Vanguard Target Date funds (in taxable accounts) --- WHAT IS GOING ON?

[Anonymous]

Anonymous wrote:
Thank you. I appreciate the explanation. I obviously made some bad choices, investing in November and into the retirement fund. So, if I sell now, this will show as a capital loss on next year's tax statement? Since this is a retirement fund (vs. regular mutual fund) am I not allowed to simply convert to the ETF? I need to sell and then re-purchase? Thanks. I'm wondering if I should move it all out of Vanguard after this.

To be fair to you, it's not November in every single fund in the world--it's just been December dividends/cap gains at Vanguard for as long as I can remember.

If you sell now and take a loss, you will have a loss you can report against capital gains on next year's taxes.

It's a reasonable question about ETFs. The fact that the fund is labeled "retirement" would have no impact on in any direction. (Maybe like you, I invested in it for the asset allocation and the ease, not specifically because I plan to use the money in retirement.) The issue is that there is no Vanguard ETF equivalent to convert this to. So you would need to sell and repurchase.

FWIW, in similar shoes, I am leaving the money in the Total Retirement fund alone (because in my case it would cement a gain I don't want to pay taxes on now, and I think Vanguard is very unlikely to ever do something like this again). But going forward, I'll put new money in ETFs. Because "impossible" is better than "very unlikely."

The real question is: if you pull it from Vanguard, then where do you put it? And Fidelity has great ultra-low fees on a range of index funds, but there are other things I like about them less, and in the end I don't think the grass is that much greener.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
Thank you. I appreciate the explanation. I obviously made some bad choices, investing in November and into the retirement fund. So, if I sell now, this will show as a capital loss on next year's tax statement? Since this is a retirement fund (vs. regular mutual fund) am I not allowed to simply convert to the ETF? I need to sell and then re-purchase? Thanks. I'm wondering if I should move it all out of Vanguard after this.

To be fair to you, it's not November in every single fund in the world--it's just been December dividends/cap gains at Vanguard for as long as I can remember.

If you sell now and take a loss, you will have a loss you can report against capital gains on next year's taxes.

It's a reasonable question about ETFs. The fact that the fund is labeled "retirement" would have no impact on in any direction. (Maybe like you, I invested in it for the asset allocation and the ease, not specifically because I plan to use the money in retirement.) The issue is that there is no Vanguard ETF equivalent to convert this to. So you would need to sell and repurchase.

FWIW, in similar shoes, I am leaving the money in the Total Retirement fund alone (because in my case it would cement a gain I don't want to pay taxes on now, and I think Vanguard is very unlikely to ever do something like this again). But going forward, I'll put new money in ETFs. Because "impossible" is better than "very unlikely."

The real question is: if you pull it from Vanguard, then where do you put it? And Fidelity has great ultra-low fees on a range of index funds, but there are other things I like about them less, and in the end I don't think the grass is that much greener.

Thanks again. I will think it over and I appreciate your insights.

[Anonymous]

You should file a complaint with the CFPB. I’d also try to contact Kiplingers, Post or other news agencies to make noise. This company deserves reputational harm in behaving that way.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Don't you pay these hefty taxes eventually and it's just a matter of when?

Yes, this is just prepaying taxes. Your basis will now be higher. But it’s not tax efficient for long term investments because you are reducing your investable income.

Can you explain this please? I opened a Vanguard brokerage account in November 2021 (invested in a Target Retirement Fund), I have lost money in the account in the two months I have held it due to poor stock market performance, and now Vanguard has issued me a 1099 saying I had $14,000 in capital gains in this account in 2021. I absolutely did not, so this isn't a question of paying taxes on my earnings. I have a net loss in this account.

PP is wrong in your case. You can and do have capital gains and a net loss. Your basis, in your situation, is likely to be lower, not higher. So you got screwed even more than long-term investors did, unless you eventually use net losses in this account to offset gains elsewhere (which is what I would do in your shoes--take the loss and move this $ to ETFs).

But the PP's advice is correct for all of us who have seen net gains in the account.

For you, the share value declined between when you bought the fund and when the cap gains and dividends paid out (avoid new taxable investments in November, friend!). Then Vanguard engaged in trading within the fund to satisfy the selloff they created that generated capital gains for all remaining shareholders (you were still a shareholder).

Assuming you reinvest dividends and cap gains, what happened when you got those capital gains and dividends was that you bought more shares at a lower price and your average basis has therefore declined. Sell now, harvest the loss, and put this money in an ETF instead.

One other question - does the fact that I've only owned these shares for only 2 months (vs. 6 or more) affect how I would be able to offset this loss in the future? Do I need to wait to sell? Thanks.

[Anonymous]

Actually given market sell off you made money if you did not reinvest.

You got paid out in capital gains sold at peak prices. Now you can buy in when less.

Now if it was auto reinvested you got tax bill and bought back in at pre market correction prices.

