Edward Jones to Vanguard Sanity Check Please

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Kintora
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Edward Jones to Vanguard Sanity Check Please

Post by Kintora » Sun Jan 12, 2020 9:21 pm

Hello, this is my first post on this forum, so please gently correct me if I am doing anything incorrectly :)

I received an inheritance from my Grandma about 9 years ago and have been receiving it over a 10 year period with the final payment to be received this coming August 2020.

I had no clue about anything back in 2011. I was referred to Edward Jones by someone and just went with it. My EJ guy is a seemingly nice and knowledgeable guy, but now I realize how badly I am getting killed by fees and expenses and an overly complicated portfolio. Better late than never I guess. Most of my taxable account assets and tax-advantaged accounts are currently under Guided Solutions with a 1.35% AUM fee and then all the other ugly fees and expenses that come along with EJ.

Needless to say, I understand that I need to leave EJ ASAP for the health of my financial future and retirement. I have done a lot of reading and research (with much more still to do) and I am starting to form a basic game plan in my mind. Hoping some of you could help me with a sanity check to make sure that I am on the right track or if I need any corrections.

Emergency Funds: Approximately one year living expenses in checking. As I get financially organized, I will reduce this to six months living expenses and relocate most of it out of checking to something that gives me at least 1 or 2% interest.

Debt: No debt!

Tax Filing Status: Single and likely to remain so.

Tax Rate (marginal): Federal - 22% or 24% this year if bumped up by annuity payment and/or taxable gains, State - 2.04%

State of Residence: North Dakota

Age: 45 (hope to retire between 55 and 60 to a lower cost of living country)

Desired Asset Allocation: Approximately 75% stocks / 25% bonds
Desired International Allocation Approximately 20% of stocks

I have done some research on Vanguard vs. Fidelity vs. Schwab, and I am strongly leaning towards Vanguard even though I know it is likely I will not be reimbursed by them for the EJ account closure fees.

I have six accounts at EJ. Four are considered Single (taxable) and then a Traditional IRA and a Roth IRA. It is a healthy 6 figures portfolio. There is a Protective variable annuity in one of the single accounts (Protective Dimensions) which is non-qualified and is approximately 13% of my entire portfolio. The annuity is listed as "held at vendor" and I am able to access the account from the Protective website and change my own allocations, etc.

From reading here and elsewhere, I have gathered that I should contact Vanguard and get their advice and assistance on pulling my accounts/funds into a Vanguard account in the most cost-efficient way possible. I realize that they may not be able to transfer some of my EJ holdings in-kind. I want a clean and swift break from EJ, so anything they cannot transfer in-kind would need to be liquidated on the EJ side likely triggering taxable events.

Trad IRA and Roth IRA: I have approximately the same amount in each and combined they comprise almost 20% of my total portfolio. I am thinking this might be a decent place to put my total bond index fund since the general rule of thumb seems to be putting bonds in tax-advantaged accounts.

Roth 401k: This is really small right now (~$3,000), but I have cut my spending and am cranking up my contributions to try and hit around $19,000/year going forward while I am still working. This is outside of EJ. Just listing as FYI.

Taxable: The majority of my investments are here. About 58% of portfolio. Many stocks, mutual funds, ETFs, CDs and municipal bonds.

So... how to proceed...

1. For the IRAs, will Vanguard be able to direct EJ to convert the holdings inside them to cash and then pull the IRAs over to Vanguard? Once in Vanguard, I could then use the cash inside them to purchase the desired Vanguard funds? Anticipating no tax consequences here.

2. For the taxable accounts, should I see what Vanguard can pull in-kind and then decide what to do with them once in my Vanguard account? Ultimately, I would want to liquidate them so that I could allocate to Vanguard index funds/ETFs (probably total US stock index and total international stock index). I would try to avoid short term capital gains where possible waiting to sell until I have held them over a year. For the stocks and mutual funds that Vanguard cannot transfer over in-kind, can Vanguard direct EJ to liquidate those to cash and then pull the cash over? This would no doubt trigger taxable events. I should state that I will have the final annuity check from my inheritance coming in August, so I could set some of that cash aside to pay the tax bill in early 2021. I really don't want to leave anything in EJ. I want a complete break from them ASAP. So, suck it up and on the Vanguard side sell all that have long term capital gains and wait on the short term ones until they become long term? And any that cannot transfer to Vanguard in-kind, have them sold on the EJ side regardless of long-term or short-term gains? Most should be long-term, but there will be a few short term gains.

