Wait for 3k limit in IRA, or pick a TDF?

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kevbot
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Joined: Fri Mar 11, 2016 9:53 pm

Wait for 3k limit in IRA, or pick a TDF?

Post by kevbot » Fri Mar 11, 2016 10:00 pm

Hello,

I am in the process of moving assets in a Roth IRA from Betterment to Vanguard (there's 6k in there, I'm only 22). I want to start a traditional IRA for 2016, but it will take a couple more months to have the $3k minimum for the fund I want (VTSMX). Is it worth it to go ahead and pick a target date fund to get the money invested immediately? Should I put the money in the Roth and then recharacterize the contributions? Is that easy to do with Vanguard? At Betterment, to change IRAs you had to cash out and redeposit. I'm not opposed to ETFs either, mutual funds just seem easier. Would ETFs work best until I reached the minimum (I could do VTI until I hit the 10k limit for VTSAX)?

Hopefully those questions make sense.
Young person hoping for a crash on the start of the journey.

nps
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Re: Wait for 3k limit in IRA, or pick a TDF?

Post by nps » Sat Mar 12, 2016 7:25 am

It depends. Is your $6000 in Roth IRA from 2015 contributions?

kevbot
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Re: Wait for 3k limit in IRA, or pick a TDF?

Post by kevbot » Sat Mar 12, 2016 8:44 am

500 from 2013, maxed it out last year.
Young person hoping for a crash on the start of the journey.

jimkinny
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Re: Wait for 3k limit in IRA, or pick a TDF?

Post by jimkinny » Sat Mar 12, 2016 8:46 am

Over a lifetime, delaying until you reach 3,000 will not matter. Keep it simple.

nps
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Re: Wait for 3k limit in IRA, or pick a TDF?

Post by nps » Sat Mar 12, 2016 9:00 am

kevbot wrote:500 from 2013, maxed it out last year.
In that case you can't recharacterize the full amount. Have you considered continuing investing in your Roth IRA? It could make sense if your marginal tax rate isn't too high. It would also avoid the concern you have with minimums.

If not, I would put it in the TR fund for now.

kevbot
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Re: Wait for 3k limit in IRA, or pick a TDF?

Post by kevbot » Sat Mar 12, 2016 9:11 am

Right, I knew I couldn't change the old ones, but I was wondering if it's possible to put money in this year, and then change it later in the year to a traditional IRA.
Young person hoping for a crash on the start of the journey.

kevbot
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Re: Wait for 3k limit in IRA, or pick a TDF?

Post by kevbot » Sat Mar 12, 2016 9:11 am

jimkinny wrote:Over a lifetime, delaying until you reach 3,000 will not matter. Keep it simple.
Thank you.
Young person hoping for a crash on the start of the journey.

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BL
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Re: Wait for 3k limit in IRA, or pick a TDF?

Post by BL » Sat Mar 12, 2016 9:14 am

Possible, maybe, but why complicate things? Just put it in a TR fund, change later if you wish. Or wait.

nps
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Re: Wait for 3k limit in IRA, or pick a TDF?

Post by nps » Sat Mar 12, 2016 9:16 am

kevbot wrote:Right, I knew I couldn't change the old ones, but I was wondering if it's possible to put money in this year, and then change it later in the year to a traditional IRA.
You can definitely do that. Recharacterizations are pretty easy at Vanguard. So you would transfer your Roth IRA over, make Roth contributions for 2016, then recharacterize those to traditional once you have enough to clear the $3000 minimum? Makes sense to me.

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FiveK
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Re: Wait for 3k limit in IRA, or pick a TDF?

Post by FiveK » Sun Mar 13, 2016 2:12 am

BL wrote:Possible, maybe, but why complicate things? Just put it in a TR fund, change later if you wish.
+1

E.g., VTTSX might be appropriate, unless you don't want international exposure.

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