I am in the 2030, 2035, 2040 and 2045 funds and it is in 401k.

Don’t laugh I have to fix my funds

[Anonymous]

Anonymous wrote:Actually given market sell off you made money if you did not reinvest.

You got paid out in capital gains sold at peak prices. Now you can buy in when less.

Now if it was auto reinvested you got tax bill and bought back in at pre market correction prices.

I am in the 2030, 2035, 2040 and 2045 funds and it is in 401k.

Don’t laugh I have to fix my funds

Expect you presumable lost about 30 percent of the gains to taxes.

[Anonymous]

This is a common thing. Closed end funds often pay an Annual Dividend composed of long term and short term capital gains. Many paid huge ones end of 2021 and if you bought late in year pre ex dividend you got burned.

However, those same funds now ex dividend in a stock mkt corrections are great buys.

[Anonymous]

Anonymous wrote:This is a common thing. Closed end funds often pay an Annual Dividend composed of long term and short term capital gains. Many paid huge ones end of 2021 and if you bought late in year pre ex dividend you got burned.

However, those same funds now ex dividend in a stock mkt corrections are great buys.

You really don't understand what happened in this case.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is a common thing. Closed end funds often pay an Annual Dividend composed of long term and short term capital gains. Many paid huge ones end of 2021 and if you bought late in year pre ex dividend you got burned.

However, those same funds now ex dividend in a stock mkt corrections are great buys.

You really don't understand what happened in this case.

+1

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is a common thing. Closed end funds often pay an Annual Dividend composed of long term and short term capital gains. Many paid huge ones end of 2021 and if you bought late in year pre ex dividend you got burned.

However, those same funds now ex dividend in a stock mkt corrections are great buys.

You really don't understand what happened in this case.

+1

+2. It would really behoove some poster spotting off in this thread to read the OP carefully.

[Anonymous]

https://www.morningstar.com/articles/1076616/lessons-from-vanguard-target-dates-capital-gains-surprise

Read brand new article - they are investigating

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is a common thing. Closed end funds often pay an Annual Dividend composed of long term and short term capital gains. Many paid huge ones end of 2021 and if you bought late in year pre ex dividend you got burned.

However, those same funds now ex dividend in a stock mkt corrections are great buys.

You really don't understand what happened in this case.

+1

Some closed end funds are down 20 percent as paid massive cap gains at year end. They operate similar to a target date fund and only pay once a year.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is a common thing. Closed end funds often pay an Annual Dividend composed of long term and short term capital gains. Many paid huge ones end of 2021 and if you bought late in year pre ex dividend you got burned.

However, those same funds now ex dividend in a stock mkt corrections are great buys.

You really don't understand what happened in this case.

+1

Some closed end funds are down 20 percent as paid massive cap gains at year end. They operate similar to a target date fund and only pay once a year.

AGAIN. You really do not understand what is being complained about in this thread.

[Anonymous]

Anonymous wrote:https://www.morningstar.com/articles/1076616/lessons-from-vanguard-target-dates-capital-gains-surprise

Read brand new article - they are investigating

Nobody’s “investigating”—this guy is a Vanguard shill. When it’s the SEC (or plaintiffs’ discovery), that’ll be worth describing as “investigating.”

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is a common thing. Closed end funds often pay an Annual Dividend composed of long term and short term capital gains. Many paid huge ones end of 2021 and if you bought late in year pre ex dividend you got burned.

However, those same funds now ex dividend in a stock mkt corrections are great buys.

You really don't understand what happened in this case.

+1

Some closed end funds are down 20 percent as paid massive cap gains at year end. They operate similar to a target date fund and only pay once a year.

Pretty sure I do. For instance RGT did Dane thing they paid a massive distribution of short and long term gains with an ex date of 12-10 and was pays me 12-23. Someone who bought that closed end fund on nov 30 had no clue about this and then in December 23 gets a payout of $2.75 on a stock worth around $15 all taxable.

On Wall Street I work at an Exchange we also get big ex dividend volume day before in taxable accounts selling, folks also buying puts. Or even folks in tax free accounts buying to get dividend.

the closed end funds with an annual payout in a bill market at YE often do a large distribution of cap gains that catch folks off guard.

ETFs are better in taxable accounts that Target funds.

AGAIN. You really do not understand what is being complained about in this thread.

NEW YORK, Dec. 1, 2021 /PRNewswire/ -- Royce Global Value Trust, Inc. (NYSE-RGT) (the "Fund") has declared a year-end distribution of $2.75 per share on its Common Stock. The distribution, optionally payable in additional shares of Common Stock, or in cash by specific stockholder election, is to be paid on December 23, 2021 to stockholders of record at the close of business on December 13, 2021 (ex-dividend on December 10, 2021). The price of shares issued for reinvestment will be determined on December 20, 2021.