Author Topic: Please Don't Punch! What to do with my portion of ex's retirement?  (Read 1924 times)

Budgie

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Hoping to get advice without being pulverized for not knowing. I will be getting retirement funds from my ex as part of our divorce. His account is with TIAA/Cref. My 401K through work is with Fidelity.

I'm a total know-nothing when it comes to investing and IDK whether I have the option of turning the TIAA funds into Fidelity so it will all be in one account, or whether I can/should put them somewhere else?

I do not need them before retirement, so I guess the question is do different companies get different results (e.g. TIAA vs. Fidelity) and if so which one would be best, if I can move the funds?

MrThatsDifferent

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Re: Please Don't Punch! What to do with my portion of ex's retirement?
« Reply #1 on: March 04, 2019, 06:29:31 AM »
Have you called both companies and at least heard from them what the process would be, what the fees are and what are the benefits of each? Id start there and then do a side by side comparison as a first step.

MustacheAndaHalf

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Re: Please Don't Punch! What to do with my portion of ex's retirement?
« Reply #2 on: March 04, 2019, 06:30:04 AM »
It might be easier to take the retirement account funds from the divorce, and setup a new IRA with them.  But there's two types of retirement accounts, and you need to make them match:

401(k) / Traditional IRA : hold pre-tax money.  If you're getting part of a 401(k), you want to keep it pre-tax, and have it "rolled over" to a Traditional IRA.

Roth 401(k) / Roth IRA : after-tax money.  To receive this money, you'd want to setup a Roth IRA, and have the money delivered into it.

A key idea is "trustee to trustee transfer", which means two companies handle the money.  There's some bad side effects if you receive a check for retirement money, please don't do that.  If you had $10,000 you'll wonder why thousands of dollars are missing: it's because they removed taxes from it, as if you are taking the money out too early.  So it's better if you can setup an IRA, and have the money transferred directly into it.

Fidelity is good, Vanguard is good, Schwab is good.  All three offer low cost funds, which are good for several reasons.  Picking a low cost fund like FZROX (Fidelity U.S. Market) or others (VTI at Vanguard, SCHB at Schwab) all have low fees and good diversification (the entire U.S. market).  Also I've heard some advice that you don't want to do too much right after a divorce, so maybe maybe try something simple that works, like a total U.S. stock market fund.  You buy it all, and next year you can revisit it.

Hopefully you can do something like the following: you're going to receive money from a 401(k), and ask them to setup a new Traditional IRA at Fidelity to hold the incoming assets.  Fidelity can help with setting that up, if you want to keep everything at Fidelity.
« Last Edit: March 04, 2019, 06:32:25 AM by MustacheAndaHalf »

La Bibliotecaria Feroz

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Re: Please Don't Punch! What to do with my portion of ex's retirement?
« Reply #3 on: March 04, 2019, 04:57:15 PM »
I'm sorry about your divorce. It will get better.

I recently successfully completed almost this exact transaction! My ex had a TIAA account, half of which was supposed to come to me.

TIAA was SUPER helpful. We had a representative that stayed with the case and who usually answered his own phone. (His name was Vonzell Simmons.)  The paperwork was tricky, and many people advise that you pay an expert (generally $500-$700) to do it for you. I was able to do it myself on the third or fourth try with help from Mr. Simmons. I would get a rejection, I would call, he would explain the problem, I would fix it.

The way it works is TIAA will create an account for you in your own name with TIAA. Then, yes, you can roll that amount over into whatever company you prefer. I'm a Vanguard girl myself. They have, and Fidelity probably also has, a rollover department. They want to make it easy for you to put your money with them :-).

MustacheAndaHalf has good advice about the 2 basic kinds. With TIAA it's probably a 403(b), but the rules are fundamentally the same.

My ex is an honest guy but I can't vouch for yours. It's better to get it done ASAP, ideally before the divorce. After you are legally divorced, it would be possible for him to, like, cash out the whole amount and go on the lam. It has happened.

Good luck!

Budgie

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Re: Please Don't Punch! What to do with my portion of ex's retirement?
« Reply #4 on: March 04, 2019, 09:50:16 PM »
Thank you all.

My attorney has filed the QDRO and TIAA has been made aware of the designation so I don't think my ex can wriggle out of it or whisk the funds away even if he wants to. TIAA sent the attorney a request for some additional info and we sent that back already.

I guess I just have to wait a few more weeks (!) for TIAA to establish that chunk as my account, then decide whether to roll it into my Fidelity or choose another company.

