Vanguard account types
Your loved one might have had an IRA or a nonretirement account with us. Here's how you can figure out which.
Check an account statement
Your loved one's account could contain Vanguard mutual funds, or it could be a Vanguard Brokerage Account holding stocks, bonds, Vanguard mutual funds or ETFs, or mutual funds or ETFs from other companies. But how would you know whether he or she had an IRA or what we call a nonretirement (or individual) account?
You may have found Vanguard statements or other mail from us when going through your loved one's important papers. If you find a quarterly or year-end statement from Vanguard, look for the account owner's name. Nearby, you'll find the account type. If it says traditional IRA or Roth IRA, that means you're inheriting an IRA.
IRAs and retirement plans
Contributions to a traditional IRA may be tax-deductible, and all or a portion of the withdrawals may be taxable. If you inherit a traditional IRA, you may be liable for income tax on distributions.
Contributions to Roth IRAs, on the other hand, are made after you've paid taxes on your income, and withdrawals made during retirement aren't generally taxable. Some beneficiaries of Roth IRAs must take required minimum distributions, but the withdrawals generally aren't taxable.
SEP-IRAs, SIMPLE IRAs, & Individual 401(k)s
The account owner may have had a SEP (simplified employee pension) or SIMPLE (savings incentive match plan for employees) IRA with Vanguard, which are common among owners and employees of small businesses.
As with traditional IRAs, contributions to SEP and SIMPLE IRAs are made before taxes are paid on income, though withdrawals are taxable.
Individual 401(k) accounts are another type of small business retirement account. Contributions may be made either before or after taxes, so withdrawals from individual 401(k)s may or may not be taxable.
If the account owner worked for a public school or a nonprofit organization (such as a hospital or university), you may inherit a 403(b)(7). As with individual 401(k)s, contributions to a 403(b)(7) can be made either before or after taxes, and distributions from 403(b)(7)s may or may not be taxable.
If the account is labeled an individual account, Vanguard funds, or brokerage assets, then the account isn't an IRA. If you don't find any Vanguard statements among your loved one's papers, call us at 877-445-8798 and we'll help you figure it out.
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Identifying the account type
A type of investment that pools shareholder money and invests it in a variety of securities. Each investor owns shares of the fund and can buy or sell these shares at any time. Mutual funds typically have lower costs and are more diversified and convenient than investing in individual securities, and they're professionally managed.
A type of investment with characteristics of both mutual funds and individual stocks and bonds. ETFs are professionally managed and typically diversified, like mutual funds, but they can be bought and sold at any time during the trading day, like stocks and bonds.
A type of account created by the IRS that offers tax benefits when used to save for retirement.