I got bored, so I wrote a novel.
First of all, if you're opening a new tIRA at Vanguard, most funds have a $3000 minimum initial buy-in so you won't be able to set up the same 84/14/2 three-fund allocation as your 401k until year 2. (The fund minimums are per-account, so the fact that you might already meet them in your Roth IRA is irrelevant.)
Second,
in general your contribution priority should be as follows:
- 401k up to the match
- HSA
- IRA up to the IRS limit, unless the choices in your 401k are at least equally good (e.g. equally low expense ratio, etc.)
- 401k the rest of the way to the IRS limit
- taxable
In the short term, your choice between a 401k and a tIRA is a choice between (e.g.) FUSVX @ 0.07%and
VFINX at 0.17%. In the short term, contributing to the 401k is better. In the long term, the choice is between FUSVX @ 0.07%and
VFIAX at 0.05%, so the Vanguard option eventually becomes better.
Of course, that's just talking about one of the three funds in your portfolio. Let's look at the costs across the board:
| Fidelity | V. Investor | V. Admiral | V. ETF |
| S&P 500 | 0.07% | 0.17% | 0.05% | 0.05% |
| Total Bond | 0.07% | 0.20% | 0.07% | 0.07% |
| International | 0.12% | 0.19% | 0.12% | 0.13% |
As you can see, for bond and international Fidelity remains tied with Vanguard in the long run. Since it's also cheaper in the short run, that means Fidelity wins for those funds.
However, what we
really care about is the weighted average of the expense ratio across all funds (and really, all accounts -- which I'll get to in a minute). In that case, the long-term comparison is:
Fidelity weighted ER = 84% * 0.07% + 14% * 0.07% + 2% * 0.12% = 0.071%
Vanguard (admiral) weighted ER = 84% * 0.05% + 14% * 0.07% + 2% * 0.12% = 0.0542%
However, you still need that $10K Admiral share minimum buy-in for the fund with the smallest allocation percentage in order to achieve those costs. Since you only have 2% allocated to international, that means your total tIRA portfolio value needs to be at least $10,000 / 2% = $500,000. You could approach it by going for the Admiral-class S&P 500 while staying investor-class for the other two, but the minimum to buy into the international fund at that asset allocation would still be $3000 / 2% = $150,000.
So that brings us to the real issue: either you're going to have to revisit your asset allocation, or you'll have to split things between accounts, or you're going to have to [be allowed to] rollover existing 401k assets into the IRA to meet the fund minimums, or you're going to have to use ETFs.
Option 1, changing your asset allocation: If you went with a 33/33/33 ratio, which I do not recommend, you'd only need $30,000 in the account to get Admiral shares for all funds. If you simplified to a two-fund portfolio, say, 80/20 S&P 500 and bond, you'd need $50,000 in the account.
Option 2, split things between accounts: You could make 84% of your intended contribution to your tIRA, putting 100% of it into VTSMX (or VTSAX starting in the third year). Then put the other 16% into your 401k to buy the other two funds.
This is probably the best option.Option 3, rollover the funds: If your 401k allows "in-service rollovers" and you already have enough in it to meet the Vanguard Admiral fund minimums for your asset allocation, then you can just move the money and enjoy the lower ER (on VTSAX, at least) now. Not many 401ks actually allow this, though.
Option 4, ETFs: IIRC, if you set up your Vanguard tIRA as a brokerage account, you can buy Vanguard ETFs (which usually have the same ER as Admiral-class funds) for, I think, a $3000
total account minimum. However, if you do that then you have to buy ETFs, which means you can't buy fractional shares (so some of your investment goes into the cash sweep account), you buy at intraday prices at the moment your order executes (instead of the NAV at the end of the day, like you get with an index fund), etc. I don't think Vanguard charges commissions when buying their own funds, but I'm not sure -- and there may be other fees associated with the account that you don't have to deal with in a non-brokerage account.
TL; DR:
Finally, there remains only one thing to consider: how much does all this matter anyway? At the end of the day, we're quibbling over a 0.02% (or less) difference in expense ratio. In the long run, when your account balance hits, say, $500K or more, it starts to matter. In the short run, it doesn't.
Realistically, you could just stick with Fidelity and then roll it over to Vanguard after you either FIRE or change jobs, and it would be fine. (I think doing all this is valuable, not so much for your particular situation, but so other people can read this thread and use it to evaluate theirs. Most people's 401ks are with companies that aren't as good as Fidelity.)
