Talked to Vanguard but still confused.

[catnamedspot]

Goal: I'm trying to buy bonds (in my Sep IRA)

History:

As Vanguard has pressured us, I transferred all my accounts to brokerage.
I thought this would allow me to buy bonds.
I went to buy a bond, but the funds available to buy it from said 'zero'.
I called Vanguard.
Vanguard says the funds are there, but they are still in mutual funds. I have to sell them and put them into a' settlement fund' before I can buy a bond.
I tried to do this (order went through), but now I cannot find any settlement account anywhere. I'm not seeing it on my list of accounts, nor is it in the place that said "zero" before.

After 20 minutes of dealing with this, I'm very frustrated. Can you direct me to where this settlement account should be?
This website does not seem very user-friendly.

[exodusNH]

Goal: I'm trying to buy bonds (in my Sep IRA)

History:

As Vanguard has pressured us, I transferred all my accounts to brokerage.
I thought this would allow me to buy bonds.
I went to buy a bond, but the funds available to buy it from said 'zero'.
I called Vanguard.
Vanguard says the funds are there, but they are still in mutual funds. I have to sell them and put them into a' settlement fund' before I can buy a bond.
I tried to do this (order went through), but now I cannot find any settlement account anywhere. I'm not seeing it on my list of accounts, nor is it in the place that said "zero" before.

After 20 minutes of dealing with this, I'm very frustrated. Can you direct me to where this settlement account should be?
This website does not seem very user-friendly.

Your mutual fund sale won't go through until after the market closes today. You'll have your funds Monday. If you had ETFs, you would be able to use the money right away.

If you have the available cash, you could move money from your bank to Vanguard, buy the bond, and then use the proceeds of the mutual fund to replenish your cash.

[Longdog]

If you sell a mutual fund within a brokerage account, the proceeds should automatically appear in your settlement account the next day.

[retired@50]

Goal: I'm trying to buy bonds (in my Sep IRA)

History:

As Vanguard has pressured us, I transferred all my accounts to brokerage.
I thought this would allow me to buy bonds.
I went to buy a bond, but the funds available to buy it from said 'zero'.
I called Vanguard.
Vanguard says the funds are there, but they are still in mutual funds. I have to sell them and put them into a' settlement fund' before I can buy a bond.
I tried to do this (order went through), but now I cannot find any settlement account anywhere. I'm not seeing it on my list of accounts, nor is it in the place that said "zero" before.

After 20 minutes of dealing with this, I'm very frustrated. Can you direct me to where this settlement account should be?
This website does not seem very user-friendly.

The settlement account isn't really a separate "account", it's a money market fund inside your SEP IRA.

If you just sold the mutual fund today, you may have to wait a day until the funds are available to trade. If you find the settlement fund, and it shows a positive number for "funds available to trade" then you should be able to buy the desired bond using the settlement fund as the source of money for the purchase.

Regards,

[delamer]

The settlement fund is the money market fund listed as the first investment when look at your holdings within the IRA.

It might still be zero if the money from your sale isn’t available yet.

[catnamedspot]

Thanks everyone for explaining...

What adds to my confusion is why did they want us all to convert our funds to brokerage accounts? I though it was so we could do things like buy CD, bonds, etc. But it seems to me nothing has changed except my having bowed to pressure.

[PaddyMac]

Re moving to a Brokerage account. Do you mean you took it out of a SEP-IRA and into a regular, taxable Brokerage account? That does not sound right. If you did that you would be hit with early-withdrawal penalties if under 59.5 afaik. And the income would all be taxable as you had originally saved those funds tax deferred in the year they were contributed to the SEP-IRA.

We have Brokerage account with Vanguard and the income it generates each year is taxable income.

[retired@50]

Thanks everyone for explaining...

What adds to my confusion is why did they want us all to convert our funds to brokerage accounts? I though it was so we could do things like buy CD, bonds, etc. But it seems to me nothing has changed except my having bowed to pressure.

Because the old style "mutual fund only" accounts were hosted on a different I.T. platform that Vanguard is trying to eliminate. Their I.T. resources are currently being sub-divided between two platforms. So, over the past several years they've been encouraging users to join the new platform. Ultimately this may benefit Vanguard clients by reducing I.T. costs and complexity.

