Real newb. Help with a check up.

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Alfonsia
Posts: 11
Joined: Thu Mar 23, 2017 1:47 pm

Real newb. Help with a check up.

Postby Alfonsia » Wed Mar 29, 2017 2:06 pm

I know that it looks really lazy, mea culpa. I could make some pathetic excuses but you have heard it all before. We are newer US citizens.
I am just trying to work through this so please bear with me. My first question is whether to open an IRA for each of us this year? I will work out the backdoor process but I am just wondering if there is a simple answer, do I open us both an IRA before continuing to work on the rest? Income is too high for roth.
DH just has no time for this stuff so this is going to be my job this year.

Emergency funds: yes, healthy. All joint accounts other 1 account with about 20K which is just a wifey account for emergency. Need to look up better savings return but I am on that.

Debt: none, house paid for. no consumer debt, no debt.
Tax Filing Status: , Married Filing Jointly,
Tax Rate: @30 Federal, 8 State (I think this is right, I will double check, high earner, 5th rung on tax list LOL)
State of Residence: UT
Age: 48 (earner) 52(wife, non earner)
Desired Asset allocation: ??
Desired International allocation: ??

20k vanguard admiral vtbif/vfiax (just recently)

Current retirement assets
Taxable
100k ++ cash (for investing – do not include emergency funds) this is what I want to sort out ASAP.
His 401k Maxed out for match, looking at this is my next thing to do, I am just trying to get started. I need to take some time to look at the costs etc.
Neither of us has IRA.
Earner has defined benefits pension (x* the last year of employment) but who knows how that could pan out). Wife, no pension.
HSA, we optimise whatever free company money we can, add 5K a year (rolls through) usually have minimal health care costs, good coverage with 6K deductible.
529, enough for college (3 kids). (opened late but college costs won't be higher than what we have in there)
No real money overseas, am checking on that though. Won't be significant AFAIK.
DH also has company shares which we generally just ignore. They just add to those every year. I will look that up as I go.

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FiveK
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Joined: Sun Mar 16, 2014 2:43 pm

Re: Real newb. Help with a check up.

Postby FiveK » Wed Mar 29, 2017 4:21 pm

Alfonsia, welcome to the forum.

See Investment Order and Prioritizing investments - Bogleheads for two perspectives on what you should do and in what order.

Reading those items will likely spur more questions. If so, just ask!

Regarding "My first question is whether to open an IRA for each of us this year? I will work out the backdoor process but I am just wondering if there is a simple answer, do I open us both an IRA before continuing to work on the rest?" - yes, you could pick a vendor (perhaps from Fidelity, Schwab, or Vanguard) and get IRA accounts for each of you. If you get these established soon (before ~April 15), you can make IRA contributions now for the 2016 tax year.

Alfonsia
Posts: 11
Joined: Thu Mar 23, 2017 1:47 pm

Re: Real newb. Help with a check up.

Postby Alfonsia » Thu Mar 30, 2017 2:18 pm

Thanks for that,
re "get IRA accounts for each of you. If you get these established soon (before ~April 15), you can make IRA contributions now for the 2016 tax year."

As a vanguard customer, do I open IRA accounts for me and DH as if I am a new customer? Does the conversion need to be done by april 15th, and it this possible if I set this up today? Thanks, I thought i would just log onto vanguard and choose IRA as an existing customer but it looks like a whole separate thing. Will the bank transfer stuff be the same as my existing vanguard link to my (same) account, because this took an age in the initial set up for the investing account. Thanks!!

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ruralavalon
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Location: Illinois

Re: Real newb. Help with a check up.

Postby ruralavalon » Thu Mar 30, 2017 4:51 pm

Welcome to the forum :) .

It's great to see that you are debt free.

Alfonsia wrote:Thanks for that,
re "get IRA accounts for each of you. If you get these established soon (before ~April 15), you can make IRA contributions now for the 2016 tax year."

