IRA control

[cloud9nd]

Hello, we currently have IRA plans with an "advisor".

I seem to do much better without "advisors"...

Long story.

Anyways how do we go about getting control of our accounts to not pay a fee anymore?

Or if we begin to draw off one using the 72t I assume we'd still be paying the advisor.

Any advice is appreciated. Thank you

 

[COcheesehead]

Roll it over to a brokerage like Fidelity.

 

[MarieIG]

Roll it over to a brokerage like Fidelity.

Yes, this. You can actually go in to the Fidelity with your account information, and they can help you with the paperwork, if you need assistance to roll over your account.

 

[Exchme]

First set up an IRA at your favorite brokerage, then fill out the paperwork at the receiving brokerage as others described.

Then write a note to your advisor saying you no longer need the service and expect a transfer request. You are sure to get the "how to keep the customer script" of how you can't survive out there in the deep dark woods without the brave guide to steer you around the big bad wolf. Don't give any reasons, don't respond to any questions, just repeat the decision.

There may be proprietary funds that cannot be transferred but instead have to be sold (not a tax problem, but it means that the automatic draw to your broker won't go through until the advisor sells). Also, not every advisor will do this on your say so or with an e-mail or letter. When I did this, my advisor also had their own paperwork that required a Medallion Signature guarantee that I had to go to my bank to get and then mail to them.

Just be persistent and don't let the sales pitches or the delaying tactics stop you.

 

[RetiredAndLovingIt]

I'm also considering moving a portion of my IRA to Fidelity and have a couple of quick questions.
Are the fixed income options and rates the same as in my taxable account for CD and Treasuries?
Do I still have to fill in trustee to trustee paperwork to move funds out to a bank or credit union if they offer a better deal or is that even an option in a brokerage? If so, is the overall transaction faster?
Are there any other advantages to using a brokerage over a bank?

 

[cloud9nd]

Thank you for the help!

I see calculators for 72T payments, however I'm wondering if there is a way to draw more annually than they set by percentage.

In other words more amount monthly, or with draw more after 59.5yrs?

 

[Al18]

New brokered CD’s at Fidelity can be bought for an after tax brokerage account, IRA or Roth IRA.

For transfers, typically you start the process at Fidelity. If there is any paperwork that needs to be completed, they will manage the process. The times may be anywhere from days to weeks, depending on your old bank, credit union or brokerage.

 

[jazz4cash]

Thank you for the help!

I see calculators for 72T payments, however I'm wondering if there is a way to draw more annually than they set by percentage.

In other words more amount monthly, or with draw more after 59.5yrs?

I’m not sure I follow. Once you reach 59.5 you can withdraw whatever you wish. You can designate a separate IRA for your 72t plan.

 

[cloud9nd]

First set up an IRA at your favorite brokerage, then fill out the paperwork at the receiving brokerage as others described.

Then write a note to your advisor saying you no longer need the service and expect a transfer request. You are sure to get the "how to keep the customer script" of how you can't survive out there in the deep dark woods without the brave guide to steer you around the big bad wolf. Don't give any reasons, don't respond to any questions, just repeat the decision.

There may be proprietary funds that cannot be transferred but instead have to be sold (not a tax problem, but it means that the automatic draw to your broker won't go through until the advisor sells). Also, not every advisor will do this on your say so or with an e-mail or letter. When I did this, my advisor also had their own paperwork that required a Medallion Signature guarantee that I had to go to my bank to get and then mail to them.

Just be persistent and don't let the sales pitches or the delaying tactics stop you.

Thank you for the detailed answer.

I'm looking to use a 5 year plan account which would drain an account we have

1. If I do the plan will it be divided by 5 years to drain equally?

2. If I do the plan is it as simple as set up and run it out or will they only allow a portion drained?

 

[COcheesehead]

Thank you for the detailed answer.

I'm looking to use a 5 year plan account which would drain an account we have

1. If I do the plan will it be divided by 5 years to drain equally?

2. If I do the plan is it as simple as set up and run it out or will they only allow a portion drained?

You’ll continue to be charged the fees if held at the advisor. I would roll it all at once and begin to take advantage of the no fee structure at another brokerage.

 

[cloud9nd]

Does anyone know how it works to draw your ira for the 5 year lock in?

I know there are lots of restrictions and cons, but I'm curious if you sign up for that do they lock in that allotment no matter what happens

Thank you.

 

[Al18]

You are locked for the number of years until you reach 59.5. You should contact your brokerage directly to setup the 72T. They will likely print out the necessary forms listing the annual withdrawal, taxes withheld and important dates.

 

[cloud9nd]

Okay. So the amount is divided up by 5 years and that's that? Market fluctuating has no bearing?

