Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Tried to setup a 72t SEPP withdrawal with Vanguard - Extremely disappointed
Old 06-18-2012, 02:20 PM   #1
Confused about dryer sheets
 
Join Date: Jun 2012
Posts: 7
Tried to setup a 72t SEPP withdrawal with Vanguard - Extremely disappointed

My wife and I called to setup a 72t from her IRA from Vanguard last Saturday. The woman I spoke to would not help me at all with my questions, she kept saying I cannot provide you with that information, this was after being transferred to her. These were extremely simple questions.

1) Can you tell me the 120% federal midterm rate that I should use for calculating the withdrawal amount for a withdrawal in July using the Amortization method? No sir, I cannot provide you with that information.

2) Can you tell me if the amount I withdraw has to be an exact calculation or can it an amount less than the calculated amount of the SEPP method chosen?
No sir, I cannot provide you with that information. Have you consulted with a tax advisor?

Then she let me set up a withdrawal to be executed on 7/1 that would have certainly been penalized 10% by the IRS because it was for less than the required calculated amount. This woman was extremely unhelpful, matter of fact I receive better service when being helped by a call center in India on a technical problem.

This sort of service is completely unacceptable, and can only hope someone from Vanguard sees this.
__________________

__________________
jtg5964 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-18-2012, 02:25 PM   #2
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,446
jtg5964, the folks at Vanguard most likely to see this are probably thinking about retirement - after all, this is the Early Retirement org. Sorry for your troubles at Vanguard, but you might have more success contacting them directly to share your complaints and dissatisfaction.
__________________

__________________
MichaelB is offline   Reply With Quote
Old 06-18-2012, 02:53 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
This seems like a question best answered by a tax adviser or diligent DIY research. After all, penalties for getting it wrong are very steep, and the last thing Vanguard wants is tons of liability for calculating and updating the annual 72t withdrawals, and making sure you make them as long as you have to.

There are services out there that will calculate 72t withdrawals for a fee.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 06-18-2012, 02:59 PM   #4
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Quote:
Originally Posted by jtg5964 View Post
This sort of service is completely unacceptable, and can only hope someone from Vanguard sees this.
I think you're getting the best possible customer-service advice that Vanguard's low-cost legal staff will let them hand out.

Quote:
Originally Posted by MichaelB View Post
Sorry for your troubles at Vanguard, but you might have more success contacting them directly to share your complaints and dissatisfaction.
It might also be worth posting at Bogleheads:
Bogleheads • Index page
and on Vanguard's Facebook page:
https://www.facebook.com/Vanguard/info
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 06-18-2012, 03:09 PM   #5
Confused about dryer sheets
 
Join Date: Jun 2012
Posts: 7
Quote:
Originally Posted by FUEGO View Post
This seems like a question best answered by a tax adviser or diligent DIY research. After all, penalties for getting it wrong are very steep, and the last thing Vanguard wants is tons of liability for calculating and updating the annual 72t withdrawals, and making sure you make them as long as you have to.

There are services out there that will calculate 72t withdrawals for a fee.
So they can tell you a RMD that needs to be done at 70.5 from your 401K, but can't tell you what your SEPP withdrawal needs to be if you want to setup a 72t if give them what method you want to use? What the heck is the difference?
__________________
jtg5964 is offline   Reply With Quote
Old 06-18-2012, 03:20 PM   #6
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,221
Quote:
Originally Posted by jtg5964 View Post
So they can tell you a RMD that needs to be done at 70.5 from your 401K, but can't tell you what your SEPP withdrawal needs to be if you want to setup a 72t if give them what method you want to use? What the heck is the difference?
The RMD is a simple table lookup of % based on your age and it's required, you don't have an option. The 72t is optional, probably fairly rare, has 3 different calculation methods, and the math is much more complex, including finding out what todays 120% rate is, since it changes every month, rules when you can stop, etc... I don't blame them at all for not getting involved with 72t.
TJ
__________________
teejayevans is offline   Reply With Quote
Old 06-18-2012, 03:30 PM   #7
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,221
Quote:
Originally Posted by jtg5964 View Post

This sort of service is completely unacceptable, and can only hope someone from Vanguard sees this.
I don't see the problem, they are not tax/financial advisors, they are a mutual fund company.
It would be like going to the computer store to buy a computer and asking them to install Linux on it...they are going to tell you they just sell the computers....now maybe if you were a flagship member, they might provide the financial advisor services, which is what you are asking for...
TJ
__________________
teejayevans is offline   Reply With Quote
Old 06-18-2012, 03:32 PM   #8
Confused about dryer sheets
 
Join Date: Jun 2012
Posts: 7
Quote:
Originally Posted by teejayevans View Post
The RMD is a simple table lookup of % based on your age and it's required, you don't have an option. The 72t is optional, probably fairly rare, has 3 different calculation methods, and the math is much more complex, including finding out what todays 120% rate is, since it changes every month, rules when you can stop, etc... I don't blame them at all for not getting involved with 72t.
TJ
Come on, they can't tell me that I can use the 120% of the mid-term rate from May or June to calculate a SEPP withdrawal in July and have what the last 2 months rates were?