As a vanguard customer, do I open IRA accounts for me and DH as if I am a new customer? Does the conversion need to be done by april 15th, and it this possible if I set this up today? Thanks, I thought i would just log onto vanguard and choose IRA as an existing customer but it looks like a whole separate thing. Will the bank transfer stuff be the same as my existing vanguard link to my (same) account, because this took an age in the initial set up for the investing account. Thanks!!

Do you already have some other account at Vanguard?

I see that you wish to do backdoor Roth IRAs. You will both be Vanguard customers.

Call Vanguard. You should both call together. They will help you start the accounts. Tell them you want to open two traditional IRAs, one for each of you. You want to contribute $5.5k to each account for 2016 contributions before April 18, 2017. Do this now, don't wait until the last minute. You can also contribute another $5.5k to each account for 2017 contributions. That's $11k for each account, a total of $22k altogether.

Just pick a money market fund to use temporarily, until you complete the backdoor Roths.


Alfonsia wrote:I know that it looks really lazy, mea culpa. I could make some pathetic excuses but you have heard it all before. We are newer US citizens.
I am just trying to work through this so please bear with me. My first question is whether to open an IRA for each of us this year? I will work out the backdoor process but I am just wondering if there is a simple answer, do I open us both an IRA before continuing to work on the rest? Income is too high for roth.
DH just has no time for this stuff so this is going to be my job this year.

Emergency funds: yes, healthy. All joint accounts other 1 account with about 20K which is just a wifey account for emergency. Need to look up better savings return but I am on that.

Debt: none, house paid for. no consumer debt, no debt.
Tax Filing Status: , Married Filing Jointly,
Tax Rate: @30 Federal, 8 State (I think this is right, I will double check, high earner, 5th rung on tax list LOL)
State of Residence: UT
Age: 48 (earner) 52(wife, non earner)
Desired Asset allocation: ??
Desired International allocation: ??

20k vanguard admiral vtbif/vfiax (just recently)

Current retirement assets
Taxable
100k ++ cash (for investing – do not include emergency funds) this is what I want to sort out ASAP.
His 401k Maxed out for match, looking at this is my next thing to do, I am just trying to get started. I need to take some time to look at the costs etc.
Neither of us has IRA.
Earner has defined benefits pension (x* the last year of employment) but who knows how that could pan out). Wife, no pension.
HSA, we optimise whatever free company money we can, add 5K a year (rolls through) usually have minimal health care costs, good coverage with 6K deductible.
529, enough for college (3 kids). (opened late but college costs won't be higher than what we have in there)
No real money overseas, am checking on that though. Won't be significant AFAIK.
DH also has company shares which we generally just ignore. They just add to those every year. I will look that up as I go.

Some additional information is needed in order to offer ideas on what to do in addition to starting the two IRAs.

Probably the next priority is to more fully fund the 401k. That depends on what investments are offered in the 401k.

What funds are you currently using in the 401k? What other funds are offered in the 401k? Please give fund names,tickers and expense ratios.

What other accounts do you have, and what investments are in each account?

Please simply add this to your original post using using the edit button, so that all of your information is in one place. Please see this for format: "Asking Portfolio Questions".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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FiveK
Posts: 2252
Joined: Sun Mar 16, 2014 2:43 pm

Re: Real newb. Help with a check up.

Postby FiveK » Thu Mar 30, 2017 5:13 pm

Alfonsia wrote:Does the conversion need to be done by april 15th...?
No - you just need to get the contribution done for the 2016 tax year. No need to wait before doing conversions, but it's no problem if the conversions occur after April 15th (or, this year, April 18th).

Alfonsia
Posts: 11
Joined: Thu Mar 23, 2017 1:47 pm

Re: Real newb. Help with a check up.

Postby Alfonsia » Thu Mar 30, 2017 8:31 pm

Thanks, I will get to the 401 is a bit, is it too onerous to do the IRA online? I just have a vanguard brokerage account (sorry, I am sure this sounds clueless).

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FiveK
Posts: 2252
Joined: Sun Mar 16, 2014 2:43 pm

Re: Real newb. Help with a check up.

