Two Roth IRAs or all eggs in one basket

[ferguson]

Hi all,

I currently have a target date Roth IRA with Vanguard. I have been interested in funding a VFINX S&P 500 Roth IRA, as well. I have read that it is good to consolidate multiple retirement accounts so you do not have to pay separate account maintenance fees and having a higher balance will result in more returns in interest. I have also read that you shouldn't put all of your eggs in one basket for retirement. Would I still be hit with as many fees if I house both of my Roths with the same firm? I will be eligible for my employer's 401k next year so if I open the second Roth IRA, I would have 3 retirement accounts. I wanted to ask here to hear if anyone had experience with multiple Roths and whether it is working for you.

Thanks in advance for any feedback!

[Frankies Girl]

I would consolidate multiple accounts that can be combined if possible just to simplify (like you have two Roth accounts). But it isn't that necessary since you should just look at all of your accounts are one puzzle piece to your whole portfolio. You don't need to open a second Roth to invest in something different than what you already hold.

The advantage is you might access the cheaper fund groups by meeting their minimum investments if you're spread out currently across several accounts - say you have 5k in one Roth and 7K in another, you'd only be able to buy the investor shares - VTSMX, because the admiral shares of the same (VTSAX) needs a 10K minimum, but combining those two Roth accounts would give you enough in one place to hit the VTSAX minimum.

It is not a big deal at all to have all of your accounts in one financial institution like Vanguard or Fido (or any of the other larger investment groups). These larger companies are regulated by the SEC, and your investments are covered up to a certain amount (500K) by SIPC, which operates similarly to the banking community's FDIC insurance. In general, it means market losses or poor buys made by a financial adviser are not covered, but if the brokerage/financial company goes under, you'll still get back all of your money (unless you hold more than 500K).


Securities you own, including mutual funds, that are held for your account by a broker, or a bank's brokerage subsidiary are not insured against loss in value. The value of your investments can go up or down depending on the demand for them in the market. The Securities Investors Protection Corporation (SIPC), a non government entity, replaces missing stocks and other securities in customer accounts held by its members up to $500,000, including up to $250,000 in cash, if a member brokerage or bank brokerage subsidiary fails. For more information contact:


And for what it's worth... I have like 8 different accounts and can't combine them further. It happens. I have them all in the same firm and it's way easier and I don't worry at all about losing my investments to a financial institution failure.

Some further reading: http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/

[johnny847]

There is no reason for you to open a separate Roth IRA at Vanguard for this purpose. Just buy shares of VFINX in your current Roth IRA at Vanguard.

You should read what the fees are for accounts at Vanguard. There aren't any for IRAs or taxable accounts so long as you accept eStatements if your balance is under $50k.

The "eggs in one basket" refers to the underlying assets, not the brokerage.

Think of the brokerage company as a mug, and the mutual funds you buy as the coffee you fill the mug with. When we talk about managing the risk of your investments, we're talking about the coffee, not the mug.

[ferguson]

Thanks for the replies. It is my understanding that with the target date fund, you cannot control the portfolio composition.

There is no reason for you to open a separate Roth IRA at Vanguard for this purpose. Just buy shares of VFINX in your current Roth IRA at Vanguard.

For instance, the target date fund consists of Vanguard Total Stock Market Index Fund Investor Shares, among other shares. If it is possible to put the VFINX S&P 500 in my target date fund, how would I go about doing that?

[seattlecyclone]

The target date fund has a fixed composition for everyone who buys it, just like any other mutual fund. If you want more exposure to the S&P 500 than the target date fund provides, buy that fund in addition to your target date fund.

I think you may be confusing some terms here. You can (and should) buy more than one mutual fund as needed to meet your desired asset allocation. Buying multiple funds does not mean you need to open up a separate Roth IRA account. You can put multiple funds in the same account.

[Frankies Girl]

Thanks for the replies. It is my understanding that with the target date fund, you cannot control the portfolio composition.

There is no reason for you to open a separate Roth IRA at Vanguard for this purpose. Just buy shares of VFINX in your current Roth IRA at Vanguard.

For instance, the target date fund consists of Vanguard Total Stock Market Index Fund Investor Shares, among other shares. If it is possible to put the VFINX S&P 500 in my target date fund, how would I go about doing that?

You're definitely a little confused.

Think of any investment account (like a Roth IRA) as a bucket. You can put many different things inside that bucket. You can continue to buy your target date mutual fund, hold cash, or add in a bunch of other mutual funds (like VFINX) inside that bucket with the other funds you currently have. If you decide to contribute $5,500 cash into it this year, and then decide you want to buy 1K of VFINX and use the rest of the money to purchase more shares of the existing target date mutual fund, that is no problem. You just have to put in the order to do so with the financial institution that holds the Roth IRA account - like Vanguard or Fidelity (once you put in the money first of course). There should be an option to buy shares if you log into your account on the website (look under "buy/trade" or the like), but I suggest you call them up and have them walk you through a buy the first time, so they can tell you exactly where to look on their website.

[Louisville]

furguson: Read this. Read all of it. Then read it again. Then come back with questions.

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