3. For the Protective variable annuity, I ultimately do not want to be in this. I want to get out and get the proceeds over to my taxable account (assuming Roth IRA and Roth 401k are being maxed yearly as priority of course). The current haircut I would take from surrender would be around $2,500 which as a percentage of the annuity is not that much. However, I also have gains on this annuity which would be hit with regular income tax as well as the 10% early withdrawal penalty. Contributions were after-tax dollars. So, not counting the surrender loss, I would be hit with a tax bill and penalty of somewhere around $4,000 for the gains if I cash out. Waiting until the surrender fees completely goes away doesn't seem like an option as that would probably take another 6 years. However the largest contribution was in November 2014, so if I wait until November of this year, the surrender amount should be less. I know there may be an option to transfer it to a Vanguard annuity with lower fees as well, but ultimately, I do not want to be in an annuity at all. I want these dollars in my Vanguard stock indexes in my taxable account. The fees/expenses on this Protective variable annuity aren't as bad as some I have heard of. As best I can tell by looking at the quarterly statements, in 2019 they took out about .64% in "total charges and fees." Of course, that doesn't account for the ERs in the subaccounts which are all over the place. I could reallocate most of it into a S&P 500 index there that would be about .32%. The bond fund would be about .65% for any funds I might allocate there. Again, I could have cash on hand to deal with the tax bill at any time, so I am tempted to just ditch this sooner rather than later. Maybe reallocate the subaccounts to the lower ERs and hold until November when surrender should lessen a bit and then sell to relocate to Vanguard taxable account? Or just rip the band-aid off now and get the dollars over to my Vanguard index funds sooner rather than later?

I know this is a lot of information, but it is one of the biggest decisions of my life, so I would sincerely appreciate any and all feedback that anyone may have. I know that I should print out all documents that I want from the EJ site before initiating anything. I am also aware of the Vanguard personal advisory services. I am hoping that they will give me enough help to transfer from EJ to Vanguard for free. I feel fairly comfortable in managing my own accounts. However, if I do opt for PAS to be more involved during my transition period, what is the minimum time they can be used for? One quarter? So, would it be 0.3% of AUM divided by 4 (0.075%) for 3 months of service?

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Dale_G
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Dale_G » Mon Jan 13, 2020 12:53 am

Kintora, I think you have a very good handle on what must be done.

1. For the IRAs, Vanguard should be able to tell you whether is cheaper to liquidate them at Ed Jones or Vanguard. If there aren't a lot of funds I would just move the ones that can be moved and liquidate them at Vanguard. Vanguard will be able to tell you whether you must first liquidate some of the funds at EJ.

2. Taxable: Again, move whatever you can "in kind" and liquidate the rest. You can decide when to liquidate the transferred funds and stocks based on the tax ramifications. For sure sell anything that is at a tax loss. And before any transfer, try to ascertain the tax basis for each of the holdings on the EJ website. The basis should be correctly reported on the transfer, but sometimes there is a delay.

3. The annuity is a slightly tougher nut, but unless you have a compelling reason to keep it (sounds like no), it is time to say bye-bye.

You are making a very good decision.

Dale
Volatility is my friend

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CAsage
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Re: Edward Jones to Vanguard Sanity Check Please

Post by CAsage » Mon Jan 13, 2020 9:57 am

Kintora wrote:
Sun Jan 12, 2020 9:21 pm

Emergency Funds: Approximately one year living expenses in checking. As I get financially organized, I will reduce this to six months living expenses and relocate most of it out of checking to something that gives me at least 1 or 2% interest.

Trad IRA and Roth IRA: I'm thinking this might be a decent place to put my total bond index fund since the general rule of thumb seems to be putting bonds in tax-advantaged accounts.

