Author Topic: Post-News IRA Strategy  (Read 832 times)

.Ryan.

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Post-News IRA Strategy
« on: October 08, 2020, 12:32:04 PM »
Like many of you, I still have an active LC IRA through Strata. With the news that LC is closing their retail investment platform at the end the year, I'm curious if there are thoughts with regard to the best way to handle the situation.

With the secondary market already closed, I know there is no longer a way to quickly liquidate the account, so I'm concerned that we will continue to be charged the annual strata account fee while we endure the painful process of watching the loan value dwindle for the next 3-5 years.

Are people planning on continuing with strata (just using other investment vehicles)? For those of us intending to transfer the funds to another IRA, is there a good transfer strategy that minimizes fees?

Love to hear peoples thoughts/strategies. TIA   

storm

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Re: Post-News IRA Strategy
« Reply #1 on: October 08, 2020, 03:46:53 PM »
I just closed out my LC IRA, but if I still had it, I would look at my returns minus the annual fee versus paying income tax on an early withdrawal and transferring the notes to a taxable LC account. Normally there is a 10% IRS penalty for early withdrawal, but there are several additional exceptions this year due to Covid. You can also give up your notes, but I don't think that qualifies as a capital loss when it's inside an IRA. If it was a Roth IRA, then I wouldn't have to worry about taxes.

Strata charges a lot of miscellaneous fees that ate into the relatively small amount of money I had invested, so it was not worth continuing to do business with them. If I was more wealthy and wanted to put the money in more exotic investments, it might be worthwhile to stick with Strata. There are many brokerages that no longer charge fees or commissions, so it was just a no-brainer to transfer the funds to one of them. Just my 2 cents.

jameslend

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Re: Post-News IRA Strategy
« Reply #2 on: October 08, 2020, 05:44:44 PM »
Lending Club hasn't really mentioned what will happen with the IRAs, right? Perhaps they may keep paying them until the loans wind down or offer to purchase them?

.Ryan do you have any self directed iras with no fees to recommend? I want to look into other investments, but I too want to move out of Strata due to their high fees.

macroman7799

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Re: Post-News IRA Strategy
« Reply #3 on: October 09, 2020, 02:59:40 PM »
My first question is if the  hi-yield savings accounts will have a IRA version because  my LC account is an IRA. I would only view the high-yield savings as a temporary parking place on the way to a new IRA.

Also I was thinking about recharacterizing the IRA as a Roth. I was going to do this a little at a time as I move funds to the new account but I wonder if maybe I should do it all at once this year.

macroman7799

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Re: Post-News IRA Strategy
« Reply #4 on: October 09, 2020, 03:45:53 PM »
I'm wondering what my best strategy is to minimize the fees. I have $ 12,810 in principal value in my LC IRA using STRATA as the custodian.

1. Do you think I should continue investing available funds until the shutdown?
2. Is there a transfer pattern that will save on fees?

I am still 3 years away from making penalty free withdrawls and had not planned to use these funds for at least 10 years. I am emailing the LC helpdesk to see if they can offer any advice but I'm sure they are swamped.

jameslend

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Re: Post-News IRA Strategy
« Reply #5 on: October 09, 2020, 05:13:31 PM »
I'm wondering what my best strategy is to minimize the fees. I have $ 12,810 in principal value in my LC IRA using STRATA as the custodian.

1. Do you think I should continue investing available funds until the shutdown?
2. Is there a transfer pattern that will save on fees?

I am still 3 years away from making penalty free withdrawls and had not planned to use these funds for at least 10 years. I am emailing the LC helpdesk to see if they can offer any advice but I'm sure they are swamped.

You might be able to save some if you accumulate before transferring out of your IRA but you'll be stuck with the investment options in STRATA.

Please keep us updated on what LC comes back with.

avid investor

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Re: Post-News IRA Strategy
« Reply #6 on: October 16, 2020, 11:44:45 AM »
I actually stopped investing in LC notes about 9 months ago.  The return wasn't worth the risk anymore to me.  So, we've been "withdrawing" the cash from our two LC IRA accounts, and rolling it over from STRATA to our Schwab Rollover IRA accounts.  It works, but it takes a couple of weeks and STRATA charges $50 each time, so I have been waiting until the LC IRA account has over $10,000 cash and then I withdraw it to STRATA and let them take their fee.  I don't want to pay $50 for ever $1000 withdrawn, and I don't want tens of thousands of dollars accruing in cash in LC, earning nothing.  So, $10,000 increments seemed about right.
Also, I didn't want to leave cash in LC if they are going through such big changes.  I just don't trust them that much.

lascott

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Re: Post-News IRA Strategy
« Reply #7 on: October 16, 2020, 12:04:38 PM »
I have a ROTH IRA in STRATA connected to one of my LC accounts.  If you have a ROTH IRA you can pull contributions at any time. Remember that all your ROTH IRAs at all the custodians you use logically count as one large ROTH IRA bucket. ie. you could have $50K at STRATA and $300K at Vanguard or Fidelity (or?) and spanned over both you have > $70K in contributions.  You can pull all of that $50K from your ROTH STRATA IRA without early withdrawal penalties to do with what you want. ie. even reinvest wherever.

I'm pulling a few thousand a month from STRATA thru automatic withdraws and it is not costing me any fees.
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

jameslend

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Re: Post-News IRA Strategy
« Reply #8 on: October 16, 2020, 01:38:03 PM »
I have a ROTH IRA in STRATA connected to one of my LC accounts.  If you have a ROTH IRA you can pull contributions at any time. Remember that all your ROTH IRAs at all the custodians you use logically count as one large ROTH IRA bucket. ie. you could have $50K at STRATA and $300K at Vanguard or Fidelity (or?) and spanned over both you have > $70K in contributions.  You can pull all of that $50K from your ROTH STRATA IRA without early withdrawal penalties to do with what you want. ie. even reinvest wherever.

