Please, need IRA info- provider and changing funds

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island
Posts: 1971
Joined: Tue Jul 23, 2013 1:45 pm

Please, need IRA info- provider and changing funds

Post by island »

Husband and I each plan to fund Roth IRAs via back door conversion this year. Think I've got the process down, but never had an IRA and have a few general questions I'm hoping you can help with.

-Is an IRA like a 401K in that I can change funds I'm invested in? Move money between what I have or eliminate a fund and buy something new?

-If so are there fees involved and what triggers them? Rebalancing, adding new funds, dropping funds, etc? Are the fees a reasonable flat rate or % of the $ moved?

-My 401K is in Vanguard and I will probably want some Vanguard options for my Roth. If I open an IRA at Vanguard will I also have access to non Vanguard funds? Many choices? Will it cost me more to buy non-Vanguard fund thru Vanguard instead of directly from the source? For example if I wanted a Fidelity fund could I get it thru Vanguard and would it be more expensive than if I had my IRA at Fidelity?

-And the opposite, if I want mostly non Vanguard Funds so I don't have all my eggs in one basket, where would be some good options to open the Roths? With access to most investment options at the most reasonable cost? And will I still be able to buy Vanguard if it's not a Vanguard account?

-Can I move a Roth from one place (brokerage, is that the term?) to another if not satisfied? Is it a hassle and/or expensive?


Bottom line and probably obvious, I'm afraid of making a mistake. Before jumping in want I to know I'm not locked into the IRA provider and/or investments I choose now if I discover I need to make changes later. Trying to determine if there are any considerations I'm not aware of!

Thank you.
Last edited by island on Sun Aug 11, 2013 3:02 pm, edited 1 time in total.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Please, need IRA info- provider and changing funds

Post by dbr »

island wrote:Husband and I each plan to fund Roth IRAs via back door conversion this year. Think I've got the process down, but never had an IRA and have a few general questions I'm hoping you could help with.

-Is an IRA like a 401K in that I can change funds I'm invested in? Move money between what I have or eliminate a fund and buy something new?

It is not like a 401K in that a 401K plan will select an array of investment choices that you have to choose from while your IRA can be invested in almost any thing you can buy from the broker or fund company at which you place the IRA. There can be some exceptions, but probably the only investment sometimes available in a 401K and not an IRA is a stable value fund.

-If so are their fees involved and what triggers them? Rebalancing, adding new funds, dropping funds, etc? Are the fees a reasonable flat rate or % of the $ moved?

An IRA is just a brokerage or mutual fund account with special tax treatment. Possible fees include commissions for buying and selling stocks and ETFs, transaction costs for buying and selling mutual funds, sometimes a fund entry or exit or short term holding fee, and possibly a small account fee. Depending on the mutual fund company you pick most or all of the funds you want will be NTF = no transaction fee. Depending on the broker you pick, if you use a broker, you may be able to find a plan offering a large number of commission free trades. Very few funds have fund purchase, sale, or frequent trading fees, so that is actually a non-issue. You can usually avoid any kind of account fee, which is most often associated with insisting on obtaining paper statements in accounts with very low assets. Some accounts charge a flat fee for closing the account. In general it is easy to set up an IRA that has no fees of any kind. Note that mutual funds themselves have expenses that are charged against the value of the fund, but these are not IRA or account fees. Note also that you can be conned into paying someone to manage your IRA for you, but this is not necessary and only happens if you let it or ask for it.

-My 401K is in Vanguard and I will probably want some Vanguard options for my Roth. If I open an IRA at Vanguard will I also have access to non Vanguard funds? Many choices? Will it cost me more to buy non-Vanguard fund thru Vanguard instead of directly from the source? For example if I wanted a Fidelity fund could I get it thru Vanguard and would it be more expensive than if I had my IRA at Fidelity?

Vanguard is an awkward provider in that they sell their funds through a mutual fund company that cannot hold anything except Vanguard mutual funds and they operate a brokerage that can hold almost anything but cannot hold Vanguard mutual funds. This is a state of affairs that does not apply at most other companies. In general if you want a Vanguard fund you should open an IRA at Vanguard and if you want a Fidelity fund you should open an IRA at Fidelity. You can have many IRAs in different places, of course.

-And the opposite, if I want mostly non Vanguard Funds so I don't have all my eggs in one basket, where would be some good options to open the Roths? With access to most investment options at the most reasonable cost? And will I still be able to buy Vanguard if it's not a Vanguard account?