Roth 401k: This is really small right now (~$3,000), but I have cut my spending and am cranking up my contributions to try and hit around $19,000/year going forward while I am still working.
One might consider putting bonds in a pretax IRA (because you are going to have to pay taxes when you pull that out...) but the general rule is to put your biggest growth items (i.e. stock) in your Roth IRA or 401l. Not all retirement buckets behave the same way. Also, I would move your emergency fund now into a taxable or muni bond fund; there is precious little reason to keep more than a month pocket money in checking. Once you have the assets, it's pretty easy to move them in a few days should you need them. See the Boglehead Wiki on fund placement for more ideas...
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

bloom2708
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Re: Edward Jones to Vanguard Sanity Check Please

Post by bloom2708 » Mon Jan 13, 2020 10:04 am

Welcome.

Hello from one ND, 40 something, former Edward Jones escapee to another. :beer

You will have to liquidate Advisory Solutions funds. They are not transferable. I had the same thing. I did transfer "in kind" some taxable funds. But everything in Rollover IRAs and Roth IRAs was liquidated and transferred as cash.

I would send a letter stating your intentions with firm directions to liquidate. I would not meet with the EJ advisor again. Thank them and tell them you appreciate their help. But state it is time to do it yourself.

Contact Vanguard to do the transfer. They will help you check to see what can be transferred and what must be sold and transferred as cash. They will pull everything in. You may end up with some small balances after the transfer. There is also account closing fees at EJ. Minor in the grand scheme.

The process takes 2-3 weeks, but it is well worth it. I luckily only spent 3 years with EJ before our accounts started to ramp up. So happy I did.

You are in the discovery and take action phase. Several nights I was wide awake in the middle of the night processing fee/expense ratio implications for the next 30 years.

Welcome again and enjoy your journey here. Lots to learn every day.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words: Whole food, plant based

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Wiggums
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Wiggums » Mon Jan 13, 2020 10:15 am

You can move a variable annuity through a tax-free transfer known as a 1035 exchange. Switching to a company with lower annuity costs can lead to substantial savings. Before you transfer, check with your current company about surrender charges you may have to pay. Which I believe you are already aware of the fees.
Last edited by Wiggums on Mon Jan 13, 2020 10:16 am, edited 1 time in total.

mptfan
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Re: Edward Jones to Vanguard Sanity Check Please

Post by mptfan » Mon Jan 13, 2020 10:16 am

bloom2708 wrote:
Mon Jan 13, 2020 10:04 am
I would send a letter stating your intentions with firm directions to liquidate. I would not meet with the EJ advisor again.
Agreed. Do not get sucked into meeting with the EJ advisor again. He has been screwing you for years.

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Re: Edward Jones to Vanguard Sanity Check Please

Post by Stinky » Mon Jan 13, 2020 12:51 pm

Kintora,

Welcome to the Forum!

I must say that I am very impressed with your first post on the Forum. You seem to clearly understand the situation, and you have a good handle on how to move forward. I really have no suggestions for improvement.

I agree with others that you shouldn’t meet with EJ guy. Nothing to be gained; plus, he put you in all of the investments and the annuity that have cost you money in fees. But that’s all behind you now.

You’re relatively young, and you have a long investing lifetime ahead of you. Soon, this time with EJ will be a distant (and unpleasant) memory. Congratulations on preparing to make the move to Vanguard.
It's a GREAT day to be alive - Travis Tritt

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Kintora
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Kintora » Mon Jan 13, 2020 4:04 pm

Dale_G wrote:
Mon Jan 13, 2020 12:53 am
Kintora, I think you have a very good handle on what must be done.

1. For the IRAs, Vanguard should be able to tell you whether is cheaper to liquidate them at Ed Jones or Vanguard. If there aren't a lot of funds I would just move the ones that can be moved and liquidate them at Vanguard. Vanguard will be able to tell you whether you must first liquidate some of the funds at EJ.

2. Taxable: Again, move whatever you can "in kind" and liquidate the rest. You can decide when to liquidate the transferred funds and stocks based on the tax ramifications. For sure sell anything that is at a tax loss. And before any transfer, try to ascertain the tax basis for each of the holdings on the EJ website. The basis should be correctly reported on the transfer, but sometimes there is a delay.