I realize there are calculators all over the net, but I was expecting someone on the phone line who could help me out with my questions. This woman had no interest in helping, none at all, and that is what PO'd me.
__________________
jtg5964 is offline   Reply With Quote
Old 06-18-2012, 03:46 PM   #9
Confused about dryer sheets
 
Join Date: Jun 2012
Posts: 7
Quote:
Originally Posted by teejayevans View Post
I don't see the problem, they are not tax/financial advisors, they are a mutual fund company.
It would be like going to the computer store to buy a computer and asking them to install Linux on it...they are going to tell you they just sell the computers....now maybe if you were a flagship member, they might provide the financial advisor services, which is what you are asking for...
TJ
Totally different scenario, you are asking the computer store to reconfigure the computer and I'm sure they would do it for a price if they had Linux licenses and familiar with wiping out the existing operating system.

So what you are telling me is if this IRA had 1 million (not sure on exact #) to qualify for financial advisor services then most likely I would have at least received correct information.
__________________
jtg5964 is offline   Reply With Quote
Old 06-18-2012, 04:21 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,642
I am not surprised at all that they won't calculate this for you. If it was a no-brainer you would not have to ask. Since you do it is obvious that it has consequences and you need to get it right. They are not tax advisors. Try putting it another way -- would you trust some random phone clerk at Vanguard or Fidelity to advise you on something like this or would you double check with other sources?
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 06-18-2012, 04:37 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by jtg5964 View Post
Come on, they can't tell me that I can use the 120% of the mid-term rate from May or June to calculate a SEPP withdrawal in July and have what the last 2 months rates were?

I realize there are calculators all over the net, but I was expecting someone on the phone line who could help me out with my questions. This woman had no interest in helping, none at all, and that is what PO'd me.
72(t) are very uncommon withdrawals I imagine much less than one person in an thousand ever use them and it is possible the number is 1/10,000 for Vanguard customers. More than likely you were the first person who ever asked her to do it..

A tax adviser is your best bet. AFAIK, the only source of accurate FREE information is 72t.net I notice the home page has 120% rates displayed prominently.
__________________
clifp is offline   Reply With Quote
Old 06-18-2012, 04:39 PM   #12
Confused about dryer sheets
 
Join Date: Jun 2012
Posts: 7
Quote:
Originally Posted by donheff View Post
I am not surprised at all that they won't calculate this for you. If it was a no-brainer you would not have to ask. Since you do it is obvious that it has consequences and you need to get it right. They are not tax advisors. Try putting it another way -- would you trust some random phone clerk at Vanguard or Fidelity to advise you on something like this or would you double check with other sources?
Don, it wasn't a no-brainer. I was not sure what mid-term rate value to use in the calculation. With more DD I figured it out, but thought the rep on the phone could have answered a simple question.

Guess Vanguard could have left out the "advice services" or clarified if you have enough in your account, you'll get the advice.

Vanguard web site
Access your accounts and timely investment information. Learn about retirement investing, mutual funds, ETFs, IRAs,
401(k) plans, college savings plans, brokerage, advice services, and more.
__________________
jtg5964 is offline   Reply With Quote
Old 06-18-2012, 04:58 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 2,360
To me it does not sound like the OP is requesting advice, but rather only the result of a calculation based on a formula that a firm like Vanguard should have readily available.
__________________
GrayHare is online now   Reply With Quote
Old 06-18-2012, 05:48 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
The penalty for getting 72t calcs wrong is very severe. It invalidates all your previous 72t withdrawals and you will get hit with interest penalties and early withdrawal penalties dating back to your first withdrawal IIRC. Could be tens or hundreds of thousands of dollars in expense if you are off by a dollar.

I wouldn't rely on the advice of a CSR to make these kinds of decisions.

