Moving from Financials Advisor to Vanguard - Tax question

[Kyle Collette]

Question for all the savvy investors with a little tax knowledge as well.

I have been looking to make the switch from my current investment portfolio into index funds. 

I was fortunate enough to start investing at a young age because of my parents, but I was more or less grandfathered in with a financial advisor for the last 8-10 years. Awesome guy and we have a great relationship, but I can’t jusitify staying with him and paying both a management fee as well as a fee per trade.

I currently have my Roth's IRA and my wife's Roth IRA with him as well as a much larger taxable account.

I want to make the move to vanguard with each of these accounts and was hoping for guidance on the best way to do so?

From my understanding, it should not be problematic to move the IRAs over as they are not subject to capital gains, correct?

However, for the taxable account, what would be my options to limit my tax basis (as well, how would I be able to calculate what my capital gains would be - is there a simple way to do so?)?

Any information or guidance is much appreciated!

[Josh E.]

Hey Kyle -

You are correct in the idea that you shouldn’t run into any capital gains problems with the move of your Roth IRAs. However, you still would want to keep track of the total amount that you’ve contributed to the account in case you wanted to withdraw your principal before 59 1/2 without penalty. Making the switch will mean vanguard won’t know automatically, so make sure you verify the total amount you’ve contributed. If you ever need to pull money out to purchase a new home or some other reason, you’ll be glad you did.

As for moving the funds in your taxable account, you could work with vanguard to journal those assets directly over, or pull them as they are currently invested. That would mean you don’t have to sell them all at once to move them, thus paying capital gains on everything. Then you could pick and choose which investments you sell at your leisure, and can hopefully limit the capital gains you pay. But if your plan is to move all your assets into index funds, you’ll have to pay taxes at some point. Hope this helps!