Thank you

 

[Al18]

The amount you can withdraw is based on a published Federal rate multiplied by the IRA balance. Market fluctuation has no bearing.

 

[SecondCor521]

The amount you can withdraw is based on a published Federal rate multiplied by the IRA balance. Market fluctuation has no bearing.

Not accurate assuming the poster is still asking about 72(t) programs.

Two of the three methods (amortization and annuitization) only consider the chosen interest rate and the initial balance. The third method works like an RMD, and the withdrawal is based on a year end balance and a divisor. A person using this third method in a 72(t) would see their withdrawal fluctuate with yearly market returns.

@cloud9nd, a person using a 72(t) generally can't drain the entire IRA during the 72(t) program. Even with a 5% interest rate, you're only going to be able to draw perhaps 6% of the balance yearly, and presumably the balance in the IRA will grow somewhat over time.

Also, you can't just say, I want to take out $X over that time frame. In order to qualify as a 72(t), the amount taken must match the result of one of the approved calculation methods based on the account balance and a valid interest rate if applicable. The typical problem is getting the withdrawal amount high enough based on the balance. The IRS allowing a person to use a 5% interest rate helps with this issue somewhat - as noted above you might be able to get about a 6% withdrawal rate using a 5% interest rate.

(Despite what was written above, the amortization and annuitization methods are not just simple multiplication, although they do use interest rates as an input.)

 

[SecondCor521]

Does anyone know how it works to draw your ira for the 5 year lock in?

One other nitpick - a 72(t) must last for the longer of 5 years or until 59.5. If you start it at age 58, you have to go to age 63. You can't start at 58 and stop a year and a half later.

 

[Al18]

SecondCor521,
Thanks for clearing this up. I had forgotten about the 3rd option when checking into 72t many years ago, when the published interest rate was lower than it is now. I didn’t like the restrictions that were part of 72t, so I did’t go this route.

 

[cloud9nd]

Not accurate assuming the poster is still asking about 72(t) programs.

Two of the three methods (amortization and annuitization) only consider the chosen interest rate and the initial balance. The third method works like an RMD, and the withdrawal is based on a year end balance and a divisor. A person using this third method in a 72(t) would see their withdrawal fluctuate with yearly market returns.

@cloud9nd, a person using a 72(t) generally can't drain the entire IRA during the 72(t) program. Even with a 5% interest rate, you're only going to be able to draw perhaps 6% of the balance yearly, and presumably the balance in the IRA will grow somewhat over time.

Also, you can't just say, I want to take out $X over that time frame. In order to qualify as a 72(t), the amount taken must match the result of one of the approved calculation methods based on the account balance and a valid interest rate if applicable. The typical problem is getting the withdrawal amount high enough based on the balance. The IRS allowing a person to use a 5% interest rate helps with this issue somewhat - as noted above you might be able to get about a 6% withdrawal rate using a 5% interest rate.

(Despite what was written above, the amortization and annuitization methods are not just simple multiplication, although they do use interest rates as an input.)

Okay, thank you for that information.

So just to be clear for example, let's say an account has 100k in it, you can't just get 20k a year for 5 years?

Thank you

 

[SecondCor521]

Okay, thank you for that information.

So just to be clear for example, let's say an account has 100k in it, you can't just get 20k a year for 5 years?

Thank you

Not with a 72(t) program you can't.

It depends on the method and interest rate you choose, but roughly speaking the most you can get is about 6%, so on an account with $100K in it, you could get out about $6K per year for five years.

Also, as a reminder, 72(t) programs must last for the *longer* of 5 years or until age 59.5. Someone starting a 72(t) at age 50 would need to continue the program for about a decade.

 

[cloud9nd]

Updating with more questions....

I called Fidelity as mentioned here and had no luck with this switching IRA over.

Then, speaking to advisor he says there's paperwork to roll into a CD and needs to write down other funds not in his control.

I'm at a loss here.

I just want to move this IRA away from the advisor and park it in a CD or annuity.

How can I do this without withdrawal penalties and without the advisor involved anymore

Need a 3 yr+ plan.

Any help is appreciated.

 

[pb4uski]

Moving the money and establishing a 72t are two separate things. Focus first on moving the money.

Alternatively, you can have the advisor make out the check to Fidelity "FBO [your name]" and then deposit that as a rollover. FBO is 'for the benefit of'.

Or you could do a rollover contribtion. You would tell the advisor that you want a check made out to you for your entire IRA.

Then when you get the check from the advisor go to your local brokerage office and deposit the check to your IRA and make sure that they designate it as a rollover contribution. Then you can decide what to invest it in and look at options for 72ts.