From what MrThatsDifferent said, it seems like I might want to compare Fidelity vs. Vanguard vs. Schwab etc based on fees they will charge, is that correct?

And no worries about me getting a check myself for the funds--I'm not touching them! I want them for my retirement years and since I'm 50 right now, RE is not an option--they can stay invested for the next 15+ years.


MustacheAndaHalf

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Re: Please Don't Punch! What to do with my portion of ex's retirement?
« Reply #5 on: March 05, 2019, 10:18:25 AM »
Three possibilities: if you're overwhelmed and want everyone to be helpful, you could keep the money where it is, at TIAA.  TIAA will be happy you're keeping your money there.  I don't have much experience with them.

Another is Fidelity, where you already have an account.  Fidelity has low cost mutual funds (by that I mean under 0.25% annual expense ratio), so you would pick a "total stock market" or "U.S. market" fund for your retirement account.  Fidelity will want to help you, but TIAA won't be that enthusiastic since they're losing your money.  You'll have all your money in one place, which is simpler and easier.

Finally, you can compare all three: Fidelity, Schwab and Vanguard.  For a complete novice starting out, I'd recommend Vanguard.  Vanguard has all low-cost funds (low expense ratio), so you won't make a bad choice.  Schwab and Fidelity have good and bad choices, so you need to be more careful there.  So if having 2 accounts isn't an issue, and you're a complete novice, I'd go with Vanguard.  But that assumes you're okay with having Fidelity and Vanguard accounts.

If your stress level is overwhelming, you could keep the money at TIAA for the simplest resolution with TIAA people being helpful - and someone else in this thread can walk you through what they did.
If your stress level is fine, and you're more worried about bad investments, I'd suggest Vanguard.  I can't resist a small joke that will hopefully be taken well: maybe you also want to be "divorced" from the company where your husband has his assets?  :)

By the way, I suggest "low expense ratio" funds for two reasons: they save you money, and they tend to beat other funds.  But low expenses mean no advertising budget.  But take this SPIVA report on fund performance: for the past 3-5 years, the S&P 500 (the 500 biggest U.S. companies) beat ~75% of "active" funds.  Over 10-15 years, the S&P 500 beat ~90% of "active" funds.
https://us.spindices.com/documents/spiva/spiva-us-mid-year-2018.pdf

Low cost funds don't spend money trying to beat the market, and as a result their performance is better.  It's hard to beat the market every time you spend money trying to do so.  So I'd suggest a low-cost index fund for the money, at Vanguard / Fidelity / TIAA per your decision / stress level.

Budgie

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Re: Please Don't Punch! What to do with my portion of ex's retirement?
« Reply #6 on: March 05, 2019, 06:38:37 PM »
Three possibilities: if you're overwhelmed and want everyone to be helpful, you could keep the money where it is, at TIAA.  TIAA will be happy you're keeping your money there.  I don't have much experience with them.

Another is Fidelity, where you already have an account.  Fidelity has low cost mutual funds (by that I mean under 0.25% annual expense ratio), so you would pick a "total stock market" or "U.S. market" fund for your retirement account.  Fidelity will want to help you, but TIAA won't be that enthusiastic since they're losing your money.  You'll have all your money in one place, which is simpler and easier....

...If your stress level is overwhelming, you could keep the money at TIAA for the simplest resolution with TIAA people being helpful - and someone else in this thread can walk you through what they did.
If your stress level is fine, and you're more worried about bad investments, I'd suggest Vanguard.  I can't resist a small joke that will hopefully be taken well: maybe you also want to be "divorced" from the company where your husband has his assets?  :)

By the way, I suggest "low expense ratio" funds for two reasons: they save you money, and they tend to beat other funds.  But low expenses mean no advertising budget.  But take this SPIVA report on fund performance: for the past 3-5 years, the S&P 500 (the 500 biggest U.S. companies) beat ~75% of "active" funds.  Over 10-15 years, the S&P 500 beat ~90% of "active" funds.
https://us.spindices.com/documents/spiva/spiva-us-mid-year-2018.pdf

Low cost funds don't spend money trying to beat the market, and as a result their performance is better.  It's hard to beat the market every time you spend money trying to do so.  So I'd suggest a low-cost index fund for the money, at Vanguard / Fidelity / TIAA per your decision / stress level.

