What to do with inherited Fidelity IRA

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What to do with inherited Fidelity IRA

Postby bru » Fri Jul 12, 2013 11:06 am

I inherited a traditional IRA. It was with Fidelity and since I do have an account with them I created a BDA account and everything got transferred over in kind. It is a mess of a portfolio with 11 holdings including 5 individual stocks. Obviously I want to simplify it and for now think the 3 fund approach would be best. The Wiki here suggests these Fidelity funds:

Spartan Total Market Index (FSTMX)
Global ex U.S. Index Fund (FSGDX)
Spartan U. S. Bond Index Fund (FBIDX)

I was thinking of using Spartan International Index Fund (FSIIX) instead for the Int'l portion. Small change but just curious what the thoughts were? Also any other suggestions other than these index funds?
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Re: What to do with inherited Fidelity IRA

Postby DSInvestor » Fri Jul 12, 2013 11:23 am

The wiki has a great page that shows which Fidelity funds are good matches for Vanguard index funds. Wiki article link: Fidelity
IIRC, Spartan International does not include Emerging Markets.

Are you're building a separate portfolio in this Inherited IRA account with its own AA?. If this account is part of your overall retirement portfolio, consider treating all accounts as one portfolio and place funds accordingly. For example, if your 401k doesn't have any low cost bond funds, you can load up on low cost spartan bond index funds in the Inherited IRA.
Last edited by DSInvestor on Fri Jul 12, 2013 11:36 am, edited 1 time in total.
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Re: What to do with inherited Fidelity IRA

Postby scrabbler1 » Fri Jul 12, 2013 11:33 am

DSInvestor wrote:The wiki has a great page that shows which Fidelity funds are good matches for Vanguard index funds. Wiki article link: Fidelity

It looks like you're building a separate portfolio in this Inherited IRA account with its own AA. If this account is part of your overall retirement portfolio, consider treating all accounts as one portfolio and place funds accordingly. For example, if your 401k doesn't have any low cost bond funds, you can load up on low cost spartan bond index funds in the Inherited IRA.


I agree. When my friend inherited an IRA late last year, we had to figure out what to do with the large cash amount in it which had built up over several years of inactivity other than RMD withdrawals. I figured out his AA from all of his retirement accounts which included a 457b account from his job and his own Roth IRA then suggested a bond fund because he was very stock heavy in the other accounts. None of his other retirement accounts had a bond fund.
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Re: What to do with inherited Fidelity IRA

Postby bru » Fri Jul 12, 2013 1:05 pm

DSInvestor wrote:The wiki has a great page that shows which Fidelity funds are good matches for Vanguard index funds. Wiki article link: Fidelity

Yep. As noted that's where I got the Fidelity funds listed.
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Re: What to do with inherited Fidelity IRA

Postby bru » Sat Jul 13, 2013 10:57 am

So no thoughts about using Fidelity funds? Oh well.
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Re: What to do with inherited Fidelity IRA

Postby gcturp » Sat Jul 13, 2013 11:05 am

I think your funds selected and your plan are great. I think fidelity's spartan funds are as good as vanguard alternatives (good enough that it probably isn't worth the hassle to transfer). Your question regarding int'l: won't make much difference, either is fine.

Fidelity has one considerable advantage though; they have local offices that you can go to and talk to someone in person if you ever wanted to.
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Re: What to do with inherited Fidelity IRA

Postby DSInvestor » Sat Jul 13, 2013 11:26 am

bru wrote:So no thoughts about using Fidelity funds? Oh well.

Fidelity funds are a great alternative to Vanguard index funds if you're going to keep the account at Fidelity. There are other options available to you at Fidelity but I don't think they are as good and as simple to use as Spartan mutual funds.
1) iShares Commission free ETFs. Higher expense ratios and more complicated to use.
2) Vanguard ETFs - low expense ratios but commissions apply for each buy or sell.
3) Vanguard mutual funds through Fidelity. $75 commission fee for each one off purchase. Admiral shares of index funds not available.
4) Other ETFs
5) Individual bonds (TIPS etc)

I use Fidelity Spartan funds in my Solo 401(k) and Vanguard index funds in IRA/Taxable. I opened my Fidelity Solo 401(k) before Vanguard offered their plan. I am happy with the Fidelity Spartan offerings. If you prefer to use Vanguard TSM, TISM, TBM funds, I suppose you can transfer that Inherited IRA to Vanguard.
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Re: What to do with inherited Fidelity IRA

Postby livesoft » Sat Jul 13, 2013 11:35 am

bru wrote:I inherited a traditional IRA. It was with Fidelity and since I do have an account with them I created a BDA account and everything got transferred over in kind. It is a mess of a portfolio with 11 holdings including 5 individual stocks. Obviously I want to simplify it and for now think the 3 fund approach would be best. The Wiki here suggests these Fidelity funds:

Spartan Total Market Index (FSTMX)
Global ex U.S. Index Fund (FSGDX)
Spartan U. S. Bond Index Fund (FBIDX)

I was thinking of using Spartan International Index Fund (FSIIX) instead for the Int'l portion. Small change but just curious what the thoughts were? Also any other suggestions other than these index funds?