If there isn't a Fidelity office near you then you can deposit the check by mail.

 

[OldShooter]

@cloud9nd, sometimes these threads get confusing because they are attempting to deal with multiple issues. Let me try to distill things down a bit:

1. Getting Control of the IRA: The easiest will probably be if you want to move it to another house, like Schwab. Your new house will have a form for you to fill out. Once they have that, they will take care of contacting Fido and making the transfer happen. You want to transfer everything "in kind" (no need to convert to cash) unless there are assets that must be sold/cannot transfer in kind. There are no tax consequences for this and no need for you to handle any money. The transfer should be trustee-to-trustee.

(If you go to another house, be sure to ask if they offer a "bounty" bonus cash for bringing them the assets. Many seem to.)

If it is staying at Fido, you need to both rescind the FA's trading authority and remove him as FA. If you get any pushback or delays, say these magic words: "Please give me the name of your compliance officer." FA will probably say: "Why do you want that?" You say: "I think this process is unnecessarily difficult and I have been advised to contact your compliance officer if I need help." All communication with Fido and with the FA must be in writing. Emails OK, not phone calls. Make good telephone notes if a call cannot be avoided. Keep everything.

2. Pause: Do not try to do any trading or take any distributions until the assets are transferred and the ship is stable. The FA should be told that he is not to take any actions without consulting you and getting authorization in writing.

3. Once the assets are transferred then you are completely in control, (including the ability to make tax mistakes when taking distributions). So ... go slowly and thoughtfully. You will get mostly good advice here.

One piece of advice I will offer is to buy brokered CDs from the investment house you are using. This may cost you a few basis points but it pays back in simplicity. Down the road, as your confidence increases, you may want to chase yields but I'd bet you'll stick with simplicity.

 

[RetireBy90]

Just one more to chime in. My 401K was with Fidelity my IRAs with an advisor. I went in to the local Fidelity office. They made the call for me and opened the IRA while I sat with them. I'm sure other firms can do the same, but I have been very satisfied with fido every since. I had to take recent statements for the IRA but they assisted or did all the paperwork for me.

 

[Gotadimple]

Update....

I called Fidelity and had no luck with this switching IRA over.

That's because you have investments at your current advisor that Fidelity can't support, probably they are proprietary to your advisor.

I just want to move this IRA away from the advisor and park it in a CD or annuity.

How can I do this without withdrawal penalties and without the advisor involved anymore

Need a 3 yr+ plan.

Any help is appreciated.

You have two choices when moving an IRA between sponsors - 1) Direct transfer, or 2) Liquidation and setting up a new account with a new sponsor (this is a manual version of what happens in a direct transfer). Just be clear about your goals.

You cannot avoid paying fees, and you may have to pay withdrawal penalties and/or an account termination fee.

#1 You can still do this but any fund that Fidelity can't support your advisor needs to be told to sell it. You may pay a commission for the sale, and/or there may be an early withdrawal penalty on something you own in the account. Once you have sold any funds that Fidelity can't accept, do not put the money into a CD or an annuity - leave it liquid in your IRA, and contact Fidelity to start a direct transfer. Your arrangement with your current advisor may include a termination fee, check the paperwork you signed when you signed up for the account.

It can take some time to do this, meanwhile you will still be paying the advisor's fees.

#2 Is the same as what you would do in #1, except you need to terminate the account, and they need to sell everything you have in the account (including commissions and/or early withdrawal penalties) and issue you a check. Then you take the check to Fidelity and set up a new IRA. You have 60 days to do this once you have the check.

Fidelity can help you with a 3+year plan, but not until the account is set up and the money is available to invest in.

 

[cloud9nd]

Thank you for all the help!

I was not very clear in this, but the advisor and I are still on okay speaking terms.

My issue is he offered the opportunity to use the IRA to purchase a CD or annuity, but the caveat is he needs to fill a form on other allocated assets and their liquidity. Im not really comfortable with that since it's not under him.

I understand it's probably protocol these days for his business but I'm uneasy with it and could still be rejected.

I was hoping to get control of the IRA and move it to a large firm and do the same thing is get an annuity or CD. I'm not sure if it's the same paperwork though.

I'm not sure why this seems so difficult for me to understand, and I do thank you folks for spelling these directions.out thoroughly so I can get a clear picture here.

The plan would be to draw in 3 years from the IRA account, but I'd like to lock it up for now

The reason for all of this hesitation and confusion is he just told me the portfolios are up considering all of my buckets... That's because he's including fixed cds... The IRAs themselves are down and have been down and going down.

It felt shady. That makes no sense to me. It's like saying you're up at the casino after starting from 100k and hitting 50, but now are at 75k.

I don't know what to do here.