I'm pulling a few thousand a month from STRATA thru automatic withdraws and it is not costing me any fees.

Can you comment how you are doing pull from STRATA with no fees?

LC => Strata (free, anytime)
Strata => another IRA ($50/withdrawal)

Or are you saying withdraw contributions only and reinvest? This is considered a rollover I think, where you're only allowed 1 rollover per year.

lascott

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Re: Post-News IRA Strategy
« Reply #9 on: October 16, 2020, 02:21:14 PM »
I have a ROTH IRA in STRATA connected to one of my LC accounts.  If you have a ROTH IRA you can pull contributions at any time. Remember that all your ROTH IRAs at all the custodians you use logically count as one large ROTH IRA bucket. ie. you could have $50K at STRATA and $300K at Vanguard or Fidelity (or?) and spanned over both you have > $70K in contributions.  You can pull all of that $50K from your ROTH STRATA IRA without early withdrawal penalties to do with what you want. ie. even reinvest wherever.

I'm pulling a few thousand a month from STRATA thru automatic withdraws and it is not costing me any fees.

Can you comment how you are doing pull from STRATA with no fees?

LC => Strata (free, anytime)
Strata => another IRA ($50/withdrawal)

Or are you saying withdraw contributions only and reinvest? This is considered a rollover I think, where you're only allowed 1 rollover per year.
I'm doing a fixed amount withdrawal to my checking account every month. The schedule below shows 'No charge'.
With a ROTH IRA if you contribute $10 today and next week the account is worth $11, then you can take out the $10 contribution (not the $1 gain) penalty free right away.  You can do anything you want with that money. Buy a car, go on vacation, or even invest it in some other account.  Your ROTH IRA contributions being withdrawn are not a 'rollover'.  Hope that helps.   Traditional IRAs or taking out ROTH IRA gains are a different matter.

I hope that helps explain.  Key point in my prev post about all your total ROTH IRAs from everywhere are considered to be in one ROTH IRA bucket. My CPA helped me understand this. It is a ROTH IRA thing/concept/IRA-handling.

Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

jameslend

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Re: Post-News IRA Strategy
« Reply #10 on: October 16, 2020, 02:29:00 PM »
I have a ROTH IRA in STRATA connected to one of my LC accounts.  If you have a ROTH IRA you can pull contributions at any time. Remember that all your ROTH IRAs at all the custodians you use logically count as one large ROTH IRA bucket. ie. you could have $50K at STRATA and $300K at Vanguard or Fidelity (or?) and spanned over both you have > $70K in contributions.  You can pull all of that $50K from your ROTH STRATA IRA without early withdrawal penalties to do with what you want. ie. even reinvest wherever.

I'm pulling a few thousand a month from STRATA thru automatic withdraws and it is not costing me any fees.

Can you comment how you are doing pull from STRATA with no fees?

LC => Strata (free, anytime)
Strata => another IRA ($50/withdrawal)

Or are you saying withdraw contributions only and reinvest? This is considered a rollover I think, where you're only allowed 1 rollover per year.
I'm doing a fixed amount withdrawal to my checking account every month. The schedule below shows 'No charge'.
With a ROTH IRA if you contribute $10 today and next week the account is worth $11, then you can take out the $10 contribution (not the $1 gain) penalty free right away.  You can do anything you want with that money. Buy a car, go on vacation, or even invest it in some other account.  Your ROTH IRA contributions being withdrawn are not a 'rollover'.  Hope that helps.   Traditional IRAs or taking out ROTH IRA gains are a different matter.

I hope that helps explain.  Key point in my prev post about all your total ROTH IRAs from everywhere are considered to be in one ROTH IRA bucket. My CPA helped me understand this. It is a ROTH IRA thing/concept/IRA-handling.



Thanks for the explanation lascott. It makes sense. It works for someone who's going to start to draw from their IRA i think.

What if you wanted to reinvest the withdrawals back in a ROTH though? By removing the funds, they are no longer tax sheltered. It's true you can avoid the fee by withdrawing contributions, but you are losing the potential tax free growth of the funds.

macroman7799

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Re: Post-News IRA Strategy
« Reply #11 on: October 16, 2020, 06:41:13 PM »
This Investopedia article seems to indicate that you can do a self-directed transfer of IRA assets. It doesn't appear that you even need to tell STRATA where the money is going:

https://www.investopedia.com/ask/answers/179.asp

Distribution to the Account Holder

Another option—albeit a riskier one—is for the account holder to ask for a check from their existing custodian, making it their responsibility to deposit the money into a new Roth account. However, to be considered a tax-free rollover to a new Roth IRA, the money must be deposited in that account within 60 days after receipt of the check.3

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I am thinking about converting the LC IRA to a Roth this year if that's still possible. It looks as if STRATA will charge $50 for that service.

storm

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Re: Post-News IRA Strategy
« Reply #12 on: October 17, 2020, 03:32:52 AM »
I don't want to pay $50 for ever $1000 withdrawn, and I don't want tens of thousands of dollars accruing in cash in LC, earning nothing.  So, $10,000 increments seemed about right.
Also, I didn't want to leave cash in LC if they are going through such big changes.  I just don't trust them that much.

You can transfer/withdraw the cash from your LC account to your Strata account and earn a little interest. It isn't much, but it is better than the nothing LC pays.