Regards,

[MrJedi]

Thanks everyone for explaining...

What adds to my confusion is why did they want us all to convert our funds to brokerage accounts? I though it was so we could do things like buy CD, bonds, etc. But it seems to me nothing has changed except my having bowed to pressure.

You can't buy individual bonds, CDs, etc. on the mutual fund platform. You need to be on the brokerage platform to do that. You're in the right place, but you need to wait for the money from the mutual fund you are selling to be available to trade with still. Mutual funds don't execute trades until market close.

[MrJedi]

Re moving to a Brokerage account. Do you mean you took it out of a SEP-IRA and into a regular, taxable Brokerage account? That does not sound right. If you did that you would be hit with early-withdrawal penalties if under 59.5 afaik. And the income would all be taxable as you had originally saved those funds tax deferred in the year they were contributed to the SEP-IRA.

We have Brokerage account with Vanguard and the income it generates each year is taxable income.

Brokerage account can be IRA, Roth IRA, etc. Brokerage does not necessarily mean taxable.

[UpperNwGuy]

The problem is that you still hold mutual funds. If you convert those mutual funds to ETFs, the proceeds from ETF sales become available immediately for your next investment, but the proceeds from mutual fund sales don't become available until the following business day. I used to dislike the concept of ETFs, but now I love them.

[yatesd]

I hear you..no real benefits if you keep everything in mutual funds. I personally preferred mutual funds and the old system. However, the cost to run an ETF must be lower and you will see Vanguard is encouraging everyone to switch over with lower fees (which I did).

I am now 100% ETF's which also made it easier to leave Vanguard for Schwab, which I also did.

[exodusNH]

I hear you..no real benefits if you keep everything in mutual funds. I personally preferred mutual funds and the old system. However, the cost to run an ETF must be lower and you will see Vanguard is encouraging everyone to switch over with lower fees (which I did).

I am now 100% ETF's which also made it easier to leave Vanguard for Schwab, which I also did.

They don't care if you stay in the mutual funds.

They want you off the old platform. They're running two parallel systems and want to discontinue the original one, which can old hold mutual funds.

[yatesd]

I hear you..no real benefits if you keep everything in mutual funds. I personally preferred mutual funds and the old system. However, the cost to run an ETF must be lower and you will see Vanguard is encouraging everyone to switch over with lower fees (which I did).

I am now 100% ETF's which also made it easier to leave Vanguard for Schwab, which I also did.

They don't care if you stay in the mutual funds.

They want you off the old platform. They're running two parallel systems and want to discontinue the original one, which can old hold mutual funds.

Yes, but at first all their mutual funds had the same costs as the ETF's. Slowly they lowered ETF expense ratios faster than mutual funds which is why I say they encouraged the move.

[exodusNH]

I hear you..no real benefits if you keep everything in mutual funds. I personally preferred mutual funds and the old system. However, the cost to run an ETF must be lower and you will see Vanguard is encouraging everyone to switch over with lower fees (which I did).

I am now 100% ETF's which also made it easier to leave Vanguard for Schwab, which I also did.

They don't care if you stay in the mutual funds.

They want you off the old platform. They're running two parallel systems and want to discontinue the original one, which can old hold mutual funds.

Yes, but at first all their mutual funds had the same costs as the ETF's. Slowly they lowered ETF expense ratios faster than mutual funds which is why I say they encouraged the move.

That's true, but that's because it is cheaper to run ETFs than it is mutual funds. However, if you look at the performance of VTSAX vs VTI, it not all that different, especially when you factor in VTSAX's slow decline in ER.

[catnamedspot]

Some people here seem to say that when you transfer to a brokerage account your funds automatically become ETF. I thought that indeed was NOT that case (in a prior threads I've read on the transfer).

[retired@50]

Some people here seem to say that when you transfer to a brokerage account your funds automatically become ETF. I thought that indeed was NOT that case (in a prior threads I've read on the transfer).

It's not the case. You're correct.

