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

[ImaCheesehead]

Thank heavens we didn’t do anything because right when we were first working on all this, the week before I made this post,the market had a dip and now it’s had a nice jump. I would’ve felt terrible if she had been sitting in cash waiting for a trustee to trustee transfer. I would’ve had to try to give her money to make up for it, and she wouldn’t have taken it, and I would’ve just had to sit there feeling bad because what was done was done.

I know I am right about getting her out of that higher expense fund, but she’s been comfortable with the way things were and generally didn’t think about what she was paying to own it. It wasn’t until I asked her if she would be willing to pay them $100 a month cash for the services they were offering her that she realized really what it was costing her.

After the great suggestion earlier in this thread to find an asset that could transfer directly, we discovered that although there were no mutual funds that would fit the bill, she could exchange to an ETF and then that ETF could come over. Then the ETF will be traded in for a low cost Vanguard fund.

My mom wants me to take care of the exchange, but I have been on a cruise since mid November and won’t be back until next week. Happily she is just sitting with her familiar MF so my big mouth is not responsible for her losing any money. We will do the transaction together when I get back.

Now I get that what we’re talking about isn’t a lot of money for most people here, but it’s about all she has besides her paid for home in an LCOL area. I also know I’m right about this, but to prove I’m right she can’t lose any money making it happen.

 

[Al18]

Being out of the market is nothing I would concern myself with. If you've ever bought a MYGA, this typically takes 3-4 weeks to complete.

 

[Raygun99]

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

Don't forget her RMD , and also, you might look at a partial ROTH (she lives on her $2000/mo SS) conversion up to her minimum tax bracket.

 

[ERD50]

Why not take the advice given earlier, do it in a series of transfers, 10% at a time. That way, any ups/downs will likely average out, and even a rare big market move will only affect 10% of the holdings.

I can understand your concern, if the move is to avoid ~ $1,200 in annual fees, a 1% rise in the market while you are in process would wipe out over a year's worth of fees, and might cause her some anxiety about it all.

 

[ImaCheesehead]

Don't forget her RMD , and also, you might look at a partial ROTH (she lives on her $2000/mo SS) conversion up to her minimum tax bracket.

Yes, we did her RMD first.

I also did think of doing a partial Roth conversion. She definitely has room on her federal tax bracket, but would end up paying in the state of Wisconsin.

Since I would be the only beneficiary of that move (when she would eventually leave the Roth to me) I didn’t want her to incur any additional costs. I could offer to pay the Wisconsin taxes but honestly, it just feels unseemly to me to get a personal benefit from any of these transactions.

For a long time, she insisted on me being 100% beneficiary on all of her assets, which is the IRA, about $40,000 in non-IRA high-yield savings, and her paid for home, as I am her only surviving child.

I finally convinced her to at least leave half of the IRA to my deceased brother’s two children with whom she hasn’t had much contact in their lifetime due to my deceased brother‘s alcoholism. She just wanted me to take all the assets that may be left at her death and give them whatever I decided on. Good grief I hated that idea.

I am actually still working on trying to have her leave her entire IRA to them even though she doesn’t like the idea right now. I do not want any of it as my own assets are significant (4.7 million currently, all in financial instruments and 90% of it in Vanguard low cost index funds) and I’m going to try to do my own Roth conversions between 65 and 75. My husband died last year so now I’m going to be filing single, pfffft.

For right now, I’m not going worry about it though because who knows what might happen with her health and long-term care. She may need/spend down her assets, and I might end up actually supporting her at some point in LTC if needed.

 

[ImaCheesehead]

I can understand your concern, if the move is to avoid ~ $1,200 in annual fees, a 1% rise in the market while you are in process would wipe out over a year's worth of fees, and might cause her some anxiety about it.

EXACTLY!!!

Drawing it out would be painful for both of us, lol. Soon as I get home, we’re going to move to the ETF that’s closest to her current allocation, and then move the ETF over, and then buy the Vanguard fund that fits her best.

 

[ImaCheesehead]

So my plan didn’t work out the way I hoped.

We couldn’t buy the ETF in her current Thrivent account because it was not a brokerage account. It was back to the drawing board…..

Instead of my convoluted first plan or my second unworkable solution we just 100% liquidated her account on Monday. The funds were in her bank account by noon on Wednesday and we purchased her Vanguard funds by the end of trading that day. Only 2 days out of the market!

Luckily electronic transfers make everything go really quickly, and there were no big market movements that I would have to take the blame for.

We processed it all as a rollover instead of a transfer. All’s well that ends well!

 

[pb4uski]

Thanks for the update.