3. The annuity is a slightly tougher nut, but unless you have a compelling reason to keep it (sounds like no), it is time to say bye-bye.

You are making a very good decision.

Dale
Thanks for the advice and reassurance.

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Kintora
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Kintora » Mon Jan 13, 2020 4:16 pm

CAsage wrote:
Mon Jan 13, 2020 9:57 am
Kintora wrote:
Sun Jan 12, 2020 9:21 pm

Emergency Funds: Approximately one year living expenses in checking. As I get financially organized, I will reduce this to six months living expenses and relocate most of it out of checking to something that gives me at least 1 or 2% interest.

Trad IRA and Roth IRA: I'm thinking this might be a decent place to put my total bond index fund since the general rule of thumb seems to be putting bonds in tax-advantaged accounts.

Roth 401k: This is really small right now (~$3,000), but I have cut my spending and am cranking up my contributions to try and hit around $19,000/year going forward while I am still working.
One might consider putting bonds in a pretax IRA (because you are going to have to pay taxes when you pull that out...) but the general rule is to put your biggest growth items (i.e. stock) in your Roth IRA or 401l. Not all retirement buckets behave the same way. Also, I would move your emergency fund now into a taxable or muni bond fund; there is precious little reason to keep more than a month pocket money in checking. Once you have the assets, it's pretty easy to move them in a few days should you need them. See the Boglehead Wiki on fund placement for more ideas...
Thanks for your reply. I will definitely get my checking account and emergency fund straightened out along the lines that you suggest.

So, the bonds in taxable versus tax-advantaged seems to be a bit of a split opinion among the community? The bonds I would be likely to hold would be in a total bond index fund, so not the best tax efficiency. I would fill up the Traditional IRA first for sure with bonds. But looking at the Roth IRA versus the taxable account for the remainder of the bonds, the argument to put them in the Roth IRA is that by putting them in the taxable account they will create a tax drag on growth. For that reason, I thought maybe I should put the bonds in the Roth IRA next (after the Trad IRA) and fill the taxable account up with tax efficient total stock indexes (US and international). The taxable account is currently about 80% of my portfolio, so filling up both tax-advantaged accounts with bonds would get me to roughly a 20% bond allocation for starters. I do understand the argument though as well to put stocks in the Roth since they should be higher growth and grow tax free there. But then I have bonds sitting in the taxable account being a tax drag to maintain my overall allocation. I know I can get municipal bonds for the taxable account which would minimize tax drag, but not sure if those are as good of a return as a total bond index. Bond location strategy is tough for me to decide on :confused

ExitStageLeft
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Re: Edward Jones to Vanguard Sanity Check Please

Post by ExitStageLeft » Mon Jan 13, 2020 4:26 pm

As you will be growing your 401k it shouldn't be too much of a dilemma. Go ahead and put bonds in the Roth IRA for now, but with a plan to move those over to your tax-deferred 401k in the future.

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Kintora
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Kintora » Mon Jan 13, 2020 4:28 pm

bloom2708 wrote:
Mon Jan 13, 2020 10:04 am
Welcome.

Hello from one ND, 40 something, former Edward Jones escapee to another. :beer

You will have to liquidate Advisory Solutions funds. They are not transferable. I had the same thing. I did transfer "in kind" some taxable funds. But everything in Rollover IRAs and Roth IRAs was liquidated and transferred as cash.

I would send a letter stating your intentions with firm directions to liquidate. I would not meet with the EJ advisor again. Thank them and tell them you appreciate their help. But state it is time to do it yourself.

Contact Vanguard to do the transfer. They will help you check to see what can be transferred and what must be sold and transferred as cash. They will pull everything in. You may end up with some small balances after the transfer. There is also account closing fees at EJ. Minor in the grand scheme.

The process takes 2-3 weeks, but it is well worth it. I luckily only spent 3 years with EJ before our accounts started to ramp up. So happy I did.

You are in the discovery and take action phase. Several nights I was wide awake in the middle of the night processing fee/expense ratio implications for the next 30 years.

