Something Different About My Vanguard Roth Conversion Today

[Trooper]

I logged in this morning before the market opened wanting to convert $80K from my tIRA to my Roth. In the past (such as in April '22) I simply indicated the dollar amount and it was converted.

Today, Vanguard made me enter the number of shares I wanted to convert; I wasn't allowed to enter a dollar amount. So I found yesterday's (really Friday's) mutual fund closing price, did the math, and performed the conversion.

When did this change? Or is it because I converted my tIRA account at Vanguard to a brokerage account? I did that last month to begin buying T-Bills.

Since mutual funds' prices don't change until the end of the day, will I potentially convert more or less than I wanted to? How do you folks handle this? Or do you not sweat it?

 

[RunningBum]

I've noticed this as well. I don't like it. If the ACA subsidy cliff comes back and I need to be more certain about my conversion amount, I will probably sell the funds in my tIRA first and then convert the cash. Interested if someone else has a better way. Without an ACA cliff I'm not sweating if I'm a little over or short.

 

[Trooper]

I've noticed this as well. I don't like it. If the ACA subsidy cliff comes back and I need to be more certain about my conversion amount, I will probably sell the funds in my tIRA first and then convert the cash. Interested if someone else has a better way. Without an ACA cliff I'm not sweating if I'm a little over or short.

I don't like it either. With Medicare there are IRMAA MAGI thresholds that I would like to avoid. Sure, I don't cut it so close that a normal day's price swing would get me in trouble, but I sure would like to hit it on the nose with a dollar-based conversion.

Is your proposed approach above to sell the mutual fund in your tIRA first, then convert dollars from the tIRA settlement fund to the Roth Settlement fund? That would probably work but might take an extra day or two, and I am usually doing my final Roth conversion in the last week of the year.

 

[MarieIG]

If I convert cash out of my settlement fund, I know the precise amount immediately.

If I convert a mutual fund in kind, I have to wait until the end of the day to get the precise amount. If you come up short you can add a bit more from your settlement account tomorrow to get up to the 80k. If you're over, you're over. The shares then seem to meander over to the Roth overnight and show up in the morning. . .

 

[audreyh1]

How annoying!

 

[RunningBum]

Is your proposed approach above to sell the mutual fund in your tIRA first, then convert dollars from the tIRA settlement fund to the Roth Settlement fund? That would probably work but might take an extra day or two, and I am usually doing my final Roth conversion in the last week of the year.

Yes, and I understand the time crunch, waiting for final distributions in my taxable account to see how much room I have to convert. If this is necessary I would use my best estimate a few days in advance to sell the largest amount I think I could convert, probably even more. Let it settle while I'm waiting to get my final actual distributions, and then convert dollars from the tIRA settlement fund. Anything left in the settlement fund I'd reinvest in my tIRA. Not a pretty solution.

 

[Trooper]

How annoying!

So is this a Vanguard thing or a brokerage account thing? IOW do Schwab and Fidelity require conversions to be done in shares also?

 

[PaunchyPirate]

I saw this as well. I did as RunningBum suggests. I sold my specific amount first from my mutual fund and put the proceeds into my settlement fund. Then the next day, I converted to Roth from there. I didn’t bother trying to do it in the same day, since I had time. It does seem like an annoying extra step.

 

[ocean view]

I have Vanguard brokerage accounts and my Roth conversions have always (this is my 6th year) made me enter shares not dollars.

I always just leave a little wiggle room in my calculation to account for any movement on the day I put in my order.

 

[Trooper]

Unless I am missing something, I also found today that one cannot do Roth conversions on Vanguard's Android mobile apps.

 

[MarieIG]

Unless I am missing something, I also found today that one cannot do Roth conversions on Vanguard's Android mobile apps.

I haven't tried, so I don't know.

 

[Midpack]

I have Vanguard brokerage accounts and my Roth conversions have always (this is my 6th year) made me enter shares not dollars.

I always just leave a little wiggle room in my calculation to account for any movement on the day I put in my order.

Same here. I’ve been doing conversions 3-4 times a year for 3 years, and I’ve had to enter shares every time with Vanguard. If there was ever an option for enter dollars, I never saw it and I looked. It’s pretty easy to calculate shares from my desired $ amount, so I never worried about it…

 

[Trooper]

It’s pretty easy to calculate shares from my desired $ amount, so I never worried about it…

I agree, but what mutual fund price do you use? Your shares will always be converted at an unknown closing price. I guess it's only an issue if you want to convert an exact dollar amount, in a single step.

 

[SecondCor521]

I think Vanguard requires you to enter shares if you have a brokerage account and are converting MFs (and maybe ETFs as well).

Your conversion order is placed before the close of the market but transfers after the close of the market and at the value as of the close of the market. So yes, there is a bit of uncertainty which can be annoying.

There are a number of things I do for this:

1. I figure out my target remaining conversion amount in dollars, then convert about 90% of that amount first. I then find out the next day what the actual amount that was converted and repeat the process a second time, converting about 90% of the new remaining smaller amount. If I need to, I can do a third round the next day. Thus within 3 days I can get to 99.9% of the target amount.

Since the market rarely if ever has a 10% up day, there's really very little chance of going over the target this way. And if it does go over, I'm probably happy enough at the 10% up day to put things into perspective.

2. If I feel like it, I wait until a few minutes before the market close and do the math to take into consideration that day's market change.

3. I also have an HSA. So for 2022 for example, I have about $500 of HSA contribution room left and am currently sitting somewhere around $50 to $80 over my AGI target. In February or March, I'll finalize my tax return and then make an HSA contribution to dial it in to the dollar. You can do a similar approach with deductible traditional IRA contributions if you are eligible for those.

The drawback to this third thing is that I leave some HSA contribution space unfilled. In my particular case, that's not that big of a drawback compared to the benefits of hitting my target AGI.