For or most folks, moving is often a sign of progress or change in life. It’s often joyful, like when we head off to college. Jill and I shipped our oldest, Maeve, out to college last month. It has been a tough summer for the kid and a lot of other folks due to Covid. While we do miss her, she was ready to move back on campus. But you know, sometimes life’s circumstances force us to move for other reasons. Perhaps we are taking a job in a new town or are adding kids to a growing family. Other times we do it because it makes sense from an economic or quality of life standpoint, such as when empty nesters decide to downsize.
Now, the lucky ones who don’t have to move get to stay in a comfortable place for a long time. But I know of some folks who moved seven or eight times between the ages of 20 and 30! When we do move, I’ve always found that the fun part is getting into the new place and enjoying the new experience. The stress, for me, is in the actual move itself. The packing, cleaning and hauling get pretty old by the time you get to your third or fourth move. Even worse is the dreaded “ask to help your friends” move. While pick-up trucks seem to be everywhere these days, it wasn’t the case back in the 80’s and my friends with trucks did a lot of moving favors.
When I think about moving, it brings to mind some financial moves that we periodically need to make, too. For example, some people might look at moving their brokerage accounts in the same way as moving their household – a chore. Why would someone want to move their brokerage accounts? Well, in many cases, a move to a different account might make sense to get more control over the asset, receive better service, change investment strategies, consolidate accounts, or possibly to work with a trusted advisor. Those in or nearing retirement, for example, will want to work with an advisor who specializes in downside risk mitigation and retirement income strategies. As you get older, your focus shifts from accumulating assets to protecting them and turning them into sustainable income in retirement. You need to work with someone who understands this aspect for your financial life and specializes in helping you prepare for – and stay – retired.
But some might see this type of move to be too much work and too little benefit to justify the effort . . . I get it. Through the years, I’ve seen many folks who are resistant to change, any change. The reality is that there is something called an “In-Kind Transfer” that allows us to move brokerage accounts and if you follow the process it’s pretty straightforward. You can move all your assets intact from one brokerage firm to another brokerage firm. You don’t need to sell anything off in the old account nor do you need to purchase anything in the new account if you choose. This is commonly used if there is no change to the investment strategy.
However, there is the “Cash Transfer” option as well. A Cash Transfer option is often employed when there must be a change to an investment strategy. For example, I see this used when folks move from their accumulation to their distribution years. Generally speaking, you sell your current assets and use the proceeds to re-buy assets in the new account. This option allows you to easily shift incoming assets right into an appropriate investment strategy.
So, what types of assets can you move as part of an In-Kind or Cash Transfer? Typically, you can move individual and joint brokerage accounts as well as qualified accounts, such as IRAs and 401ks. You can also move custodial accounts held for minors. Within those accounts, the list of individual assets that can be moved is fairly long. They include stocks, bonds, mutual funds, exchange trade funds, money market funds, CDs, and options, among others. Now, there are a few items that usually can’t be moved, such as crypto-currency and precious metals like gold. It’s always best to check with the brokerage you are moving to for a comprehensive list of what can be moved in-kind and what needs to be sold off.
The upside to doing an In-Kind or Cash Transfer is the ease in which it can be done. Usually, it’s a matter of signing some paperwork that directs your old brokerage account to initiate the move. In either case, make sure you address any potential tax consequences as well. While we never want to let, “the tax-tail wag the dog”, all tax scenarios should be considered before any changes are executed.
One thing to note is that the firm you are going to may charge a one-time transfer fee. But the move may still make good sense if there are greater long-term benefits in store for you.
An “In Kind or Cash Transfer” is not days of packing, unpacking, and organizing. It’s often a simple situation if and when the move makes sense. Better yet, no pick-up truck is required and you don’t have to ask for help from your annoying brother-in-law whose chief talent is being good at lifting things!
So as always – be vigilant and stay alert, because you deserve more!
Have a great week.
Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, Mansfield & Southlake, TX. Jeff can be reached at firstname.lastname@example.org.
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