Your mutual funds will stay as mutual funds, unless you call Vanguard and ask for the tax-free conversion to the ETF share class - assuming you hold a mutual fund that is eligible for the conversion.

Regards,

[catnamedspot]

Re moving to a Brokerage account. Do you mean you took it out of a SEP-IRA and into a regular, taxable Brokerage account? That does not sound right. If you did that you would be hit with early-withdrawal penalties if under 59.5 afaik. And the income would all be taxable as you had originally saved those funds tax deferred in the year they were contributed to the SEP-IRA.

We have Brokerage account with Vanguard and the income it generates each year is taxable income.

No, It's an ira into an ira transition. The only difference I see is ugly big bold fonts.

[watchnerd]

As a fellow Vanguard customer, I wish everyone would get off the mutual fund system.

Maintaining two parallel IT systems costs money.

That money contributes to ERs and is costing the rest of us money!

[exodusing]

I have a mutual fund account and a brokerage account with Vanguard. I can't buy bonds online with funds from the mutual fund account, but can do it by calling the bond department. I've only used funds from money markets so far. I've been told I can use other mutual funds, but haven't tried that yet. You might try calling them.

[watchnerd]

I have a mutual fund account and a brokerage account with Vanguard. I can't buy bonds online with funds from the mutual fund account, but can do it by calling the bond department. I've only used funds from money markets so far. I've been told I can use other mutual funds, but haven't tried that yet. You might try calling them.

Why wouldn't you just use the online bond desk in the brokerage account, instead?

[exodusing]

I have a mutual fund account and a brokerage account with Vanguard. I can't buy bonds online with funds from the mutual fund account, but can do it by calling the bond department. I've only used funds from money markets so far. I've been told I can use other mutual funds, but haven't tried that yet. You might try calling them.

Why wouldn't you just use the online bond desk in the brokerage account, instead?

Because that requires funds to be in the brokerage account. The brokerage account started empty and now holds only the bonds I bought. I wanted to buy same day, not wait a day for funds to transfer over.

[catnamedspot]

I have a mutual fund account and a brokerage account with Vanguard. I can't buy bonds online with funds from the mutual fund account, but can do it by calling the bond department. I've only used funds from money markets so far. I've been told I can use other mutual funds, but haven't tried that yet. You might try calling them.

Why wouldn't you just use the online bond desk in the brokerage account, instead?

I'm not sure of your terminology, but my understanding is there is only one way to buy bonds on the Vanguard site. And, they won't allow you to do that unless you convert your account to a brokerage account. None of it makes any sense to me. My logic says, why do I need to convert anything, why can't I just open up a brokerage account, and just put money in it. Clueless.

[watchnerd]

I have a mutual fund account and a brokerage account with Vanguard. I can't buy bonds online with funds from the mutual fund account, but can do it by calling the bond department. I've only used funds from money markets so far. I've been told I can use other mutual funds, but haven't tried that yet. You might try calling them.

Why wouldn't you just use the online bond desk in the brokerage account, instead?

I'm not sure of your terminology, but my understanding is there is only one way to buy bonds on the Vanguard site. And, they won't allow you to do that unless you convert your account to a brokerage account. None of it makes any sense to me. My logic says, why do I need to convert anything, why can't I just open up a brokerage account, and just put money in it. Clueless.

I have a brokerage account and if I go to:

Transact >> Buy & Sell >> CDs & Bonds >> Trade Bonds & Treasuries

...it takes me to the online bond trading desk.

I can buy them using funds in my brokerage accounts.

[catnamedspot]

I have a mutual fund account and a brokerage account with Vanguard. I can't buy bonds online with funds from the mutual fund account, but can do it by calling the bond department. I've only used funds from money markets so far. I've been told I can use other mutual funds, but haven't tried that yet. You might try calling them.

Why wouldn't you just use the online bond desk in the brokerage account, instead?

I'm not sure of your terminology, but my understanding is there is only one way to buy bonds on the Vanguard site. And, they won't allow you to do that unless you convert your account to a brokerage account. None of it makes any sense to me. My logic says, why do I need to convert anything, why can't I just open up a brokerage account, and just put money in it. Clueless.