If the IRA is large enough, consider the Spartan Advantage equivlants. The FSGDX is Spartan Advantage, but FSTVX and FSITX are also Spartan Advantage.

As for FSGDX vs FSIVX (FSIIX), I switched from FSIVX to FSGDX because I wanted a fund with both developed and developing markets. Perhaps you only want developed markets, so FSIVX would be a fine choice. We cannot predict the future, so we cannot say which one would be better performing over the time period that you will use.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: What to do with inherited Fidelity IRA

Postby M_to_the_G » Sat Jul 13, 2013 11:59 am

I inherited a ROTH IRA, and it throws such a wrench into things that I'm not even calculating it as part of my retirement strategy. It wasn't much (~$9,000), and I am not allowed to change anything in it or add anything to it. Not that I'm complaining. It does continue to grow tax-free, and the distributions are tax-free. I have to take minimum distributions (based on IRS life expectancy) every year, so I'm doing that. All in all, it's a nice "gift that keeps on giving." I'll invest those annual minimum distributions. Right now, that's about $200 per year. The peak of the distribution curve will be when I'm in my late 50's and early 60's, peaking at about $2,000 or so. So it's a nice little boost, but too little and too complicated to really factor in my grander schemes, although it will be factored in indirectly as I'll be investing the distributions.
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Re: What to do with inherited Fidelity IRA

Postby livesoft » Sat Jul 13, 2013 12:02 pm

M_to_the_G wrote:I inherited a ROTH IRA, ... and I am not allowed to change anything in it or add anything to it.

Can you please explain why you cannot change anything? My spouse inherited an IRA held at a bank. She moved the inherited IRA to Vanguard and can invest any way she wants.

Perhaps you have been duped?
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: What to do with inherited Fidelity IRA

Postby M_to_the_G » Sat Jul 13, 2013 2:13 pm

EDIT: Ugh, I have to look more into this. I'll report back.

UPDATE: Sent the question to Vanguard, awaiting a response. In any case, my inherited ROTH IRA is actually in decent fund (LifeStrategy Growth--VASGX) and the amount is small (~$9,800), so it wouldn't bother me if I can't change it, but it looks like you actually can... I'll confirm.
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Re: What to do with inherited Fidelity IRA

Postby bru » Tue Jul 16, 2013 1:46 pm

Thanks for the replies.

With the amount of the BDA I can get Advantage class funds as long as I stay with four or so funds, which shouldn't be a problem. And I definitely should/will consider it as part of my overall portfolio.

I probably should transfer it to Vanguard along with my other Fidelity accounts (Rollover IRA and Brokerage). If I did I could move up a level at Vanguard. But I'm a bit lazy and sort of like not having everything with one company. And I do already use Fidelity's low cost funds (for the most part) so I'm not really losing anything there.

I (along with the other IRA beneficiary) have to take the original owner's RMA for this year and then of course my own RMAs going forward. Fidelity has an automated service, so I need to sign up for that.
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Re: What to do with inherited Fidelity IRA

Postby M_to_the_G » Wed Jul 17, 2013 1:33 am

livesoft wrote:
M_to_the_G wrote:I inherited a ROTH IRA, ... and I am not allowed to change anything in it or add anything to it.

Can you please explain why you cannot change anything? My spouse inherited an IRA held at a bank. She moved the inherited IRA to Vanguard and can invest any way she wants.

Perhaps you have been duped?


As it turns out, I was indeed duped... by my own failure to fully research this. I verified with VG that I can change the funds to whatever I like (or make transfers between my own ROTH IRA and the inherited non-spouse IRA). I still cannot add anything to the inherited ROTH and am required to take MRD for life.

I decided to include the inherited account in my overall retirement AA picture because it makes sense despite being a mild PITA, and I also decided to stick with the fund that was already there (VASGX) because, enigmatically enough, it actually tracks with my AA goals (see my thread here: viewtopic.php?f=1&t=119662).
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