Will this plan work to minimize time out of market with an IRA transfer?

[ImaCheesehead]

At my suggestion, my 83 year old mother is going to transfer about $165,000 IRA from Thrivent to Vanguard. We found a fund at Vanguard that is pretty darn close to what she has at Thrivent that she’s been happy with. The issue is, though, that it cannot be transferred in kind.

Vanguard called and told her that she would need to liquidate the fund, put the assets in cash, and then they could reach out to Thrivent and do a trustee to trustee /custodian to custodian transfer.

I don’t want her to be out of the market, however, during a possible big upswing day.

Is the following plan possible:

1. She links her bank account to her new Vanguard IRA account.

2. I send her the approximately $165,000 and she holds it in her bank account

3. She liquidates her Thrivent fund. We know the dollar amount at the end of the business day. She instructs Thrivent to send her the cash money no withholding

4. The following day she makes a purchase for that exact amount at Vanguard and sends it from her bank account to her IRA.

5. When she gets the cash from Thrivent, she gives it to me.

I’m guessing it would be important that the 165k not appear in two qualified accounts at once so selling one day at Thrivent and buying the following at Vanguard would eliminate that risk?

Is there something about this that I’m not thinking about correctly that would make it not work?

 

[Steelpony]

Well if she likes where she is why do this? Capturing future markets as they are instead.

Or

Why don’t you liquidate say monthly or quarterly up to a year, DCA out and DCA into her new holding? Don’t try to play an unknown in one lump sum, to risky.

 

[pb4uski]

I think you are overthinking it a bit but understand what you are trying to do.

I think that the money needs to be out of the Thrivent IRA in order for the money sent to the Vanguard IRA to be a rollover contribution, so timing is important.

Can you liquidate the fund she is in at Thrivent, buy the fund that she would like to be in and then do an in-kind transfer?

Or are there funds available in her Thrivent IRA that are transferrable in kind to Vanguard that are close enough even if you have to swap it again once it gets to Vanguard?

 

[junkanoo]

Since this involves a sale, what is the LTCG on the sale? Because if it is significant and would be significant on her taxes ... it might not be worth the effort.

If that's not an issue ... I'm guessing that there is some OEF offering at Thrivent that Vanguard would take in-kind, just solving this problem. Then, you move it over to Vanguard, then you move it from the in-kind OEF to the OEF you agreed to with your mom.

I realize that you're looking out for your mom, but taking your money out of play just to make sure your mom's money is in play ... doesn't seem to be a win/win proposition.

 

[Phroig]

I wouldn’t worry about being out of the market for the few days it takes to get the money from Thrivent to Vanguard. The market could go up or down, no way to predict if your mom will be better or worse off.
Also, keep in mind that you will be out of the market for the days she has your cash.

 

[EastWest Gal]

OP said Vanguard doesn't allow an in-kind transfer. Also, there is no tax consequence since the sale would be within her IRA.

The time out of the market may only be a few days. How much does market change in a few days? 1-2% at most, and likely less. There is just as much chance of a drop in the market as a gain. She is equally likely to end up ahead as behind. The difference might be $1000-2000, and likely much less. I agree you're overthinking it.

 

[GrayHare]

If that Thrivent fund is inside an IRA, there will be no capital gains taxes associated with liquidating the fund and rolling the cash to a Vanguard IRA. Taxes are paid upon actual withdrawal from a tIRA.

 

[DrRoy]

I believe that the payment must come as a check. In order to ensure that the transfer does not become taxable, you should get that exact check to Vanguard.

 

[MarieIG]

You can probably set up the IRA in Vanguard first, indicating during the set up that you will be transferring the funds from Thrivant, and then liquidate the next day as it typically takes Vanguard a few days to complete the transfer. If you buy a Vanguard fund, you don't necessarily have to wait the additional days for the funds to settle, i.e. IIRC they allow you to buy Vanguard funds while the $ is still "pending."

 

[ImaCheesehead]

ok, good ideas coming my way already!

No tax implications for her as it is all IRA $.

Since the expenses on her fund are so much higher than a similar Vanguard fund it “costs” her about $100 per month. This is her only nest egg and she lives on her $2000/mo SS and the rent I pay her to live in her basement, so $100 a month isn’t nothing to her.

For the last 15 years she has just poo-pooed me about the higher expense ratio and said she likes her advisor. I don’t think she really considered how much it was costing her. Well, he retired a few years back and new guy only sends a few emails from time to time so she is less connected to him.

The other day I asked her if she would be willing to write a check for $100 to them each month for the service they provide to her and that THAT made her stop and think and she decided to change over. So, now it’s on me to make sure she isn’t out during a 2-3% upswing so my bright idea doesn’t turn out to cost her $. I need to be right that this is the best thing for her.

I am going to look to see if Thrivent offers any funds that could go over in kind. They might only have proprietary stuff.

The 160k float won’t do me much harm as I keep more than that in my money market and it would just be a few days

 

[ImaCheesehead]

$1000-$2000 loss is exactly what worries me, it could take over a year to make up a loss like that from the lower expenses and she’s 83 already. She is still buying green bananas, but…….

