead last place for customer service. You can hold Vanguard ETFs almost anywhere, and Fidelity, Schwab et al have plenty of alternatives if you want traditional mutual funds. Your kids will be just fine at Fidelity, Schwab, Merrill Edge, or any number of places as long as they stick to low-cost investing.

[Quaestner]

It's great to teach your kids the 3-fund strategy, but why not start them with Vanguard's Target 2065 (VLXVX) now? $1000 minimum - 90% Stock. After a few years of contributions, you could then switch to the funds you want. (No tax consequences to switching since this would be a Roth.)

[FiveK]

It's great to teach your kids the 3-fund strategy, but why not start them with Vanguard's Target 2065 (VLXVX) now? $1000 minimum - 90% Stock. After a few years of contributions, you could then switch to the funds you want. (No tax consequences to switching since this would be a Roth.)

+1

See also Working teens and Roth IRAs: A perfect investing match | Vanguard Blog if you want to open a custodial account at Vanguard: "You can’t open a custodial IRA online, but the process is simple. Call us at 800-551-8631 during normal business hours."

I believe Fidelity and Schwab will let you open a custodial IRA online.

[Bama12]

Use Vanguard and buy ETF.

[arcticpineapplecorp.]

Use Vanguard and buy EFT.

what's an EFT? I don't see that as a ticker. Google says it's "Emotional Freedom Technique" (source: https://www.google.com/search?client=fi ... -1-d&q=eft). Do you mean ETF (Exchange Traded Funds)?

[rai]

yes you can buy Vanguard ETFs in a Roth IRA, you can buy stocks and probably trade options too if you wanted.


My Daughter set up 100% VTI. We set up with electronic delivery and there are no fees although she did deposit $6000 (no fees whatsoever to trade Vanguard ETFs or hold the account open).

[Cubicle]

I set up my brother's Roth IRA a few years ago. Using ETFs without any troubles.

I actually believe you have a brokerage account. I can't imagine you have such an old Roth IRA account that it would be mutual funds only. There are 2 options to be aware of when you click the "Buy and Sell" link.

"Buy Vanguard Funds"

Below that...

"Trade Vanguard ETFs (and non-Vanguard ETFs)"

I've gotten lost there as well.

[grabiner]

You can start a Roth IRA at Vanguard with $1000 in a Target Retirement fund, which is a great fund for getting started with investing because it is a diversified portfolio on its own.

[TravelforFun]

Schwab and Fidelity are both good choices, but you can buy ETFs in Vanguard IRAs. It needs to be a brokerage account which is what you’d get if you opened a new account today. You may have one of the old mutual-fund-only accounts, which I don’t think they will even let you open anymore.

FWIW I have my taxable investments at Fidelity and don’t see any reason to prefer Vanguard.

I agree with the bolded statement. I have or had accounts at Vanguard, Fidelity, Schwab, Etrade, and TD Ameritrade and they're all are good. No need to limit yourself to just Vanguard.

TravelforFun

[cowbman]

I personally like Fidelity, but to each his own. FZROX solves your issue.

[Nummerkins]

I opened 529s for my kids at Fidelity due to this very reason... $0 minimums. I considered moving them to Vanguard once they reached the minimum but I ended up going the opposite way and transferring all my assets to Fidelity.

[Spirit Rider]

FWIW I have my taxable investments at Fidelity and don’t see any reason to prefer Vanguard.

I agree with the bolded statement. I have or had accounts at Vanguard, Fidelity, Schwab, Etrade, and TD Ameritrade and they're all are good. No need to limit yourself to just Vanguard.

That is fine if you are investing in ETFs. Fidelity broad market equity Index Funds generate taxable distributions most years, while Vanguard broad market equity Index Funds seldom do.

[oldfatguy]

I actually believe you have a brokerage account. I can't imagine you have such an old Roth IRA account that it would be mutual funds only.

Why is that hard to imagine? I only converted my Roth IRA account to a brokerage account earlier this year (or maybe it was late last year).

[Spirit Rider]

I actually believe you have a brokerage account. I can't imagine you have such an old Roth IRA account that it would be mutual funds only.

Why is that hard to imagine? I only converted my Roth IRA account to a brokerage account earlier this year (or maybe it was late last year).