People here can suggest their favorite brokers and fund companies. Most often Vanguard funds are not NTF at most other companies, and Vanguard does not allow Admiral shares of Vanguard index funds to be held by other companies. An alternative is to buy the ETF version of a Vanguard fund if that is needed. ETFs trade at stock commissions rather than at mutual fund transaction fees.

-Can you move a Roth from one place (brokerage, is that the term?) to another if not satisfied? Is it a hassle and/or expensive?

You can. If you do it is best to open an account at the receiving company and have them pull the assets. In rare instances hassles can develop and most companies charge an account closing fee of maybe $50-$95.


Bottom line and probably obvious, I'm afraid of making a mistake. Before jumping in want I to know I'm not locked in to the IRA provider and/or investments I choose now if I discover I need to make changes later. Trying to determine if there are any considerations I'm not aware of!

I am sure people will chime in. Things to look for are transaction costs and account servicing meaning order handling, account reporting, tax reporting, problem solving, etc. I have no recommendations.

Thank you.
livesoft
Posts: 86079
Joined: Thu Mar 01, 2007 7:00 pm

Re: Please, need IRA info- provider and changing funds

Post by livesoft »

island wrote:-Is an IRA like a 401K in that I can change funds I'm invested in? Move money between what I have or eliminate a fund and buy something new? Yes, you can switch investments.

-If so are their fees involved and what triggers them? Rebalancing, adding new funds, dropping funds, etc? Are the fees a reasonable flat rate or % of the $ moved? There may be fees involved, but you should choose a financial institution so that no fees are involved.

-My 401K is in Vanguard and I will probably want some Vanguard options for my Roth. If I open an IRA at Vanguard will I also have access to non Vanguard funds? Many choices? Will it cost me more to buy non-Vanguard fund thru Vanguard instead of directly from the source? For example if I wanted a Fidelity fund could I get it thru Vanguard and would it be more expensive than if I had my IRA at Fidelity? You can have access to non-Vanguard funds at Vanguard if you open a Vanguard Brokerages Services account within your newly opened IRA account. You can call Vanguard up and confirm all this. You may have to pay a commission to purchase some non-Vanguard investments at Vanguard.

-And the opposite, if I want mostly non Vanguard Funds so I don't have all my eggs in one basket, where would be some good options to open the Roths? With access to most investment options at the most reasonable cost? And will I still be able to buy Vanguard if it's not a Vanguard account? One should be able to find a non-Vanguard institution where one will not be charged any commissions to buy/sell investments. Some examples are: Fidelity, TDAmeritrade, Schwab. But only for specific investments at each vendor.

-Can I move a Roth from one place (brokerage, is that the term?) to another if not satisfied? Is it a hassle and/or expensive? Yes. You can do this at least once a year. It may or may not be a hassle depending on what you call a hassle. Some institutions have account closing fees. Some institutions have rebates for new money coming into accounts and free trades. One should be able to figure out how to never pay any fees.

Bottom line and probably obvious, I'm afraid of making a mistake. Before jumping in want I to know I'm not locked into the IRA provider and/or investments I choose now if I discover I need to make changes later. Trying to determine if there are any considerations I'm not aware of! Relax. Please.

Thank you.

It turns out we have the most assets at TDAmeritrade, then Fidelity, then WellsTrade, then Vanguard, then TIAA-CREF. All of these places offer no fees and no commissions for the things we deal with.
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Topic Author
island
Posts: 1971
Joined: Tue Jul 23, 2013 1:45 pm

Re: Please, need IRA info- provider and changing funds

Post by island »

dbr and livesoft. Thank you so much for answering all my Qs. Really appreciate it!
gtwhitegold
Posts: 673
Joined: Fri Sep 21, 2012 1:55 pm

Re: Please, need IRA info- provider and changing funds

Post by gtwhitegold »

island,

To further assist, I would look to see what NTF funds and commission-free ETFs were available at the various providers and also review their account agreement paperwork to ensure that you agree with their policies.

Vanguard, Fidelity, TDAmeritrade, Charles Schwab, and e*Trade all have access to NTF mutual funds and commission-free ETFs. Just do the research to find what best suits you.

Also, ensure that you will choose the fund with the lowest overall expenses. Some indexes are followed by many ETF and mutual fund providers. Sometimes paying a transaction fee will reduce overall costs since the fund has lower overall costs than other competing funds.

Allen
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