I have a “target retirement account” which is performing poorly because when I opened it I selected the wrong target date (2031-2035). I want to change just the targeted date of this fund so that it is more aggressive. I don’t need help on making this decision but does anyone know how I would do this? Do I have to actually exchange it since it’s the same asset class but just a different category? Or do you think this is something a customer service rep can easily alter for me?
Two things to keep in mind:
I went to art school.
I am very low on spoons right now and also on pain meds. Simple explanations only please!
I was in a target date fund at one time with Vanguard before switching to a different index fund. I believe first you need to move the money from your fund, into the “settlement fund”. Then I basically went into my IRA, and hit “Buy” and selected the new fund I wanted to switch to. There is a list somewhere where you can get the fund name to enter into the “add another Vanguard fund” section. Then you would just select “from my settlement” fund when it asks you where the money will come from.
I have heard really good things about Vanguard customer service, so this might be an easy phone call too
I think you do an exchange. If you sell and rebuy there will be tax implications (potentially significant). Honestly, I would just wait until you have a good brain day and just call support (a day or a week or even a month likely won’t make much of a difference, if you are changing the date to a later date (I assume) and be a more aggressive mix (more stock, less bonds)). Anyway, phone support has been super helpful every time I have needed help with something I couldn’t do on my own, and for this I would want to be sure.
That’s what I was worried about. I think you’re right and I should just call on a different day. At least I can ask if an exchange is appropriate, and I will look up the name of the fund I want to replace it with in advance.
But if you sell it inside the retirement account, I don’t know if it immediately gets disbursed (since you can withdraw early from a retirement account, it’s just that the penalties are ugly). But doing an exchange from one fund to another is all within that account. I think? But I don’t know. That’s why I would ask a person.
@AllHat if you do eventually talk to a person, please let us know what happens!!! I am very curious.
Is the money in a retirement account like a 401k? If so, I don’t think you need to worry about tax implications unless you’re actually withdrawing the money (and they should warn you in big letters if you hit a button that leads in that direction). Within the account you should be able to either sell into a stable value fund and then slowly re-buy or just exchange straight into a new bucket. Personally I do exchanges about once a year for rebalancing…it’s through Fidelity not Vanguard but the rules should be the same.
If it’s a taxable account, then there are definitely tax implications and that’s where you’d want to sit down and math.
Okay, I move money around in my Roth IRA more than I probably should–as long as you’re buying/selling funds within the account and not taking anything out, you don’t need to worry about tax implications.
Stable value fund is what they call the fund in my 401k where you can leave cash sitting if you sell one investment but don’t immediately want to buy another (and don’t want to withdraw it)…in my IRA it’s called ‘Cash Reserves’ and I’m guessing Vanguard probably has its own name for a fund that does the same thing. But if you’re just moving straight from one target date fund into another, it probably won’t even show up.
In both Vanguard IRAs and Fidelity 401ks (what I have experience with), you can absolutely just exchange funds, with no tax implications at all.
ETA - go to exchange funds, decide which fund it’s coming from (your target date account), and click continue. Then it will let you pick a new fund to transfer it to, all within your Roth IRA.
Oh, I don’t know! Maybe if you never withdraw it (to an external account) that works fine! I just don’t know. Which is why it makes me think exchange is what you want (one fund to another within the account). It makes me super nervous, that’s why I would want to talk to a person. That’s just me though!
Thank you @kenner ! This is so helpful. I think vanguard’s version of the stable value fund is the settlement fund someone else mentioned, because I recall using that another time. It’s good to know this won’t impact taxes even if I buy/sell rather than exchange. You explain things well, if you have a minute could you explain the difference between buying and selling versus exchanging? Is it just immediacy and skipping the “settlement fund” middle man (during an exchange) versus parking your money for a bit (during a sell and then subsequent buy)?