Pay a tax adviser, do the due diligence yourself, or hire a more expensive financial adviser that will throw in some tax consulting for "free".
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 06-18-2012, 06:27 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by FUEGO View Post
The penalty for getting 72t calcs wrong is very severe. It invalidates all your previous 72t withdrawals and you will get hit with interest penalties and early withdrawal penalties dating back to your first withdrawal IIRC. Could be tens or hundreds of thousands of dollars in expense if you are off by a dollar.

I wouldn't rely on the advice of a CSR to make these kinds of decisions.

Pay a tax adviser, do the due diligence yourself, or hire a more expensive financial adviser that will throw in some tax consulting for "free".
+1

It is like calling up the law office and expecting the receptionist to tell you what forms you need to file for appealing your felony conviction. I would think the liability issues alone would keep the Vanguard frontline CSR people from talking.

Years ago when I was seriously considering doing a 72(t) I read the section in the IRS publication. I'm smarter than the average bear about taxes and financial, and I can say that my brain hurt after reading it.
__________________
clifp is offline   Reply With Quote
Old 06-18-2012, 08:51 PM   #16
Confused about dryer sheets
 
Join Date: Jun 2012
Posts: 7
Quote:
Originally Posted by clifp

+1

It is like calling up the law office and expecting the receptionist to tell you what forms you need to file for appealing your felony conviction. I would think the liability issues alone would keep the Vanguard frontline CSR people from talking.

Years ago when I was seriously considering doing a 72(t) I read the section in the IRS publication. I'm smarter than the average bear about taxes and financial, and I can say that my brain hurt after reading it.
Actually the initial person who had a limited knowledge on what I was even proposing, transferred me to someone else. So I assumed that the person on the phone would have more been more helpful. In reality, I just don't think i was asking very complicated questions.

So if I call up Vanguard and ask them if they can give me some information on tax free investments, the person on the phone is going to tell me to consult a tax advisor before giving me one ioda of information?
__________________
jtg5964 is offline   Reply With Quote
Old 06-18-2012, 09:17 PM   #17
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Quote:
Originally Posted by jtg5964 View Post
So if I call up Vanguard and ask them if they can give me some information on tax free investments, the person on the phone is going to tell me to consult a tax advisor before giving me one ioda of information?
If you're expecting the readers of this question to react with sympathy or even empathy instead of feeling antagonized by the tone of your question, then I suspect you're going to be disappointed.

If, as perhaps your question is implying, you're looking for some other fund company to do a better job with a 72(t), then I suspect you're going to be even more disappointed.

And, yes, I'm pretty sure that on every piece of Vanguard paper that offers advice on tax-free investments (and 72(t) withdrawals) , it will recommend that you consult your tax advisor. The advantage is that Vanguard's pieces of paper with that advice are much cheaper than the ones handed out by Fidelity, Schwab, and other fund companies.

Perhaps an imperfect analogy would be expecting a car dealer to run a driver's ed school as well as just selling & maintaining the hardware.

So... heard anything back yet from posting your questions on Bogleheads?
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 06-18-2012, 09:53 PM   #18
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Quote:
Originally Posted by jtg5964 View Post
Vanguard web site
Access your accounts and timely investment information. Learn about retirement investing, mutual funds, ETFs, IRAs,
401(k) plans, college savings plans, brokerage, advice services, and more.
They're only saying "Learn about... advice services", not that they're giving advice out for free. I think your question was out of their league and too close to the forbidden zone of tax advice.
__________________
Animorph is offline   Reply With Quote
Old 06-18-2012, 10:26 PM   #19
Recycles dryer sheets
winger's Avatar
 
Join Date: Jan 2007
Posts: 251
You will find Vanguard stays as far away from 72Ts as possible. They will not "code" your payments as "approved" withdrawals, you will need to file an additional form every year that requests a coding change.

Of course, the IRS doesn't look at that form until you appeal the tax deficiency notice they send you.
__________________
winger is offline   Reply With Quote
Old 06-18-2012, 11:16 PM   #20
Thinks s/he gets paid by the post
Htown Harry's Avatar
 
Join Date: May 2007
Posts: 1,516
Welcome jtg5964!

I hear you, man. Just the other day I got the cold shoulder from my HR Department at work.

I thought it was an extremely simple question - I asked them what changes I should make to my W-4 so that I could stay cool with the IRS if I reduced my IRA and 401(k) contributions this year.

They said they would be happy to help me with the part the equation they were involved with (the payroll deduction) but I was on my own in figuring out the part they didn't have anything to do with.

__________________

__________________
Htown Harry is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 03:19 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.