Welcome again and enjoy your journey here. Lots to learn every day.
Thanks and cheers my ND friend :sharebeer

I am drafting my letter to EJ as we speak. Need them to kill DCA systematic purchases and dividend reinvestment as well. Taking your advice. I do not want to meet with the EJ guy again nor even talk to him on the phone if possible. I will try to do as much as I can from the Vanguard side. Being polite in the letter. Thanks, but time for me to do this on my own type thing.

Yeah, I will eat some closure fees, but as you say, a drop in the bucket compared to my 1.35% AUM fee and everything else. Short term pain, long term gain. Thanks again.

mptfan
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Re: Edward Jones to Vanguard Sanity Check Please

Post by mptfan » Mon Jan 13, 2020 4:45 pm

Kintora wrote:
Sun Jan 12, 2020 9:21 pm
Most of my taxable account assets and tax-advantaged accounts are currently under Guided Solutions with a 1.35% AUM fee and then all the other ugly fees and expenses that come along with EJ.
Others have more experience with EJ that me, but I would guess that with the high expense ratio funds on top of the AUM fee and all of their junk account fees and various maintenances fees, not to mention any 12b-1 fees, it would not surprise me if EJ was extracting 3-4% of your money each year.

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Kintora
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Kintora » Mon Jan 13, 2020 4:51 pm

ExitStageLeft wrote:
Mon Jan 13, 2020 4:26 pm
As you will be growing your 401k it shouldn't be too much of a dilemma. Go ahead and put bonds in the Roth IRA for now, but with a plan to move those over to your tax-deferred 401k in the future.
Thanks for the advice. The 401k I am currently about to start contributing to at around $19,000/year is currently a Roth 401k. I can switch it on the fly though to make my future contributions to a Traditional 401k instead. Both options are in the Voya platform. Do you suggest that I switch to Traditional 401k if I will be allocating bonds there? My effective tax rate should be lower in retirement, so I think I get the logic, but who knows how taxes may change in the future. I also kind of like the idea of the Roth 401k being tax free on the back end in my retirement years, even if it might be more tax pain up front, but that may not be a good reason to go Roth 401k. I guess the key is being disciplined and taking the up front tax savings of the Traditional 401k and investing it as opposed to spending it?

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Re: Edward Jones to Vanguard Sanity Check Please

Post by CoastalWinds » Mon Jan 13, 2020 4:59 pm

mptfan wrote:
Mon Jan 13, 2020 4:45 pm
Kintora wrote:
Sun Jan 12, 2020 9:21 pm
Most of my taxable account assets and tax-advantaged accounts are currently under Guided Solutions with a 1.35% AUM fee and then all the other ugly fees and expenses that come along with EJ.
Others have more experience with EJ that me, but I would guess that with the high expense ratio funds on top of the AUM fee and all of their junk account fees and various maintenances fees, not to mention any 12b-1 fees, it would not surprise me if EJ was extracting 3-4% of your money each year.
Agreed. I really wish this sort of thing (and EJ as an institution) could be prevented by regulation. Taking 3-4% in fees per year, combined with currently-projected longer-term returns of 3-4% for a ~60/40 portfolio, means zero growth for the customer beyond their contributions. How is that fulfilling a fiduciary duty?

EJ is the scourge of the earth.

mptfan
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Re: Edward Jones to Vanguard Sanity Check Please

Post by mptfan » Mon Jan 13, 2020 5:03 pm

CoastalWinds wrote:
Mon Jan 13, 2020 4:59 pm
I really wish this sort of thing (and EJ) could be prevented by regulation.
Good luck with that. We are not allowed to discuss politics on this forum, but who do you think benefits from the billions of dollars that financial firms make from unsuspecting investors? Don't expect the government to save you from unscrupulous financial firms, either you educate yourself or you get screwed.