Because the Original Post and the entire thread is about opening new Roth IRA accounts for their teenagers.

[oldfatguy]

I actually believe you have a brokerage account. I can't imagine you have such an old Roth IRA account that it would be mutual funds only.

Why is that hard to imagine? I only converted my Roth IRA account to a brokerage account earlier this year (or maybe it was late last year).

Because the Original Post and the entire thread is about opening new Roth IRA accounts for their teenagers.

I don't believe the OP has opened new accounts yet, he was describing his own account.

When I go into my Vanguard Traditional IRA it only let's me buy/exchange for mutual funds. If I type in any Vanguard ETF ticker it doesn't find it. The label for the field says "mutual funds".

[snowman]

There are no minimums anywhere anymore if you buy ETFs. My kids started Roth IRA over 10 years ago at TDA with about $200 each. About 2 years ago they both transferred to Vanguard when TDA started charging commissions on Vanguard ETFs.

Today, you can open Roth IRA at any of the firms mentioned and have no minimums and no commissions. I like Fidelity and TDA the most, but Schwab is a good alternative as well. If I were opening new Roth IRA today, I would go with Fidelity (since TDA will become Schwab next year), and buy VTI and VXUS there.

Another reason I would go with Fidelity is their CMA offering. Sooner or later, your teens will want to establish their own checking account, and Fidelity has the best offering on the market - no fees, no minimums, ATM free around the world, free checks, etc. I hear great things about Schwab, so that would be good alternative, but I have no personal experience so cannot recommend it.

With Fidelity or Schwab, they could use single login to manage their finances, and access great CS via chat should they need help. Add to that slow and antiquated website, lack of bank product offering, and declining level of phone CS, and I would not go with Vanguard today.

One more thing - when your teenagers reach adulthood, you will face the task of converting Roth IRA Minor account (where you are the custodian) to regular Roth IRA account. My older one did it at TDA and it was a quick, simple task (as one would expect). The younger one did it at Vanguard, and it was a nightmare... They simply did not have the process in place, gave consistently different answers over the phone, etc. Another reason to avoid Vanguard for Roth IRA Minor account.

[mikepru]

I opened Roths for my children back when-----I just called Vanguard and asked if they could open accounts without the minimum, which they did. One account now has over $100K and he's only 29.

[mikepru]

Forgot to mention--both children converted from minor to adult Roth--no problems at all.

[Broken Man 1999]

Use Vanguard and buy ETF.

That is what I would do.

Although it is easy to swap investments without incurring taxes in a Roth, having ETFs in a Roth makes it very easy to decamp Vanguard if another brokerage better suits your teens.

I have already exchanged all my equity Vanguard mutual funds to Vanguard ETFs. When I have procrastinated long enough and finally decide on my bond holdings, I will convert my Vanguard bond mutual funds to Vanguard bond ETFs.

Then, I will be able to slip away quickly like a thief in the night if Vanguard ever disappoints me enough to cause me to rethink my relationship with the company. Very unlikely, but one never knows what the future will bring.

Unlike many long-term Vanguard customers, I am delighted to see Vanguard adding new products to their offerings. I think if a company doesn't grow, the company will atrophy. Businesses decline for many reasons, losing sight of, or not rolling out products the market wants is but one way. I like having the option to purchase what financial products make sense for me, and I don't begrudge others who might want a different array of products. If someone is buying a new product that is widely available to the masses, I hope they are buying it from Vanguard.

Broken Man 1999

[Wiggums]

I bought Vanguard ETFs in a Vanguard Roth.

You might already know this, but there has to be earned income to contribute to a Roth.

The kids have earned income above what they would contribute.

Interesting that you can trade ETF's in the Roth, that changes everything; I could not find any clarification of this initially on the Vanguard site. I can't buy or exchange for ETF's in my Vanguard traditional IRA & assumes this applied to a Roth as well.

Thanks!

It shoulda like you have a mural fund only account. The account can be upgraded to a brokerage account. Call Vanguard.

[Doom&Gloom]

There may be valid reasons to open his account elsewhere, but Vanguard's minimum requirements is not one of them.

I opened my kid's Roth (actually helped him open it but I funded it) at Vanguard earlier this year.