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Author: FoolishWarthog Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75384  
Subject: Vanguard IRAs Date: 2/16/2002 6:05 PM
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For those that have a Vanguard IRA:

Do they automatically reinvest dividends (even for partial shares)?

I looked all over their website and couldn't find anything.

Reason:

I'm looking for a new home for my former employers 401k. I make too much for the tax benifit of contributing to a traditional IRA, so all my 'new money' goes in to the Roth. Basically, I'm looking for a place to put the money (about 7k) and 'forget' about it.

Thus, I'm concerned about 'inactiviy' fees, etc. Any other suggestions would be helpful.

Thanks,

-Warthog
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Author: WPatch Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33823 of 75384
Subject: Re: Vanguard IRAs Date: 2/16/2002 6:49 PM
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Hello Warthog,

Yes, Vanguard will reinvest your dividends automatically in an IRA, unless you were to specify you wanted them dumped into a MMF. As Vanguard chages a $10 annual low balance fee for IRA mutual fund of less than $5,000, you would probably want only one fund. Index funds are $10 per year extra for balnces less than $10,000. If you want specificly a total market index fund, or more than one fund, or to avoid the index fees. TIAA-CREF is another low fee fund family to consider.

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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33829 of 75384
Subject: Re: Vanguard IRAs Date: 2/17/2002 9:14 PM
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Author: FoolishWarthog Date: 2/16/02 6:05 PM Number: 33822
For those that have a Vanguard IRA:

Do they automatically reinvest dividends (even for partial shares)?


I have a Vanguard IRA, and I heartily endorse them as one of the best IRA custodians there is!

The Vanguard default is always full dividend reinvestment (even for partial shares), unless you request otherwise. This selection option is included in the paperwork when you open your account.

If I were going to put in money and forget it, and I had a lot of time (ten years or more), I think I would put 75% in VTSMX, Vanguard's Total Market Index, and 25% in VGSIX, Vanguard's REIT Index. The REIT Index is expected to grow at about the same rate as quickly as the total market, but is highly uncorrelated with regular stocks. This should reduce the volatility of the portfolio, and possibly increase its total return.

Since you cannot roll a 401(k) directly to a Roth IRA, you have to roll it to a traditional IRA first. Then, you can convert it to a ROTH by paying the taxes. I would only do this if you can afford to pay the taxes with funds outside the IRA.

RK

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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33830 of 75384
Subject: Re: Vanguard IRAs Date: 2/17/2002 9:20 PM
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Author: FoolishWarthog Date: 2/16/02 6:05 PM Number: 33822

I'm concerned about 'inactiviy' fees, etc

I found the following on the Vanguard site at:

http://victory.vanguard.com/educ/newsstnd/ITV/2000Spring/custodial.html

Vanguard assesses a $10 annual custodial fee for each fund in which an investor has IRA assets during the year. For example, if you have IRAs in three funds, you will owe three fees, or $30, for the year. The custodial fee covers the cost of tax reporting that Vanguard is required to complete each year. The fee is due regardless of how long an account is open.

You need not worry about the fee if:

Your IRA fund accounts are valued at $5,000 or more. We look at account balances in the beginning of June to identify accounts that are eligible for this waiver. Accounts established after the June evaluation are reviewed in December.


RK

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