Intro:
I’ve mentioned this a few times, but now its actually time to do it. I’m rolling my Roth IRA from Scottrade to Vanguard. There were times in the past when this could have been done, but I wanted to reach a certain goal before opening the account. I reached that goal so now its time. First, a little background on how I started my Roth.
Why I Loved Scottrade:
The year was 2005, real estate was booming, money was cheap, the sun was shining, and a 20 year old finance student had just found an extra $500 in his budget. The good ole days. Philip had been doing some research on retirement accounts for a class and learned all about Roth IRAs. He knew the earlier he started saving for retirement, the better off he would be. After looking at all the options, Philip found there weren’t many ways to start a Roth with $500, but didn’t want to wait until he saved up for more.
Enough with the 3rd person, Scottrade welcomed me with open arms. $500 was all I needed to get started in a no fee IRA. The local office helped me identify a decent index fund with a minimum investment of $250. This is harder to find than you might think. Over the years I made a few deposits when I had the money, I worked part time so money wasn’t flying in. Scottrade continued to work with me and offer great advice on funds even waived the fees to buy a couple of ETFs.
Why I’m Leaving Scottrade:
The main reason is the selection. Why there are thousands of funds available, none of them are as good whats offered with other institutions. The fees are higher, likely because Scottrade is getting a kickback. This allows them to advertise a no fee IRA to customers. They get paid, just on the back end. Because of the poor selection of good funds, I bought ETFs which came with a fee. The manager will no longer waive the fee for me so it was time to go.
Then there’s the issue with deposits. I’m big on the “set it and forget it” attitude for retirement accounts. Its REALLY hard to write a check and send money away not to be touched until my 60′s. I’d rather not have seen the money. You don’t miss what you never had. From DAY 1, the Scottrade people electronic fund transfer would be coming. 3 years later and I’m still waiting. My options are to mail the check or come to a branch and deposit. I’m not mailing checks with that kind of money in them. So all I can do is go to the branch and make a deposit. They’re open from 8-5 Monday through Friday, the problem is SO AM I. It takes a full lunch break, an hour, to get down and back, and the traffic just annoys me. Between this and the disappointing funds, it was time to move on.
Where I’m Going:
Vanguard of course. You know the spiel: good funds, low costs. Vanguard keeps the fees low on index funds because they require little maintenance and trading.
How Did I Roll the Roth?
I was doing two things at once with my new Vanguard Roth IRA. The Scottrade IRA was to be rolled and a deposit made from my checking account at the same time. The first step was to contact Scottrade and let them know I was departing. There are fees involved with this. The ETFs must be sold, so a $7 broker fee for each ETF. None of my mutual funds had a back end load so I’m clear there. Finally Scottrade has no closing fees, so just a few broker fees and I’m in the clear. I did the math to calculate what I expect to be transfered into the Vanguard Roth so I can make sure that amount arrives.
The next step was to verify I had sufficient funding in my savings account to open the new Roth with the balance goal I had set. I did, and this was promptly transfered from ING Direct to my local brick and mortar checking account. The transfer could have come from ING, but I prefer to isolate those accounts from other sources.
Now its off to the Vanguard website. Everything I need is on this site, and there is a toll free number that I can call for any additional assistance. It was used a few times.
Having already decided on the funds I wanted, the set up was simple. Filled out a few forms, they’ll even take care of closing out my Scottrade Roth. In the end there was some confusion about the forms and something called a “Medallion Signature Guarantee”, but its all straightened out now. Not being one to talk about my specific investment philosophy, I’m not going to share what funds I bought. Rest assured they are index funds and I’m diversified to my satisfaction. I feel fortunate that this was not done last year when I first considered it. Given to the down market and my large cash infusion, I just bought a bunch of securities at a great discount.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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