 

[FD1000]

The easiest is to sell the fund and buy a generic ETF that both have.
For stocks: VOO or even SPY which is the SP500.
For bonds: BND=US total bond index or PYLD=multi-sector bond, similar to PIMIX.

Then, just do in-kind transfer.
You name the fund, and I can find something close.

 

[Koolau]

Whatever you do, I'd suggest letting Vanguard do their thing so that the paperwork will be unassailable. I'd not mix your money into the process.

A couple of market days is just as likely to save her money as it is to lose her money I would think.

 

[pb4uski]

.... I am going to look to see if Thrivent offers any funds that could go over in kind. ...

Any update?

 

[TheWizard]

Googling Thrivent IRA gives me the impression that one needs to invest strictly in Thrivent MFs and ETFs, no brokerage window.
So the question becomes: does Vanguard allow any Thrivent funds to be transferred in-kind?
I don't know the answer...

 

[ImaCheesehead]

Another thing I thought of. If Thrivent sends the proceeds of the liquidation payable to my mom, they are going to withhold 20%.

Of course, in the rollover we would send 100% of the full liquidation amount and get that 20% withholding back when it’s time to do the taxes. Since it’s the almost the end of the year and she does her taxes by paper the first day that they can be done it shouldn’t take too long for the money to come back.

She’s goning to get very nervous though, with all these complications. I understand it, but she won’t like the fuss.

I’m not home with her right now, I am on a cruise, and when Vanguard sent an email message for her to call them about not being able to transfer the assets in kind, she said they were kind of condescending to her and almost suggested that since it was such a small amount, she just leave it at Thrivent. That put a bit of a bad taste about Vanguard in her mouth. As I said, I wasn’t there so I didn’t hear the conversation.

THMAX is the fund she is in and according to ChatGPT the two closest funds for her to consider are:

Vanguard Balanced Index Fund Admiral Shares (VBIAX)

Vanguard LifeStrategy Moderate Growth Fund (VSMGX)


Either would do. VSMGX does have some international exposure but the expenses on VBIAX are a bit lower

I think FD1000 has figured out the best way! I went looking to see if Thrivent had any ETFs and they do. I just pulled a random one and tried to model a purchase of the ETF shares in my own brokerage account at Vanguard and it seems like it would go through if I click to the final step.

If that would work, everything will be so much simpler!!!

 

[ImaCheesehead]

Also, I may be able to just go with some simple like SPY assuming I can buy it in her account. Chat GPT suggests I can but we will see. Then we can change it over to the more conservative mf at Vanguard.

Thanks all for helping me with this issue!

I knew folks smarter than I would come through with the answer.

 

[pb4uski]

So post #3, last paragraph.

 

[levindb]

I would ask Vanguard to handle the whole transfer so here is no check coming to you or your mom...it should be an ACH transaction. There will probably be a short delay from initiating the sale, allowing the account to settle, and then the funds will be pushed or pull to Vanguard. Sometimes Vanguard even offers a bonus for opening a new account...a Vanguard advisor can even offer a suggested fund to purchase that would be similar to what your mom has now, or even suggest a more appropriate fund, rather than asking a bunch of folks on the internet.

 

[ImaCheesehead]

I know what fund to choose.

I think the whole POINT of this forum is to ask folks on the internet for ideas, lol. PB4uski and FD1000 came up with a much better plan for me than what I originally suggested, and I am going to find and purchase an ETF for her in her current before requesting an inkind transfer.

Thanks to all who took the time to help answer my questions!

 

[TheWizard]

I know what fund to choose.

I think the whole POINT of this forum is to ask folks on the internet for ideas, lol. PB4uski and FD1000 came up with a much better plan for me than what I originally suggested, and I am going to find and purchase an ETF for her in her current before requesting an inkind transfer.

Thanks to all who took the time to help answer my questions!

Thrivent website doesn't seem to allow purchase of generic ETFs in their tIRA, just Thrivent ETFs.
Will be interesting what you find...

 

[FD1000]

Looks like VG doesn't have access to Thrivent mutual funds but has access to Thrivent ETFs. Thrivent has only 4 ETFs. They don't have large cap.
Using TSME=small-mid cap + TCPB=core bond are the closest to an allocation fund.

See below 3 years TSME vs SPY. For one year SPY is better

See below TCPB VS BND. Looks like TCPB exists less than a year but pretty close to BND.

 

[ImaCheesehead]

VERY COOL! Thank you so much for this information. When I went into my own Vanguard brokerage account I found I could choose a Thrivent ETF although I did not complete the purchase of course.

This is definitely the way for us to go!

And please remind me to keep my mouth shut next time. oh, who am I kidding? That’ll never happen.

 

[imnontrad]

Is this money eventually going to be spent by her or inherited by others? That would really determine how to invest this.

 

[rmcelwee]

I'm jumping in just so I can be subscribed to the thread and eventually find out how much she would have made or lost "during a possible big upswing day".

Every time (4 or 5?) I have ever transferred money/stocks when doing something like this I sold high and bought low. It not only hasn't been an issue, it has worked out very well for me. Of course, this doesn't mean that the day Mom does this won't be one of the biggest up days in history. I'm very curious to see how this works out.