Thank you for this great breakdown of options. My stress level is relatively low--although it seems like one would be in much worse shape financially after parting ways with a spouse who earns twice as much, that isn't the case when the spouse also spends twice what they earn, so I'm feeling better off on my smaller salary with just my own self to manage :) 

My Fidelity account says my 401K funds are in "Fidelity Freedom 2030". How do I know if this is one of the low-cost index funds you recommend? (Like I said, total know-nothing here).

MustacheAndaHalf

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Re: Please Don't Punch! What to do with my portion of ex's retirement?
« Reply #7 on: March 06, 2019, 10:07:30 AM »
You can use a google search where you append "morningstar" to the search, so:
"Fidelity Freedom 2030 morningstar"

Which leads to the following page:
https://www.morningstar.com/funds/xnas/fffex/quote.html

And an expense ratio of 0.70%, which is kinda high (there's worse, but you can improve on it).  There's a lot of companies offering retirement / target date funds, in 5 year increments.  So you can search for "Vanguard 2030 morningstar":
https://www.morningstar.com/funds/xnas/vthrx/betaquote.html
(You might need to hit <ESC> if you're using an ad blocker and morningstar complains about it)

Vanguard's fund charges 0.14% / year.  So let's compare 2 years of max contributions rounded off:
$40,000 x 0.0070 = $280/year
$40,000 x 0.0014 = $56/year
Expense ratios are hard to spot, since the fund consumes them before reporting anything to you.

Since you wound up in a higher cost fund at Fidelity, I'd recommend you open an account at Vanguard for the money you're receiving.  That also fits with how you mention being a novice a lot.  Vanguard's low cost target date fund is the only one they have, and in general it's harder to make a mistake with Vanguard's choices of funds.

I almost forgot to explain why I like using "moringstar" to look up fund information.  First, it's always presented in the same format (sortof - they have a "betaquote" version now).  But you can always look for "fees" to see the expense ratio of a fund.  Plus, I want to make sure the fund is known outside the company that runs it.  If morningstar doesn't know what's in the fund, I don't want to invest in it.  I'd rather have details disclosed to third-party websites like morningstar, so that's why I look for fund information there.
« Last Edit: March 06, 2019, 10:11:38 AM by MustacheAndaHalf »

DeepEllumStache

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Re: Please Don't Punch! What to do with my portion of ex's retirement?
« Reply #8 on: March 06, 2019, 10:36:42 AM »
Sorry that you have to go through a divorce. But I'm glad you're able to get this sorted out.

Vanguard is always a solid choice but if you prefer consolidating at one institution, Fidelity has some low cost index fund options. Since you'll move the money over to an brand new individual IRA, you'll have access to all of their funds. It's not the same as a 401k since the IRA won't be limited to what your employer has negotiated. FZROX is their zero fee S&P 500 fund. The money will likely transfer into a money market account initially, but you can go in and transfer it to an index fund through the website.

Later when you do get a moment and want to check your 401k options, Fidelity should have a screen that compares the fund options. My MegaCorp uses Fidelity and has a slightly different portal than the usual Fidelity site for 401k stuff. YMMV but if you have that too and a similar interface, look for Investments -> Performance and Research, and you might have to scroll down slightly to see the tab that says Fees.

Budgie

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Re: Please Don't Punch! What to do with my portion of ex's retirement?
« Reply #9 on: March 10, 2019, 09:03:38 AM »
Since you wound up in a higher cost fund at Fidelity, I'd recommend you open an account at Vanguard for the money you're receiving.  That also fits with how you mention being a novice a lot.  Vanguard's low cost target date fund is the only one they have, and in general it's harder to make a mistake with Vanguard's choices of funds.

Thank you. This is very helpful.

Budgie

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Re: Please Don't Punch! What to do with my portion of ex's retirement?
« Reply #10 on: March 10, 2019, 09:06:24 AM »
Vanguard is always a solid choice but if you prefer consolidating at one institution, Fidelity has some low cost index fund options. Since you'll move the money over to an brand new individual IRA, you'll have access to all of their funds. It's not the same as a 401k since the IRA won't be limited to what your employer has negotiated. FZROX is their zero fee S&P 500 fund. The money will likely transfer into a money market account initially, but you can go in and transfer it to an index fund through the website.

Later when you do get a moment and want to check your 401k options, Fidelity should have a screen that compares the fund options. My MegaCorp uses Fidelity and has a slightly different portal than the usual Fidelity site for 401k stuff. YMMV but if you have that too and a similar interface, look for Investments -> Performance and Research, and you might have to scroll down slightly to see the tab that says Fees.

Thank you! My portal through the work website is also different than if one just goes to Fidelity on one's own. I will check this out. I appreciate the map!