I have a brokerage account and if I go to:

Transact >> Buy & Sell >> CDs & Bonds >> Trade Bonds & Treasuries

...it takes me to the online bond trading desk.

I can buy them using funds in my brokerage accounts.

Yes, I did that, but it would not let me buy anything until I converted my account. Once I did, then it allowed me to BUT, it did not transfer any money, so my balances were all zero. Today I learned I had to actually sell the converted accounts and put them into a different account before I buy bonds. I used to do website design, and their website has a lot to be desired - in terms of functionality. I could this easily in Schwab, but with Vanguard it's like steering a blind elephant.

[watchnerd]

I have a mutual fund account and a brokerage account with Vanguard. I can't buy bonds online with funds from the mutual fund account, but can do it by calling the bond department. I've only used funds from money markets so far. I've been told I can use other mutual funds, but haven't tried that yet. You might try calling them.

Why wouldn't you just use the online bond desk in the brokerage account, instead?

I'm not sure of your terminology, but my understanding is there is only one way to buy bonds on the Vanguard site. And, they won't allow you to do that unless you convert your account to a brokerage account. None of it makes any sense to me. My logic says, why do I need to convert anything, why can't I just open up a brokerage account, and just put money in it. Clueless.

I have a brokerage account and if I go to:

Transact >> Buy & Sell >> CDs & Bonds >> Trade Bonds & Treasuries

...it takes me to the online bond trading desk.

I can buy them using funds in my brokerage accounts.

Yes, I did that, but it would not let me buy anything until I converted my account. Once I did, then it allowed me to BUT, it did not transfer any money, so my balances were all zero. Today I learned I had to actually sell the converted accounts and put them into a different account before I buy bonds. I used to do website design, and their website has a lot to be desired - in terms of functionality. I could this easily in Schwab, but with Vanguard it's like steering a blind elephant.

Well, you have to have cash to buy individual bonds.

You can't buy them by converting funds or ETFS -- you have to sell them first and put the proceeds in your settlement account.

This is true even if you've always used a brokerage account.

[rkhusky]

Yes, I did that, but it would not let me buy anything until I converted my account. Once I did, then it allowed me to BUT, it did not transfer any money, so my balances were all zero. Today I learned I had to actually sell the converted accounts and put them into a different account before I buy bonds. I used to do website design, and their website has a lot to be desired - in terms of functionality. I could this easily in Schwab, but with Vanguard it's like steering a blind elephant.

It should only take a day or two for all the money to show up in your new accounts, with the same mutual funds you had before. I think it was overnight for me.

You don’t sell accounts, you sell shares of your mutual funds. That gives you cash to buy bonds or CD’s or stocks or ETF’s.

[beyou]

Thanks everyone for explaining...

What adds to my confusion is why did they want us all to convert our funds to brokerage accounts? I though it was so we could do things like buy CD, bonds, etc. But it seems to me nothing has changed except my having bowed to pressure.

There main reason was to sell ETFs.
But you can also buy bonds, stocks etc.
You just need to learn how to use a brokerage acct and their site.

[Eagle33]

Vanguard has a tutorial on how to buy a bond.
https://support.vanguard.com/tutorials/buy-bond

[catnamedspot]

Vanguard has a tutorial on how to buy a bond.
https://support.vanguard.com/tutorials/buy-bond

Yes I actually watched that before trying to buy it. But I got to a dead end when it said I had zero money I can use to buy it. I think (looking back) my problem was, is that I thought 'after' I converted to the brokerage account, I could buy bonds from my money market, but I couldn't. I had to first sell the money market to a settlement fund - Which made me feel like "then what is the purpose of converting all my mutual funds?" Then I sold the money market and put it in the so-called "settlement" fund, but then I couldn't find the fund. Anyway you don't need to hear my complaining. I just think their website could be simpler. I don't know how the average person would have figured this out. Luckily I have the time.

