Author Topic: Switching from one Roth to another Roth  (Read 3760 times)

umterp1999

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Switching from one Roth to another Roth
« on: April 11, 2014, 08:23:45 AM »
I have recently begun learning about fund expense ratios and how they can erode returns over time.  I discovered that my Roth has an expense ratio of 1.95% and a deffered load of 1.0% (facepunch).  I see Vanguard has Roth IRAs for something in the neighborhood of .20% expense ratio.  It seems like a no brainer.  Is there something I am missing?  Also would there be any penalties or taxes with such a move?  It seems like I can just do a direct transfer. 

matchewed

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Re: Switching from one Roth to another Roth
« Reply #1 on: April 11, 2014, 08:27:35 AM »
Direct transfer is fine. There may be fees on selling out of your current fund. Remember it's not your Roth IRA which has the fee, but what fund or asset you've invested in.

Cromacster

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Re: Switching from one Roth to another Roth
« Reply #2 on: April 11, 2014, 08:29:28 AM »
I used to be in a fund that was 1.23% exp ratio with a 5% front load (ack crazy right!?)

I had to do a wire transfer, which my former institution charged a 50$ wire fee.  Did it all on the phone with the Vanguard rep.  Pretty easy and straight forward.

No penalties or taxes.

nereo

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Re: Switching from one Roth to another Roth
« Reply #3 on: April 11, 2014, 08:30:02 AM »
I have recently begun learning about fund expense ratios and how they can erode returns over time.  I discovered that my Roth has an expense ratio of 1.95% and a deffered load of 1.0% (facepunch).  I see Vanguard has Roth IRAs for something in the neighborhood of .20% expense ratio.  It seems like a no brainer.  Is there something I am missing?  Also would there be any penalties or taxes with such a move?  It seems like I can just do a direct transfer.
The only thing I'd say you are missing is that Vanguard has index funds with a 0.05% expense ratio.  But choose the fund that best suits you.
Vanguard also has a very helpful "conceirge service" that will set up all the forms and initiate the transfer for you.  I did this a few months ago, and it takes a total of about 10 minutes of your time.  You can call their number at 800-841-7999 (or google it if you don't trust random numebrs given out in a forum).
As long as the funds are rolled over from one ROTH to another it's a "non-taxable event".  If you have Vanguard handle it they'll do a wire tranfer of the funds and you never have to touch the money yourself.

Alternatively, you can close the account yourslef, have them write you the check (preferably made out to Vanguard on your behalf), and then you have 60 days to deposit the full amount into a ROTH of your choosing.

Frankies Girl

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Re: Switching from one Roth to another Roth
« Reply #4 on: April 11, 2014, 09:07:46 AM »
When I moved one of my accounts, the one I was leaving hit me with a $95 closing fee and a $75 transfer fee. The new place refunded the transfer fee, but they couldn't do anything about the closing fee... still was worth it to get away from them.

So be aware some places will act like a jerk and can charge you fees.

umterp1999

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Re: Switching from one Roth to another Roth
« Reply #5 on: April 14, 2014, 06:32:43 PM »
Thanks for the info so far. I'm having a hard time figuring out the difference between class A, B and C shares. Can I go from Class C shares to Class A if/when I switch?  It seems like Class A would better fit my situation. 

Frankies Girl

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Re: Switching from one Roth to another Roth
« Reply #6 on: April 14, 2014, 09:48:32 PM »
Thanks for the info so far. I'm having a hard time figuring out the difference between class A, B and C shares. Can I go from Class C shares to Class A if/when I switch?  It seems like Class A would better fit my situation.

Or how about "D" none of the above? Class of shares generally means you're paying more either up front (front loaded) on the back end, or just in general (like 12b-1 expenses... which are basically marketing and kickback fees that the fund creators use to sweeten the pot to get companies/advisers to offer their specific fund to the company's clientele... and they pass the cost on to YOU!)
http://www.investopedia.com/terms/c/class.asp

There are tons of funds out there that don't do classifications and have flat fee expense ratios - I don't know who you have your Roth with, but if they only have "Class" funds, then they are overcharging you. You'd be smart to switch out to someplace like Vanguard, Fidelity, etc... that let you invest in low cost index funds, or even regular old funds.

umterp1999

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Re: Switching from one Roth to another Roth
« Reply #7 on: May 05, 2014, 09:44:59 AM »
I just wanted to update everyone, the transfer was complete, it took about two and half weeks from start to finish.  I determined I will save me about 1,000 a year in fees in my new vanguard fund.  My old fund made me pay about 50.00 of deferred fees, but it's worth it in the long run.  Thanks for the assistance, and for this forum.  It has been such an education.  My only regret is I didnt do it sooner. 

matchewed

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Re: Switching from one Roth to another Roth
« Reply #8 on: May 05, 2014, 10:08:00 AM »
I just wanted to update everyone, the transfer was complete, it took about two and half weeks from start to finish.  I determined I will save me about 1,000 a year in fees in my new vanguard fund.  My old fund made me pay about 50.00 of deferred fees, but it's worth it in the long run.  Thanks for the assistance, and for this forum.  It has been such an education.  My only regret is I didnt do it sooner.

Congrats, good decision. :)