Author Topic: Roth IRA beginner questions  (Read 3439 times)

Bettis

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Roth IRA beginner questions
« on: July 09, 2014, 08:19:59 AM »
About 3 years ago, while I was a Dave Ramsey listener, I bought into the Endorsed Local provider program to find a financial adviser.  I set up my Roth IRA through him with American Funds.  I'm a beginner at investing so from what I understood, it only cost me $30 a year for setup/maintenance fees.

I finally logged online to check it out and happened to come across fees of 5.75% every month as a sales charge.  I'm sure this is a no-brainer to many of you that A) there are other fees than $30 per year and B) 5.75% is way too high.  (I'm in no way saying that the adviser mislead me, I may have just assumed the charge was normal and not thought about it much.)

I hear plenty of how good Vanguard is and how low the fees are but have no idea how to make the switch, especially taking any hidden fees or tax issues into account.  Can anyone give me a layman's terms primer?  This is only a Roth IRA which I intend to not take out any money until I'm 59.5 or later (whatever the law is).  Early retirement might change things but I don't expect that to come into play for a long time.

Thanks

matchewed

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Re: Roth IRA beginner questions
« Reply #1 on: July 09, 2014, 08:25:42 AM »
https://investor.vanguard.com/what-we-offer/transfer-ira-to-vanguard

A Roth to Roth transfer will incur no taxable event. Any fees will solely be on the side of your American Funds account with selling the shares. Vanguard has no maintenance fees as long as you go with electronic statements. You will just have one simple expense ratio to pay.
« Last Edit: July 09, 2014, 08:27:35 AM by matchewed »

Frankies Girl

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Re: Roth IRA beginner questions
« Reply #2 on: July 09, 2014, 09:33:31 AM »
I had an old AF account; they'll hit you with an account closing fee of somewhere around $95 when you roll it over and a smaller transfer fee if I am remembering correctly (because they can). I rolled the account over "as is" - I didn't sell off anything until everything was transferred so that avoided some of the sell-off fees, but they'll still hit you with maintenance and account closing fees. The place I rolled it to actually paid me back the transfer fee that AF charged, but I'm not sure that Vanguard also does this. In any case, it's worth it to stop paying AF's high fees just for having the account with them, not counting the poor performance you've been paying for all along...

Call up Vanguard and ask them to walk you through what you need to do to transfer your account. Generally, you fill out some paperwork, provide a recent statement from the account, and they'll take care of the rest. It is actually really easy, but may take a few weeks to get completely moved (AF wasn't too long, but some of my other old stuff they dragged out for close to three weeks).
« Last Edit: July 09, 2014, 11:39:18 AM by Frankies Girl »

Bettis

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Re: Roth IRA beginner questions
« Reply #3 on: July 09, 2014, 11:34:34 AM »
Thank you for the quick replies.  I'll give them a call once I figure out what fund I want to use. I know I've seen mention of VBINX but I'm not sure if that's available for a Roth IRA.  If it matters, I'm 30 and have about $22k in the account that would be transferred.  I figure there must be balance minimums to get the low cost fees.  I'll keep reading up but any advice is appreciated.

matchewed

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Re: Roth IRA beginner questions
« Reply #4 on: July 09, 2014, 11:36:26 AM »
Thank you for the quick replies.  I'll give them a call once I figure out what fund I want to use. I know I've seen mention of VBINX but I'm not sure if that's available for a Roth IRA.  If it matters, I'm 30 and have about $22k in the account that would be transferred.  I figure there must be balance minimums to get the low cost fees.  I'll keep reading up but any advice is appreciated.

Yes VBINX is available. Given the amount you'll be rolling over I'd go with VBIAX (the admiral version of VBINX). Given that you're thirty is the 60/40 balance VBIAX reflecting your desired AA?

Bettis

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Re: Roth IRA beginner questions
« Reply #5 on: July 10, 2014, 11:56:06 AM »
Is AA asset allocation?  I'm not really sure how I would want to allocate besides making sure I am diversified.  Remember I'm a beginner at this stuff.  I do have a 401K that uses a T Rowe Target Fund (2050 I think) and haven't had any issues with it.  Is that anything like an index fund?

matchewed

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Re: Roth IRA beginner questions
« Reply #6 on: July 10, 2014, 12:38:54 PM »
Is AA asset allocation?  I'm not really sure how I would want to allocate besides making sure I am diversified.  Remember I'm a beginner at this stuff.  I do have a 401K that uses a T Rowe Target Fund (2050 I think) and haven't had any issues with it.  Is that anything like an index fund?

Yes it is. You'll need to decide on an AA that you can live with. Asset allocations have a certain historical return that you balance with the volatility. Higher return = higher risk. You need to step back and do a little reading.

http://jlcollinsnh.com/stock-series/

And after you get through some of that think about constructing an investment policy statement.