[Eagle33]

Vanguard has a tutorial on how to buy a bond.
https://support.vanguard.com/tutorials/buy-bond

Yes I actually watched that before trying to buy it. But I got to a dead end when it said I had zero money I can use to buy it. I think (looking back) my problem was, is that I thought 'after' I converted to the brokerage account, I could buy bonds from my money market, but I couldn't. I had to first sell the money market to a settlement fund - Which made me feel like "then what is the purpose of converting all my mutual funds?" Then I sold the money market and put it in the so-called "settlement" fund, but then I couldn't find the fund. Anyway you don't need to hear my complaining. I just think their website could be simpler. I don't know how the average person would have figured this out. Luckily I have the time.

I came to realize that the old mutual fund only platform was actually separate accounts for each mutual fund for each tax category and could interact directly between each mutual fund subaccounts, though appeared to be a single account from the user login perspective. While the newer brokerage platform account holds mutual funds but only transacts through it's settlement fund (actually one of VG's money market fund). I've read that even though the settlement fund is a money market fund, if you held that specific money market fund on the old mutual fund platform, once you converted from mutual-fund to brokerage platform there would be both a settlement fund and that specific mutual fund.
My spouse is on the brokerage platform while I am still on the mutual fund platform. It appeaars to me that the brokerage platform is based on doing transactions on a share basis to support ETF transactions. Even though both of us only have VG mutual funds, spouse started with a $ amount to Roth convert but was forced to also enter a quantity of share to convert. While I could convert an exact dollar amount on the mutual-fund platform. Spouse is now 100% Roth, so I am not rushing to change my accounts to brokerage platform until either forced to by VG, I have completed all my planned Roth conversions, or reach RMD age and am forced to transact from my mutual-fund IRA to my brokerage taxable account. I might consider changing to all brokerage sooner if VG would start allowing Ohio state tax withholding on the brokerage platform.

[catnamedspot]

Spouse is now 100% Roth, so I am not rushing to change my accounts to brokerage platform until either forced to by VG, I have completed all my planned Roth conversions, or reach RMD age and am forced to transact from my mutual-fund IRA to my brokerage taxable account. I might consider changing to all brokerage sooner if VG would start allowing Ohio state tax withholding on the brokerage platform.

Can you say more about your spouse being 100% Roth? I don't know anyone who has done that and have always been curious. When did you decide to do that (age-wise) and did you do it in small segments over time? I hear a lot of different opinions (beyond the obvious 0 tax benefit) about when or if it makes sense. Would love to hear your viewpoint. btw - that's for your story about VG. It confirms to me, how it can be confusing.

[Eagle33]

Spouse is now 100% Roth, so I am not rushing to change my accounts to brokerage platform until either forced to by VG, I have completed all my planned Roth conversions, or reach RMD age and am forced to transact from my mutual-fund IRA to my brokerage taxable account. I might consider changing to all brokerage sooner if VG would start allowing Ohio state tax withholding on the brokerage platform.

Can you say more about your spouse being 100% Roth? I don't know anyone who has done that and have always been curious. When did you decide to do that (age-wise) and did you do it in small segments over time? I hear a lot of different opinions (beyond the obvious 0 tax benefit) about when or if it makes sense. Would love to hear your viewpoint. btw - that's for your story about VG. It confirms to me, how it can be confusing.

Spouse's tax deferred accounts only amount to about 5% of all our accounts. Since spouse plans to work until death, ran some future income estimates and determined we could not get our tax deferred accounts down enough to keep spouse below IRMAA threshold if I pass first. Determined it was possible to convert all spouse's tax deferred and leave a way for spouse to continue contributing to Roth IRA after my death via backdoor Roth conversions. If spouse passes first I will not have earned income to contribute to a Roth IRA and it would be next to impossible to convert my tax deferred account (90% of portfolio) down to zero. Plus our state does not allow any of our tax deferred withdrawals to be tax free on an individual basis, so no advantage to keep spouse's tIRA balance.
It is possible those on this forum more versed in financial planning could say our decision was not the most optimal, but for us we like simple and less stress. I suggest you select one aspect of your finances and learn, then select another & learn, then select another & learn, then .... I help VITA program the last few years and getting reintroduced to taxes help fix most holes in our financial plan. It seemed overwhelming back in 2016, not so much now after finding Bogleheads philosophy fit our lifestyle.