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Vanguard IRA: What You Need to Know

By Dan Caplinger – Nov 15, 2016 at 6:43AM

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The low-cost provider of investments offers IRAs to investors.

The Vanguard Group has a reputation for having low costs for investors, and that makes many people look at a Vanguard IRA when they consider saving for retirement. Some people think that the Vanguard IRA is the best in the business because it offers commission-free ETF trading, traditional or Roth IRA options, and the opportunity to have a personal advisor review your investments and come up with an investing plan to help you reach your goals. Below, we'll go into more detail about the ins and outs of the Vanguard IRA.

Vanguard IRA features



IRA types

Roth or traditional; individual, rollover, spousal, or inherited

Minimum investment

Minimal for ETFs; $1,000 for some funds; $3,000 for others

Account service fee

$20 per account; waived if register online and sign up for electronic delivery

Investments available

ETFs, stocks, bonds, mutual funds

Data source: Vanguard Group.

What types of IRAs does Vanguard offer?

At Vanguard, you'll have full access to just about every type of IRA you can think of. Both traditional and Roth IRA options are available to investors. Moreover, you can either fund a Vanguard IRA directly from contributions you make year in and year out, or you can rollover a 401(k) account at work or another IRA at a different financial institution into a Vanguard IRA. Vanguard also offers spousal IRAs for those who don't have earned income but whose spouses do, taking advantage of legal provisions allowing one-earner households to have both spouses save for retirement. Finally, if a loved one had a Vanguard IRA and named you as the beneficiary, then you can inherit that IRA and keep it at Vanguard.

How much do I have to invest in a Vanguard IRA?

The minimum amount for a Vanguard IRA depends on what types of investments you want to make. For Vanguard exchange-traded funds, the minimum amount necessary is the value of a single share. Depending on the ETF, that can be less than $50. By contrast, most Vanguard mutual funds have minimum investments of either $1,000 or $3,000. Fixed-income securities often come in minimum denominations of $5,000 to $10,000, making it necessary to have at least that much in your Vanguard IRA in order to have effective access to such investments.

Image source: Vanguard.

What are the costs of a Vanguard IRA?

Again, how much you'll pay in expenses for a Vanguard IRA depends largely on the investments you make. Vanguard charges commissions for stock trades that are based on the amount of money you have across all the accounts in your relationship with the financial provider. For those with $1 million or more, free trading is available for the first 25 trades you make. For others, commissions of $2 to $20 per trade are available.

For mutual funds and ETFs, you'll pay the underlying expenses that each fund you own charges. Vanguard is well known for having fund costs that are well below the industry average, and Vanguard IRA accountholders have full access to the same low-cost funds that other investors can buy.

Vanguard accounts typically have $20 account service fees. However, you can have those fees waived if you have at least $50,000 in assets at Vanguard, or if you agree to have documents sent to you electronically and register your accounts online.

Will an advisor help with a Vanguard IRA?

Vanguard has recently started offering its Personal Advisor Services to clients, and Vanguard IRAs are eligible for such assistance. Professional advisors will look at your overall investment picture and offer guidance in coming up with a customized financial plan that will handle your own particular situation and meet your goals.

One large obstacle to the service, however, is that Vanguard requires a relatively high minimum amount of assets in order to qualify. Right now, you need $50,000 in order to use Vanguard Personal Advisor Services. Not all of this money needs to be in a Vanguard IRA; you can also have non-IRA accounts that will count toward the total. Nevertheless, the high minimum puts the service out of reach for many savers.

Despite that potential shortcoming, Vanguard IRAs give most investors access to the proprietary low-cost mutual funds and exchange-traded funds that have helped make the Vanguard Group such a large player in the financial industry. If you like the mix of ETFs and mutual funds that are available from the company, then a Vanguard IRA might well make sense for you in your retirement financial planning.

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