My husband and I have had accounts with a portfolio manager for about 8 years. I have two retirement accounts (IRA and Roth IRA), my husband has one (IRA), and we have a joint taxable account. Almost all of this money is invested in stocks. We are very unhappy because, over time, the accounts have not done as well as the ones we have with Vanguard and TIAA-CREF, and in the last 18 months things have gotten worse. They are doing really badly. And their fees are high. And we’ve been paying the fees in cash, so they’re not even included in the bad performance.
We’ve decided to get out, but I need to figure out how to do it. For the taxable account, we would be selling stocks and getting cash. I know that this will trigger capital gains and losses, and I know that I have to get the basis for every stock. It may be more complicated, because for the past few years my husband has had to take RMDs. We’ve combined the RMD for all his IRAs and taken them all from this investment company IRA. So each year, we’ve moved stocks from his IRA to our taxable account, and paid ordinary income tax on the value. So this might complicate the tax calculations.
I’m concerned that we might lose money if we liquidate everything right now, if we generate so much in tax losses that we won’t be able to use them all (I am vaguely aware that you can offset a certain amount of regular income each year for 3 years).
For the IRAs, I assume that we can just tell them to liquidate them and roll them over to Vanguard.
I would be so grateful for any advice you brilliant CC posters can offer! I have never in my life owned stocks before (only mutual funds) and it hasn’t been a good experience. The complexity of getting out is just the icing on the rotten cake.
Just a quick post right now, time is short right now. I’ll check back later.
All IRAs (traditional and Roth): contact the company you want to transfer them to. Vanguard has a good “concierge” department to handle such asset transfers. Fidelity has a good one also.
If I am understanding you correctly, you and your H have multiple IRAs. In that case, it is definitely in your interest to have trustee-to-trustee transfers only so you do not run afoul of the “one rollover per year” rule:
Wow. AttorneyMother - I had no idea there was a limit. I have two IRAs, my husband has one. But we would be doing trustee-to-trustee transfers. We have done this a few times before, so I’m familiar with the concept.
You can transfer securities from your IRA to Vanguard IRA without selling them. Just compare Vanguard fees with what you would be paying to your current broker if you sell. For example Vanguard may charge you up $35 to sell non-Vanguard mutual fund.
You can write off 3K per year of losses in your taxable account against other income year after year. I believe there is no 3 years limit.
I’d second the suggestion of letting Fidelity or Vanguard handle it. Fidelity handled stock transfers just fine, and there was no need to liquidate them simply for the purpose of moving them.
We did have to get a Medallion Signature Guarantee from Fidelity in order to have the assets released by the (despised) Putnam.
Thanks CCDD14 and arabrab. I hadn’t realized that transferring the stocks to Vanguard was a possibility. Of course I will call them, and talk to the person who does our taxes. But I feel completely in the woods right now and wanted to have some idea of the situation before I talk to anyone.
CCDD14, is the $3k for each of us, or joint? I hope there’s no limit, that would be great.
If you are rolling from one IRA to another, the once-a-year rollover rule doesn’t apply. IRA-to-IRA transfers are known as direct rollovers and since you never get constructive receipt of the $$, it’s not a taxable event and there are no limits on how many IRAs you can consolidate.
The once-a-year rule applies when you take out a distribution from your IRA and have it paid directly to you. You’d then have 60 days to get it back into an IRA or it becomes taxable. THAT is the scenario that’s covered by the once-a-year rule.
I believe it is $3K per return but talk to your tax preparer.
Hopefully not all of your stocks are under water so you can sell selectively winners and losers together.
Read Vanguard fee structure - the fees drop depending on the amounts invested with them and in their mutual funds. So it may be beneficial to buy the required amount of their products before selling other stuff.
Thanks @rosered55 for providing that link to the new for 2015 rule from the IRS. I read it, and I have to admit I did not understand what they are saying, not one little bit.
I thought RMDs had to be withdrawn in cash from an IRA. You can transfer stock out of the IRA without selling it and count the market value as your RMD?
Yes I think you can transfer stocks out of it. Nothing prevents you from doing it.
The example is pretty helpful. Made life simpler if you just have one IRA and one Roth IRA.
You can use capital losses to offset your capital gains. If you run out of capital gains in the current tax year against which to offset your capital losses, you carry them over to future years and use $3,000 per year mentioned above.
Here’s a good definition of Capital Loss Carryover:
The net amount of capital losses that aren’t deductible for the current tax year but can be carried over into future tax years. Net capital losses (total capital losses minus total capital gains) can only be deducted up to a maximum of $3,000 in a given tax year. Any amounts exceeding $3,000 can be put toward offsetting capital gains in the current year or simply deducted in the next year(s).
NJres, if you have several IRAs, you can take the total RMD from one of them, if you choose. We’ve been taking the RMD each year from his IRA at this company, and it has been accomplished by transferring stocks from the IRA to our taxable account (with a little bit of cash to make the number come out right). We’ve had to pay income tax on the RMD amount.
I don’t really understand the tax situation when stocks are held in an IRA. When there’s a distribution, it’s taxed as ordinary income. I understand that the initial investment was income from a previous year that wasn’t taxed. So it makes sense to tax that. But the growth would have been long-term capital gain, which could have been taxed at a lower rate. And now the stocks are sitting in a taxable account. Do we have to pay capital gains taxes when we sell them? That would be double-taxation, I think. Unless the basis is adjusted somehow.
AttorneyMother, do you mean that if, for example, you have $10k in capital gains and $5k in capital losses, you can not pay any capital gains tax, reduce your regular income by $3k this year for tax purposes, and reduce it by $2k next year?
Unfortunately it does not work this way. But
if you have $10k in capital loses and $5k in capital gains, you will reduce your regular income by $3k this year for tax purposes, and reduce it by $2k next year.
Very interesting discussion about transferring stock from IRA to taxable account as port of RMD. If this was legal can you transfer out the stock that is underwater, sell it and write off capital loss?
Dr.Google, this article is right on the money. So the stock basis resets when it is distributed from IRA. This should be spelled in some IRS document probably.