ExitStageLeft
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Re: Edward Jones to Vanguard Sanity Check Please

Post by ExitStageLeft » Mon Jan 13, 2020 5:08 pm

Kintora wrote:
Mon Jan 13, 2020 4:51 pm
ExitStageLeft wrote:
Mon Jan 13, 2020 4:26 pm
As you will be growing your 401k it shouldn't be too much of a dilemma. Go ahead and put bonds in the Roth IRA for now, but with a plan to move those over to your tax-deferred 401k in the future.
Thanks for the advice. The 401k I am currently about to start contributing to at around $19,000/year is currently a Roth 401k. I can switch it on the fly though to make my future contributions to a Traditional 401k instead. Both options are in the Voya platform. Do you suggest that I switch to Traditional 401k if I will be allocating bonds there? My effective tax rate should be lower in retirement, so I think I get the logic, but who knows how taxes may change in the future. I also kind of like the idea of the Roth 401k being tax free on the back end in my retirement years, even if it might be more tax pain up front, but that may not be a good reason to go Roth 401k. I guess the key is being disciplined and taking the up front tax savings of the Traditional 401k and investing it as opposed to spending it?
If you don't have a pension it makes sense to enter retirement with about $500k in tax-deferred if single, $1M if MFJ. That allows you to draw $12k annually, offset that with the standard deduction and have a taxable income of $0. Do that for forty years and you'll want to have about half a million in tax-deferred.

Beyond that, there are way too many parameters in play to be able to predict what is your best course. I encourage you to learn more about tax diversity and how to optimize your savings. For now, focus on the immediate task of transferring away from EJ. Down the road, explore how much of the 401k should be in tax-deferred. Do make the max annual contribution to your Roth IRA, spending from taxable if necessary to do that.

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Kintora
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Kintora » Mon Jan 13, 2020 5:17 pm

Wiggums wrote:
Mon Jan 13, 2020 10:15 am
You can move a variable annuity through a tax-free transfer known as a 1035 exchange. Switching to a company with lower annuity costs can lead to substantial savings. Before you transfer, check with your current company about surrender charges you may have to pay. Which I believe you are already aware of the fees.
Thanks Wiggums. Yes, I read about those, and no doubt I could get into a lower cost annuity with Vanguard via 1035 exchange which would definitely be an improvement to the Protective one. I would have surrender charges, but I can live with that as they aren't too crazy (3.7% of the contract value or roughly $2,500). I guess knowing that I ultimately want out of annuities altogether, it becomes a question of when I want to take the tax hit of cashing out. Three options come to mind...

1. Cash out the annuity now incurring the surrender charge and tax plus penalty on gains (a/k/a rip the band-aid off). Put cash in stock index funds.
2. Hold the annuity until after November for the surrender charge to go down a bit and cash out in January 2021 to defer the taxes/penalty on gains.
3. Transfer via 1035 to a lower cost Vanguard partner annuity now incurring the surrender charge, let it ride for a while with lower fees, and cash out in January 2021.

Options 2 and 3 sound like kind of a wash, as with one the fees are higher but surrender charge is less, and with the other, the surrender is higher but the fees are less until ultimately cashing out.

I don't think option 1 would bump me up into a higher tax bracket, but I would need to analyze what happens from the other sales first. I suppose that may factor into my decision.

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Kintora
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Kintora » Mon Jan 13, 2020 5:39 pm

Stinky wrote:
Mon Jan 13, 2020 12:51 pm
Kintora,

Welcome to the Forum!

I must say that I am very impressed with your first post on the Forum. You seem to clearly understand the situation, and you have a good handle on how to move forward. I really have no suggestions for improvement.

I agree with others that you shouldn’t meet with EJ guy. Nothing to be gained; plus, he put you in all of the investments and the annuity that have cost you money in fees. But that’s all behind you now.

You’re relatively young, and you have a long investing lifetime ahead of you. Soon, this time with EJ will be a distant (and unpleasant) memory. Congratulations on preparing to make the move to Vanguard.
Thanks, I appreciate your kind words and reassurance :happy

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Kintora
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Kintora » Mon Jan 13, 2020 5:50 pm

