VTSAX Dividends: Transferring 403(b) from Vanguard to Fidelity

[rashad3000]

Good morning.

My wife and I are simplifying everything and moving our 403(b) accounts from Vanguard to Fidelity. When we moved our Roth IRAs from Vanguard to Fidelity, everything just moved over “in kind”. So most of our Roth IRAs are in VTSAX (no fee, of course). Therefore, we receive the quarterly dividends and reinvest.

With our 403(b) accounts, we cannot transfer in kind. We have to pick a fund and we’ve chosen FSKAX. Our VTSAX dividends hit at the end of December. If we transfer our 403(b) accounts around mid-December, what happens to the pending dividends? It’s usually around $750-800 for both of our accounts.

Will we just get partial dividends for FSKAX for December and the prorated dividends for VTSAX? Will we just lose out on the dividends? Should we just wait until January to make the vendor exchange?

Thanks, in advance.

[rkhusky]

You have to own a stock fund on the record date in order to get the dividends. Note that the stock fund price will drop at the same time as the dividends are paid, such that you have the same amount after the dividend payout as before. In a tax-advantaged account, stock dividends are a non-event.

Bond funds often behave differently, but in both cases you can't game the system by buying or selling at strategic times.

[rashad3000]

You have to own a stock fund on the record date in order to get the dividends. Note that the stock fund price will drop at the same time as the dividends are paid, such that you have the same amount after the dividend payout as before. Bond funds often behave differently.

Thanks so much for this reply.

So technically speaking, it really doesn’t matter if we transfer now or if we wait until after the dividend is paid, right?

[rkhusky]

You have to own a stock fund on the record date in order to get the dividends. Note that the stock fund price will drop at the same time as the dividends are paid, such that you have the same amount after the dividend payout as before. Bond funds often behave differently.

Thanks so much for this reply.

So technically speaking, it really doesn’t matter if we transfer now or if we wait until after the dividend is paid, right?

Right. If you sell now, you'll get zero dividend for VTSAX and the full dividend for FSKAX .

[rashad3000]

Thanks so much for this reply.

So technically speaking, it really doesn’t matter if we transfer now or if we wait until after the dividend is paid, right?

Right. If you sell now, you'll get zero dividend for VTSAX and the full dividend for FSKAX .

Awesome. I appreciate your response.

[rkhusky]

Presumably, you are moving your 403(b) to a tIRA.

[rashad3000]

Presumably, you are moving your 403(b) to a tIRA.

Contract exchange with the same employer: 403(b) to 403(b)

[rkhusky]

Presumably, you are moving your 403(b) to a tIRA.

Contract exchange with the same employer: 403(b) to 403(b)

Gotcha.

[ResearchMed]

Presumably, you are moving your 403(b) to a tIRA.

Contract exchange with the same employer: 403(b) to 403(b)

Ordinarily (in our experience, at least), if holdings are moved before a dividend arrives, usually, the trailing dividend is moved over with a bit of a delay.

However, IF your entire 403b plan itself is moving, then this shouldn't be happening. Nothing like that happened the two times our 403b plan was moved from one financial firm to another.
In this case, because the 403b plan moved as one entity, there were no trailing dividends, etc. Everything stayed "the same as if there had been no move" withIN the 403b plan, while the plan itself was moved.
(I suppose one could think about it as moving the furniture in a house, vs moving the entire furnished house...??)

But you should *not* be losing any money, because you are not changing any of your investments.
(Moving from a 403b to an IRA can require selling and repurchasing holdings, and that can lead to some problems, depending upon market moves.)

One important question: Is there any indication that the available funds within the 403b plan will be changing?
*That* can lead to some changes in the mutual funds held, depending upon what one is starting with and what changes are being made.
But that should be clearly specified in advance.

RM