A question: My existing brokerage account charges 1% and also has expensive money, so I am considering moving my money. My question is should I wait for the market to calm down or should I pull the trigger now? I am assuming I will have to liquidate my money before transferring the money and the brokerage where I want to transfer my money has told me that it will take about seven days before the money is back in the market. I don’t want to lock in losses, but will I stay if I get out of the market for only seven days? I appreciate any ideas you may have.
Answer: First, your instinct to move your money is probably a good idea. First, the high money is probably not necessary, and it is simply too expensive for you. Furthermore, although 1% is a pretty standard fee for a financial advisor, there are plenty of good advisors at good financial firms who will manage your money and charge lower fees. This tool can help match you with a counselor who may meet your needs.
Moreover, you may not have to go out of the market at all, say the professionals. In fact, depending on your investments, you may be able to convert the entire account without having to sell your investment, says certified financial planner Danielle Miura of Spark Financials. Certified financial planner Cody Garrett of Measure Twice Financial adds: “Many jobs can simply transfer in kind without any tax or market consequences.”
If this is your situation, “this means that you do not have to sell your shares and can continue to invest during the conversion process. Once you transfer the shares to your new investment company, you should be able to make changes within two business days,” says John Burchill, Certified Financial Planner at John Piershale Wealth Management.
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To see if your money can transfer, provide a list of the money you have now to the brokerage firm you want to transfer your money to “to determine if they can accept an in-kind transfer of those securities,” says Garrett. In other words, don’t assume that your money can’t be transferred directly, instead ask the broker what can and can’t be transferred. Most mutual funds, cash, stocks, and bonds are convertible with no associated tax penalties or fees. “At the same time, investments like cryptocurrencies and options are usually non-transferable,” Miura says.
Garrett says that if you have to liquidate money, don’t make any decisions without considering the expected tax consequences, especially if you plan to liquidate the money into a taxable brokerage account rather than a tax-deferred retirement account. Shares that have been held for a year or less are subject to short-term capital gains tax, and money removed from a 401(k) before age 59.5 is subject to a 10% penalty tax in addition to taxes due to the IRS. And, he adds, you’ll want to “ensure that the transfer is completed and quickly reinvested in line with [your] Unique investment goals,” says Jarrett.
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Miura notes that: “There is some risk in not having your assets in the market for seven days, however, in the long run, seven days won’t make much difference. Unfortunately, it is difficult to determine whether you sell the assets now or later.”
If such questions concern you, the professionals say you may want to hire a financial advisor. But don’t necessarily just use the free advisor from the brokerage firm you’re transferring your money to – sometimes these advisors are not honest and may earn a commission. You may want to choose a certified financial planner who has a legal and ethical obligation to act in your best interests. (Looking for a financial advisor, too? This tool can help match you with an advisor who might meet your needs.)
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