ExitStageLeft wrote:
Mon Jan 13, 2020 5:08 pm
Kintora wrote:
Mon Jan 13, 2020 4:51 pm
ExitStageLeft wrote:
Mon Jan 13, 2020 4:26 pm
As you will be growing your 401k it shouldn't be too much of a dilemma. Go ahead and put bonds in the Roth IRA for now, but with a plan to move those over to your tax-deferred 401k in the future.
Thanks for the advice. The 401k I am currently about to start contributing to at around $19,000/year is currently a Roth 401k. I can switch it on the fly though to make my future contributions to a Traditional 401k instead. Both options are in the Voya platform. Do you suggest that I switch to Traditional 401k if I will be allocating bonds there? My effective tax rate should be lower in retirement, so I think I get the logic, but who knows how taxes may change in the future. I also kind of like the idea of the Roth 401k being tax free on the back end in my retirement years, even if it might be more tax pain up front, but that may not be a good reason to go Roth 401k. I guess the key is being disciplined and taking the up front tax savings of the Traditional 401k and investing it as opposed to spending it?
If you don't have a pension it makes sense to enter retirement with about $500k in tax-deferred if single, $1M if MFJ. That allows you to draw $12k annually, offset that with the standard deduction and have a taxable income of $0. Do that for forty years and you'll want to have about half a million in tax-deferred.

Beyond that, there are way too many parameters in play to be able to predict what is your best course. I encourage you to learn more about tax diversity and how to optimize your savings. For now, focus on the immediate task of transferring away from EJ. Down the road, explore how much of the 401k should be in tax-deferred. Do make the max annual contribution to your Roth IRA, spending from taxable if necessary to do that.
Thanks for your comments. I do not have a pension. I will only have social security whenever I choose to take it. I may retire before I am eligible for that. I will further research tax-deferred and tax diversity. Understood on the Roth IRA.

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Kintora
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Kintora » Tue Jan 14, 2020 11:56 pm

Pulled the trigger today on contacting Vanguard, opened an account, and started the process of getting things transferred. I will be on the phone with them more tomorrow to continue transfer work, but the ball is rolling. Farewell letter will be sent to EJ tomorrow morning with appropriate instructions. Bye-bye, EJ!

I expect the whole process will take a while, and I will probably post again later to share my "lessons learned" from the transfer process for those who might face a similar situation in the future. I know the historical "Edward Jones" posts from this board and others helped me a lot. As well as the feedback from the great members here in this post of course.

And now to have a wee dram of Scotch whisky to celebrate my new and improved investing future. I might even get really wild this weekend and open a Fidelity HSA! :beer

Katietsu
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Joined: Sun Sep 22, 2013 1:48 am

Re: Edward Jones to Vanguard Sanity Check Please

Post by Katietsu » Wed Jan 15, 2020 12:32 am

Congratulations.

I just read this thread for the first time. Just a few comments.
-Look at how using a traditional 401k this year might keep your taxes down while you sell your investments.
-The tax drag from bonds in taxable is not as big of a concern right now because interest rates are low. Fill up the traditional IRA and traditional 401k with bonds. Then consider leaving the remaining bonds in taxable until you build up bonds in a traditional 401k.
-I have not done any recent comparisons, but a municipal bond funds may not be advantageous in your tax bracket.
-Keep whatever you need to make life easy in your checking. This is small potatoes. I need 2 to 3 months of expenses in my checking for peace of mind.

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Kintora
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Re: Edward Jones to Vanguard Sanity Check Please

Post by Kintora » Wed Jan 15, 2020 12:41 am

Katietsu wrote:
Wed Jan 15, 2020 12:32 am
Congratulations.

I just read this thread for the first time. Just a few comments.
-Look at how using a traditional 401k this year might keep your taxes down while you sell your investments.
-The tax drag from bonds in taxable is not as big of a concern right now because interest rates are low. Fill up the traditional IRA and traditional 401k with bonds. Then consider leaving the remaining bonds in taxable until you build up bonds in a traditional 401k.
-I have not done any recent comparisons, but a municipal bond funds may not be advantageous in your tax bracket.
-Keep whatever you need to make life easy in your checking. This is small potatoes. I need 2 to 3 months of expenses in my checking for peace of mind.
Thanks for the feedback. I really appreciate it. That crossed my mind as well how maxing a traditional 401k this year might keep taxes down while I am selling. I want to get an HSA started as well which should further reduce my taxable income.

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