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Subject: Vanguard vs Discount
Broker
Date: 8/30/99 11:12 AM
Author: MJJANDERSON
Number: of 13543
Vanguard vs Discount Broker

I have a large 401k that I am moving from an Employer plan to a
self-directed IRA. I'd like to put it in a index fund until I know a
little bit more about the FOOLISH strategies.

Other than the direct costs of the trades, what other things should
I take into account when choosing between Vanguard or a
Discount Broker ?


There are several factors to consider. An index fund is for peace of mind, generally to keep your gains as Unrealized Appreciation (NUA), cash out at LTCG rates. These factors are not necessary to contemplate in an IRA, but if you add the factor of a TAX MANAGED index fund you can almost bypass the tax shelter of an IRA.

ALso, if you are rolling over a 401k and you are over 59 1/2 it may be advantageous to take a Lump Sum Distribution instead. Then the tax managed index becomes critical to replace the tax deferral of the IRA. Other factors come into play, such as double FETaxation, and more importantly, do you need these funds during your lifetime, and, or course, is there an advantage enough to justify prepaying taxes.

If you intend to roll-0ver to an IRA and then convert to a Roth, again the tax sheltering factors of the index fund are immaterial.

You'll have to make a decision of whether you can beat the index personally. I decided long ago I couldn't, didn't, and probably wouldn't (except in retrospect). Ed
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