Investors help - (left employer so 401K to IRAs)

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volk06

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So I recently changed jobs. My previous employer had a 401K system, which I did Roth and Traditional contributions. I'm looking to roll them over into IRAs, a traditional and Roth IRA. I want to be able to still contribute to which ever IRA I want to or need to for tax purposes. I've been looking hard at Vanguard due to their low cost and fees. I'm not really one to day trade or anything like that, probably pick a fund and leave it there like a Target 2055 fund or something. The other main player I saw was Fidelity since they just lowered a lot of their cost of fees.

Current employer does not have a 401K but does have a 403b (no match). I've elected to participate in a defined contribution/pension plan instead of a contribution plan (TIAA).

My current thoughts are open a vanguard roth and traditional IRA (unless there are other suggestions) and utilize a target date fund for now since I've not fluent in trading and all that stuff.

Does this sound like a decent plan and are there other companies out there I should look at?

Thanks
 
Roll over to Vanguard and VTI ETF for your IRA verses target date fund. Why do you want 2 different IRA's ?

You just need a Roth and contribute the maximum $5500.... $6500 if you are over 50 years old.
 
That sounds like a good plan. I'm with Vanguard too.

The Target Funds are great for people who want to make regular contributions and not have to worry about trading ever. I have a while left before retirement, and all of the funds in my Roth are in VTSAX (VIT is the ETF equivalent).
 
I like the Fidelity user interface so that's what I've used the last 10 years. Also, I like that I can purchase most of the ishares ETF's without any transaction fees and they usually have really low expense ratios.
 
If you have a traditional IRA, you can do a 'backdoor' Roth conversion and pay taxes on that lump sum. But from that point forward you won't pay any taxes on all that money withdrawn from Roth IRA at age 59.5
Make sure your wife also maximizes her Roth contributions.


The benefits of a 'backdoor' Roth:

http://www.vanguard.com/pdf/ISGIRA9.pdf
 
I am pretty involved in managing my own 401k with Fidelity, the best thing that ever happened to me years ago was watching a Edward Jones rep lose money for me while market was charging hard,painful at the time but ever since I have had a close eye on my own money and taught me a valuable lesson...no one has an interest in your money more than you. I would advise to learn about things and that being said a Vanguard Target Date Fund is a smart investment . It is Aggresive at 1st and gets more conservative as time goes on, it will convert to a income fund eventually. The fund will also rebalance automatically.The fees are low so in my opinion is a good bang for buck. Hope this will help.
 
Fidelity or Vanguard are great ideas. We use Vanguard but I hear that customer service with Fidelity is much better. Regardless the best thing you can do for your financial future is avoid financial advisors like the plague. These salesmen (like Edward Jones mentioned above) do not have your best interests by losing much of your gains to their fees to help make their boat payments.
 
Originally Posted By: alanwayne1908
I am pretty involved in managing my own 401k with Fidelity, the best thing that ever happened to me years ago was watching a Edward Jones rep lose money for me while market was charging hard,painful at the time but ever since I have had a close eye on my own money and taught me a valuable lesson...no one has an interest in your money more than you. I would advise to learn about things and that being said a Vanguard Target Date Fund is a smart investment . It is Aggresive at 1st and gets more conservative as time goes on, it will convert to a income fund eventually. The fund will also rebalance automatically.The fees are low so in my opinion is a good bang for buck. Hope this will help.


Same thing happened to me when I retired. And you're 100% correct that no one cares more about your money than you yourself. I rolled over all my retirement funds into a managed brokerage account with Paine Webber. I invested the cash bonuses I received and managed them myself. After one year, I was up 14% in the portfolio I managed, and was down 1 1/2% with Paine Webber. Needless to say I got out of Paine Webber and took control of everything and never looked back. Good luck with your decision.
 
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Your thinking is sound. I'm a fan of Fidelity for their low fees, good customer service and excellent research tools. But Vanguard is excellent too. Move your 401-K to a Rollover IRA. Transfer your Roth IRA and maximize your Roth contributions while you remain income eligible to do so. Your new employer's 403-B plan may not be so great---they often tend to be run by insurance companies with fewer investment choices and fees higher than Fidelity and Vanguard. It would be a no brainer if they did any matching.

As another poster mentioned, research your individual situation to see if converting your existing IRA to a Roth makes sense.
 
Originally Posted By: Mr Nice
Roll over to Vanguard and VTI ETF for your IRA verses target date fund. Why do you want 2 different IRA's ?

You just need a Roth and contribute the maximum $5500.... $6500 if you are over 50 years old.


My old employer was small, it started with a SIMPLE IRA and then went to a 401K 3 years ago. I made a mistake, I did not contribute to a roth 401k but a roth ira. So clarification, I have a current Roth IRA and traditional 401K, don't know what I thinking before.


I already have a Roth IRA on the side that I've had the last few years, I'd open the rollover IRA and more than likely backdoor it into my Roth. My Roth IRA is with Prudential who my old employer used. Those fees see really high for what I've been getting so that's why I'd open both. One to rollover the traditional 401K and one to rollover my current Roth IRA away from prudential. I don't want to roll it all over to a Roth right away due to taxes.

My old employer was small, it started with a SIMPLE IRA and then went to a 401K 3 years ago. I made a mistake, I did not contribute to a roth 401k but a roth ira.

With the market up so much, am I right to be hesitant to rollover to Vanguard right now and wait until the market drops or just do it and ride it out?
Vanguards target 2055 is made up of index funds, which is better than regular mutual funds, correct?


I need to take an investment class to learn all of this stuff myself. Any suggestions on where to start?
 
