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Learning, Sharing, and Teaching => Investor Alley => Topic started by: mustacheme on February 13, 2016, 06:16:37 PM

Title: Roth in a Target Date Fund. Wasting Money on Fees?
Post by: mustacheme on February 13, 2016, 06:16:37 PM
I currently have my ROTH savings in Fidelity's 2040 Freedom fund (expense ratio 0.75%). Last year an adviser provided by my work 401k plan suggested that I move my 401k funds out of the target date fund it was in and into an index allocation fairly similar to what MMM suggests for investing in order to save on fees over the years. I am starting to wonder if I am wasting money on fees by not doing something similar with my ROTH.

This fall will be the first time I'll need to look at rebalancing the 401k funds and I'm a bit nervous about doing it even though I get the general idea. This is part of the reason that I've left my Roth in the managed fund because I figure they'll automatically rebalance as needed. Any advice for a bit of a novice?
Title: Re: Roth in a Target Date Fund. Wasting Money on Fees?
Post by: Physicsteacher on February 13, 2016, 06:30:05 PM
You could switch your Roth to the Fidelity Freedom Index for the year of your choice and save a bunch on the expense ratio without having to give up the convenience of an all in one fund with automatic rebalancing.
Title: Re: Roth in a Target Date Fund. Wasting Money on Fees?
Post by: mustacheme on February 14, 2016, 10:12:58 AM
I checked it out, and it is a much lower fee. The page for it even says, "Fees are Low compared to funds in the same category.
Fidelity FreedomŽ Index 2040 Fund has an expense ratio of 0.08 percent." And sounds easy peasy! Thank you.
Title: Re: Roth in a Target Date Fund. Wasting Money on Fees?
Post by: mustacheme on February 15, 2016, 09:53:39 AM
I called to switch to the Fidelity FreedomŽ Index 2040 Fund, but they told me it's only open to qualified investors (brokers). So it looks like that option isn't going to work for me.
I looked at Vanguard Target Retirement 2040 and it looks like their fees are much lower, 0.16 vs 0.75 at fidelity. Perhaps I should look into moving my roth to Vanguard.
Are there any other thoughts on the best approach?
Title: Re: Roth in a Target Date Fund. Wasting Money on Fees?
Post by: NoStacheOhio on February 15, 2016, 11:02:36 AM
I called to switch to the Fidelity FreedomŽ Index 2040 Fund, but they told me it's only open to qualified investors (brokers). So it looks like that option isn't going to work for me.
I looked at Vanguard Target Retirement 2040 and it looks like their fees are much lower, 0.16 vs 0.75 at fidelity. Perhaps I should look into moving my roth to Vanguard.
Are there any other thoughts on the best approach?

You may have been looking at the wrong share class.

FBIFX Fidelity Freedom Index 2040 @ 0.16%
$2,500 minimum for the first buy, no transaction fees for Fidelity accounts
https://fundresearch.fidelity.com/mutual-funds/summary/315793885
Title: Re: Roth in a Target Date Fund. Wasting Money on Fees?
Post by: mustacheme on February 15, 2016, 11:12:12 AM
That's the one I wrote down and told the Fidelity agent. I will try it again. Maybe I said it wrong or he typed it in wrong. Thank you.
Title: Re: Roth in a Target Date Fund. Wasting Money on Fees?
Post by: NoStacheOhio on February 15, 2016, 11:34:09 AM
That's the one I wrote down and told the Fidelity agent. I will try it again. Maybe I said it wrong or he typed it in wrong. Thank you.

Your earlier post said ER 0.08%, which makes me think it's a share class thing. They're going to have very similar tickers, so it's pretty easy to get the wrong one.

I'd say try just doing the transaction online instead of calling.