The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: stevesue32 on July 20, 2016, 10:28:37 AM
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Hi
I was wondering if anyone can shed some light on how fees are calculated for Roth IRA. My wife has a Roth with American Funds and the expense ratios seem quite high. Here are the funds and expense ratios:
American Funds U.S. Government Money Market Fund 0.38%
Class C Shares
AMCAP Fund 1.48%
American Balanced Fund 1.38%
Capital Income Builder 1.38%
Capital World Growth and Income Fund 1.57%
Fundamental Investors 1.40%
The Income Fund of America 1.35%
The balance is $21,000. Am I getting screwed? Are there too many funds? Our broker says he doesn't look at fees, he looks at returns. The returns are decent but the expense ratios seem really high.
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Sounds high to me. Personal capital fund analyzer says .8% average I think. Can you roll it into different IRA?
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Yes, those fees are outrageous. Liquidate it all and transfer to Vanguard.
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The balance is $21,000. Am I getting screwed? Are there too many funds? Our broker says he doesn't look at fees, he looks at returns. The returns are decent but the expense ratios seem really high.
I believe AmFunds brokers are getting a percentage each time you buy a fund, so ... that's part of why he says that.
You should look at both.
Your true return is: return - fees. If the fees are high enough, they offset even really good returns.
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On top of those fees, some funds have 5.75% front load charges. Ridiculous. Fire your financial adviser and move it all into Vanguard or Fidelity Spartan Series index funds.
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I held American Funds for quite a while and continually noticed a stagnation in earnings...it was the damn management fees. Vanguard will be more than happy to take those for you and earn you some real money. I did that 2 years ago and have been very pleased with the difference.
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Wow, those fees look terrible!
You can open a Roth IRA almost anywhere. I have one that was originally opened at eTrade, which I later moved over to Fidelity. I have exclusively bought VTI. The trades cost about $7.95, and, as everyone here probably knows, the expense ratio on VTI is 0.05%. Fidelity (and eTrade before that) costs nothing other than the $7.95 commission when I place a buy order. You are being totally ripped off.
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The balance is $21,000. Am I getting screwed? Are there too many funds? Our broker says he doesn't look at fees, he looks at returns. The returns are decent but the expense ratios seem really high.
Fire your broker. He's not doing you any favors.
We had a similar situation (Edward Jones) with American Funds and Franklin Templeton, where our financial advisor(s) were moving us around funds just to make more in fees for themselves (and I guess technically for the funds). Only after we found MMM did we realize they had absolutely no concern about our actual financial wellbeing.
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I also switched from American Funds to Vanguard 2 years ago because of those damn fees. 5.75% front load plus some other fees. I couldn't believe it when I found this board and compared. I still get an Xmas card from the broker so he doesn't even realize I left him for Vanguard. I'm a Dave Ramsey guy but did not have a good ELP experience that's for sure.
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Yes those expense ratios are terrible and you are getting screwed. Hopefully you can move the funds. Since it's an IRA I assume you can.
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My 401(k) is through American Funds and they are trash. Ludicrous expense ratios and no real index funds. Definitely switch your Roth to Vanguard.
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Wow, those fees look terrible!
You can open a Roth IRA almost anywhere. I have one that was originally opened at eTrade, which I later moved over to Fidelity. I have exclusively bought VTI. The trades cost about $7.95, and, as everyone here probably knows, the expense ratio on VTI is 0.05%. Fidelity (and eTrade before that) costs nothing other than the $7.95 commission when I place a buy order. You are being totally ripped off.
If you're buying mainly Vanguard ETF's, you're better off switching your IRA to them. They don't charge fees for buying their own ETF's.
OP, definitely switch your IRA elsewhere.
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Wow, those fees look terrible!
You can open a Roth IRA almost anywhere. I have one that was originally opened at eTrade, which I later moved over to Fidelity. I have exclusively bought VTI. The trades cost about $7.95, and, as everyone here probably knows, the expense ratio on VTI is 0.05%. Fidelity (and eTrade before that) costs nothing other than the $7.95 commission when I place a buy order. You are being totally ripped off.
If you're buying mainly Vanguard ETF's, you're better off switching your IRA to them. They don't charge fees for buying their own ETF's.
OP, definitely switch your IRA elsewhere.
You're right about saving on commissions that way. I don't move to Vanguard simply because one of my other retirement accounts through work must (sorta kinda) be through Fidelity, and I found it simplifies my life for all my brokerage accounts to be through one company. IRA stock purchases happen 0 to 1 times a year anyway, so commissions don't cost too much.
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I also switched from American Funds to Vanguard 2 years ago because of those damn fees. 5.75% front load plus some other fees. I couldn't believe it when I found this board and compared. I still get an Xmas card from the broker so he doesn't even realize I left him for Vanguard. I'm a Dave Ramsey guy but did not have a good ELP experience that's for sure.
I had american funds as well due to going with a financial advisor recommended through the Dave Ramsey ELP program. It seemed like a good experience at first until I started learning more about fees and their impact on your bottom line. This became especially obvious to me when I used the personal capital fees analyzer which I highly recommend. This free tool will probably saved me tens of thousands of dollars in the future if I hadn't realized this. I am still a big fan of Dave Ramsey and I do credit his program with getting us out of debt and on the path of personal finance. The advisors recommended like any advisors are to expensive and their self interest is rarely aligned with yours. If you want to know more about that I recommend JLColins book, the simple path to wealth. We have since moved most of that money away from him and into betterment which also has very low cost vanguard funds.
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American funds are great if you believe in active management. They are one of the few funds that have a good track record of outperforming the market. The problem is you have to go through an advisor to get access to them, hence the fees. Dave Ramsey believes in active management that's why he recommends them. But they are good funds, their returns have been really good.
If you're a passive investor and want passive funds with low expense ratios, go with vanguard. There are people out there that still believe in active management, you just won't find them on this forum.