Mutual Fund cost basis

[esposla]

Hi. I am 61yo , married, employed full time. I transferred TRowe mutual fund to Fidelity. I am meeting with Fidelity for 2nd time to review portfolio. A few of these funds have notifications about dividends and mentions updating cost. Is it important to update , how do I and is it important to update before moving these mutual funds to another fund? Or do I need to update cost at all? This is $60k of a $400k portfolio.

I appreciate any input. Thank you.

I’m guessing it’s required, and Fidelity would assist me.

 

[VungTau]

Dividends would normally be distributed to you in one of two ways:

1) Cash, in which case there is no change to your fund basis, you will simply receive a cash payment.
2) Reinvested to purchase more shares in which cases your number of shares and cost basis will both increase.

In both cases TRP and/or Fidelity should update the balances for you automatically in your account. I use both firms and my numbers get updated regularly with no action required by me.

 

[MBAustin]

If you have mutual fund shares that you've held for a long time, the cost basis is not required to be reported. However, in my case I called the mutual fund company for this information (before I transferred it to Vanguard) and they had the information available immediately (I'd held some of the shares for more than 30 years).

The reason it's important is that if you reinvested dividends and or capital gains over the years, this increases your cost basis and therefore reduces the capital gains (and thus taxes) when you sell.

 

[Sunset]

If this fund is in a 401K plan or other similar tax sheltered thing, then cost basis is irrelevant as all money is taxed as income when withdrawn (in USA).

 

[LOL!]

If you have mutual fund shares that you've held for a long time, the cost basis is not required to be reported [by one's broker, but you have to report it if you sell shares when these shares are held in a taxable account]. However, in my case I called the mutual fund company for this information (before I transferred it to Vanguard) and they had the information available immediately (I'd held some of the shares for more than 30 years).

The reason it's important is that if you reinvested dividends and or capital gains over the years, this increases your cost basis and therefore reduces the capital gains (and thus taxes) when you sell.

I added some text in red.

 

[esposla]

Thank you all.

 

[esposla]

I haven’t sold a share ever, that I can remember. Just rebalanced a few times .

 

[esposla]

Here’s a picture

 

[audreyh1]

When I transferred shares from one brokerage to another (taxable accounts), I made sure to have the cost basis information from the original broker, and provided it to the new broker for them to enter. If you have this information, Fidelity will enter it for you. You really must get that info from the old account, otherwise you may end up paying far higher taxes than you need to when you sell any shares.

TRowe should have this information. Average cost is better than nothing. The exact purchase history is best, but cumbersome.

 

[esposla]

Thank you, i looked at TRowe site but don’t see it. I’ll call them . These are in an IRA.

 

[esposla]

If this fund is in a 401K plan or other similar tax sheltered thing, then cost basis is irrelevant as all money is taxed as income when withdrawn (in USA).

I see, so since this is an IRA, doesn’t matter.

 

[esposla]

I believe I transferred the IRA with Average Costing.

 

[audreyh1]

Thank you, i looked at TRowe site but don’t see it. I’ll call them . These are in an IRA.

Well, cost basis doesn’t matter then. So don’t worry about it. Just discuss this with your Fidelity person.

 

[RunningBum]

Yes, the reason it doesn't matter is because when you withdraw out of the IRA, it's all taxed as regular income. There's no capital gains, so no need to know the basis.

If it's a Roth, none of it is taxed, so again, no capital gains, and no need to know the basis.

No worries for you at all.

 

[N02L84ER]

Yes, the reason it doesn't matter is because when you withdraw out of the IRA, it's all taxed as regular income. There's no capital gains, so no need to know the basis.

If it's a Roth, none of it is taxed, so again, no capital gains, and no need to know the basis.

No worries for you at all.

Agreed. But if it is a nondeductible IRA, then the contribution amounts are needed (the basis) because only the earnings are taxed.


They may only want the basis so that they can calculate earnings percentages - YTD, 1 yr, 3 yr, 5 yr, since opened, etc.

 

[MRG]

If you have mutual fund shares that you've held for a long time, the cost basis is not required to be reported. However, in my case I called the mutual fund company for this information (before I transferred it to Vanguard) and they had the information available immediately (I'd held some of the shares for more than 30 years).

The reason it's important is that if you reinvested dividends and or capital gains over the years, this increases your cost basis and therefore reduces the capital gains (and thus taxes) when you sell.

+1000

Fund companies/brokerers were required after a certain date to make the information available. Prior to that some did, some didn't(or lost the data) but you can ask. Some of the data may not be absolutely correct, or may differ in reporting methodology between fund companies but it's the best they have.

 

[esposla]

+1000

Fund companies/brokerers were required after a certain date to make the information available. Prior to that some did, some didn't(or lost the data) but you can ask. Some of the data may not be absolutely correct, or may differ in reporting methodology between fund companies but it's the best they have.

Thank you. There is a wealth of information here. I hope to digest it all as I head to retirement. I’ll see if Fidelity/TRowe have info and ask advisor. By the way, should I expect Fidelity to ever charge to work with me?

 

[esposla]

Agreed. But if it is a nondeductible IRA, then the contribution amounts are needed (the basis) because only the earnings are taxed.


They may only want the basis so that they can calculate earnings percentages - YTD, 1 yr, 3 yr, 5 yr, since opened, etc.

Thank you. I will check on IRA type.

 

[esposla]

Yes, the reason it doesn't matter is because when you withdraw out of the IRA, it's all taxed as regular income. There's no capital gains, so no need to know the basis.

If it's a Roth, none of it is taxed, so again, no capital gains, and no need to know the basis.

No worries for you at all.

Good to know. I appreciate it. I have small piece non-retirement, so I’ll address that when I meet with them .

 

[scrabbler1]

When I transferred shares from one brokerage to another (taxable accounts), I made sure to have the cost basis information from the original broker, and provided it to the new broker for them to enter. If you have this information, Fidelity will enter it for you. You really must get that info from the old account, otherwise you may end up paying far higher taxes than you need to when you sell any shares.

TRowe should have this information. Average cost is better than nothing. The exact purchase history is best, but cumbersome.

I was ready to reply with this, too, but you beat me to it. Then, when the OP said it was an IRA, I agree it became moot.

When my (snake-bit) friend received a large inheritance following his remaining parent's death in 2012, I made sure to hang onto the known cost basis of non-IRA holdings from his mom's brokerage house so I could enter them for him into his Fido brokerage account later on.

 

[MRG]

Thank you. There is a wealth of information here. I hope to digest it all as I head to retirement. I’ll see if Fidelity/TRowe have info and ask advisor. By the way, should I expect Fidelity to ever charge to work with me?

I've only been hit up twice, once I asked about their managed accounts and they made it very clear what their fees were.

My last private client representative did a hard sell of an annuity to me. There were fees associated with it. I told him to call back when he!! had frozen over.

In general no.

 

[steelyman]

Wouldn’t the holdings in a taxable account qualify for a stepped-up basis as of date of death?

 

[esposla]

I've only been hit up twice, once I asked about their managed accounts and they made it very clear what their fees were.

My last private client representative did a hard sell of an annuity to me. There were fees associated with it. I told him to call back when he!! had frozen over.

In general no.

Thank you. I don’t plan to pay for one.
I found it odd that I’ve had $200k with them and I was never contacted but when I move $60k they reached out quickly. So far I like the advisor.