Yes, I did roll the simple over to the current Roth IRA. There wasn't much in there at the time. I did do the back door conversion.
 
Originally Posted By: volk06
Originally Posted By: Mr Nice
Roll over to Vanguard and VTI ETF for your IRA verses target date fund. Why do you want 2 different IRA's ?

You just need a Roth and contribute the maximum $5500.... $6500 if you are over 50 years old.


My old employer was small, it started with a SIMPLE IRA and then went to a 401K 3 years ago. I made a mistake, I did not contribute to a roth 401k but a roth ira. So clarification, I have a current Roth IRA and traditional 401K, don't know what I thinking before.


I already have a Roth IRA on the side that I've had the last few years, I'd open the rollover IRA and more than likely backdoor it into my Roth. My Roth IRA is with Prudential who my old employer used. Those fees see really high for what I've been getting so that's why I'd open both. One to rollover the traditional 401K and one to rollover my current Roth IRA away from prudential. I don't want to roll it all over to a Roth right away due to taxes.

My old employer was small, it started with a SIMPLE IRA and then went to a 401K 3 years ago. I made a mistake, I did not contribute to a roth 401k but a roth ira.

With the market up so much, am I right to be hesitant to rollover to Vanguard right now and wait until the market drops or just do it and ride it out?
Vanguards target 2055 is made up of index funds, which is better than regular mutual funds, correct?


I need to take an investment class to learn all of this stuff myself. Any suggestions on where to start?


Traditional 401k is the correct choice in 99% of situations. Roth 401k isn't really needed. Not sure why you think you made a mistake. There are a lot of incorrect thinking about roth vs traditional. The most common myth is to pay the tax now and let it grow tax free makes roth better than traditional. When you do the correct math you see that this is incorrect. In general it is pretty even if current tax rate is same as future tax rate when pulling money out of traditional. But this is not even correct and traditional can still win because one needs to compare current top tax rate vs future marginal tax rate to do correct comparison. Even better is to do conversion of traditional to roth right before retirement when you might be in a very low tax rate (lower than current).

Vanguard or Fidelity (as long as using their low cost index funds as they are a little tricky about slipping in higher fee options) are both great. There is absolutely no reason to leave money in a provider who is charging high fees unless someone likes making the boat payments of their broker for no added benefit.
 
Originally Posted By: Nate1979
Originally Posted By: volk06
Originally Posted By: Mr Nice
Roll over to Vanguard and VTI ETF for your IRA verses target date fund. Why do you want 2 different IRA's ?

You just need a Roth and contribute the maximum $5500.... $6500 if you are over 50 years old.


My old employer was small, it started with a SIMPLE IRA and then went to a 401K 3 years ago. I made a mistake, I did not contribute to a roth 401k but a roth ira. So clarification, I have a current Roth IRA and traditional 401K, don't know what I thinking before.


I already have a Roth IRA on the side that I've had the last few years, I'd open the rollover IRA and more than likely backdoor it into my Roth. My Roth IRA is with Prudential who my old employer used. Those fees see really high for what I've been getting so that's why I'd open both. One to rollover the traditional 401K and one to rollover my current Roth IRA away from prudential. I don't want to roll it all over to a Roth right away due to taxes.

My old employer was small, it started with a SIMPLE IRA and then went to a 401K 3 years ago. I made a mistake, I did not contribute to a roth 401k but a roth ira.

With the market up so much, am I right to be hesitant to rollover to Vanguard right now and wait until the market drops or just do it and ride it out?
Vanguards target 2055 is made up of index funds, which is better than regular mutual funds, correct?


I need to take an investment class to learn all of this stuff myself. Any suggestions on where to start?


Traditional 401k is the correct choice in 99% of situations. Roth 401k isn't really needed. Not sure why you think you made a mistake. There are a lot of incorrect thinking about roth vs traditional. The most common myth is to pay the tax now and let it grow tax free makes roth better than traditional. When you do the correct math you see that this is incorrect. In general it is pretty even if current tax rate is same as future tax rate when pulling money out of traditional. But this is not even correct and traditional can still win because one needs to compare current top tax rate vs future marginal tax rate to do correct comparison. Even better is to do conversion of traditional to roth right before retirement when you might be in a very low tax rate (lower than current).

Vanguard or Fidelity (as long as using their low cost index funds as they are a little tricky about slipping in higher fee options) are both great. There is absolutely no reason to leave money in a provider who is charging high fees unless someone likes making the boat payments of their broker for no added benefit.


In my first post I said I had a roth 401K, when what I actually meant was I already have a Roth IRA on the side of the traditional 401K.
 
Hands down if you are not going to do your own stock picking I would use Vanguard.

I would never recommend Fidelity if you are planning to engage in self directed foreign securities trades as their foreign currency transactions are very usurious that have cost me 10s of thousands in both extra transaction fees and/or lost opportunity costs.
 
Every person's tax and financial situation is different...
Just continue to max out your 401K and IRA.

I have a Vanguard Flagship account today from maxing out my contributions, really not that difficult to do.
 
Originally Posted By: Mr Nice
Every person's tax and financial situation is different...
Just continue to max out your 401K and IRA.

I have a Vanguard Flagship account today from maxing out my contributions, really not that difficult to do.


I no longer have an employer sponsored 401K as mentioned in my first post. So that's why I'm looking at rolling things over.
 
I think that's an excellent idea Volk. Vanguard has some competition now in the low cost funds, some of Fidelity, Tiaa and USAA come to mind.

Vanguard STAR fund is also a possibility, as it resembles an old fashioned pension fund.

Keep it simple, cheap (in terms of overhead) and diversified.

That's not me parroting the literature. That's the school of hard knocks talking.
 
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