Postby FiveK » Thu Mar 30, 2017 8:34 pm

Alfonsia wrote:Thanks, I will get to the 401 is a bit, is it too onerous to do the IRA online? I just have a vanguard brokerage account (sorry, I am sure this sounds clueless).

Check Open an IRA account in 3 easy steps | Vanguard and see if that helps.

Alfonsia
Posts: 11
Joined: Thu Mar 23, 2017 1:47 pm

Re: Real newb. Help with a check up.

Postby Alfonsia » Tue Apr 11, 2017 11:22 pm

Re the IRA. Does the ACH transfer have to sit in the vanguard settlement account and then I choose (e.g. the target date option)? The option for 2016 is already blocked out and the transfer is pending, even though the bank etc was all the same as the brokerage account. Is this the normal way? Or have I effed it up? I keep going in circles with the links but maybe I am just being impatient. Thanks!!

Alfonsia
Posts: 11
Joined: Thu Mar 23, 2017 1:47 pm

Re: Real newb. Help with a check up.

Postby Alfonsia » Thu Apr 20, 2017 5:55 pm

I wonder why seem to be having a problem and it is very likely me LOL. the T IRA brokerage has the 5500 (for 16) in a mutual fund target retirement date (I think that was my mistake? To do that from the MM account rather than the roth conversion then?), I am trying to do the roth conversion and I am not sure what the steps are, when I click on the convert to roth, it says no available accounts are available, but i can click on my mutual fund only IRA option to sell, am I just doing all this wrong? I really appreciate any help, I have been following the directions but I think it might be that I am looking at it all wrong. am I looking to exchange as I don't have any roth already? What steps and I missing (again, thank you, I know this must look ridiculous)?

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FiveK
Posts: 2252
Joined: Sun Mar 16, 2014 2:43 pm

Re: Real newb. Help with a check up.

Postby FiveK » Thu Apr 20, 2017 7:43 pm

Alfonsia wrote:What steps and I missing?
Is How to convert to a Roth IRA online helpful? Perhaps the "If you want to open a new Roth IRA" part?

crit
Posts: 310
Joined: Mon Jan 05, 2015 12:54 pm

Re: Real newb. Help with a check up.

Postby crit » Thu Apr 20, 2017 7:52 pm

It sounds like you need to open a Roth first, and then you'll be able to convert.

Don't sell or exchange from your tIRA, that isn't how you move it.

You'll eventually have to pay tax on any (usually small) amount that is earned in the tIRA before you convert it. That's why money market is easiest - usually no gains. But target date funds will work.

If you list the options in the 401k, folks here will help you choose good options.

Ps. Congrats on your citizenship!

Alfonsia
Posts: 11
Joined: Thu Mar 23, 2017 1:47 pm

Re: Real newb. Help with a check up.

Postby Alfonsia » Thu Apr 20, 2017 9:04 pm

OK, thanks so much, so I do open a roth, even though income is too high, and do I fund it with anything while I am opening it? I am really bumbling through and learning on the job.

I need to look more at the 401K, I know it is 100% vested, theoretically has no fees and the current allocation is:
73% balanced target retirement fund 2035, 14% large cap and 13% mid. Net expense ratio is.10% for the balanced fund, and between .08-.95% for the rest. (actually two vanguards are .08 and .04, then the mid cap is .95, and a stock fund is .52, these being about 7% each of the total 40iK). Historically we have ignored it other than fully funding it. I don't know what the target fund consists of. That is my next thing to do.

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FiveK
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Re: Real newb. Help with a check up.

Postby FiveK » Thu Apr 20, 2017 9:11 pm

Alfonsia wrote:OK, thanks so much, so I do open a roth, even though income is too high, and do I fund it with anything while I am opening it? I am really bumbling through and learning on the job.
Might be worth following the instructions in How to convert to a Roth IRA online.

If you try those, and it still doesn't work, let us know where it failed. You should be successful by following those steps....

Alfonsia
Posts: 11
Joined: Thu Mar 23, 2017 1:47 pm

Re: Real newb. Help with a check up.

Postby Alfonsia » Thu Apr 20, 2017 9:17 pm

Thanks, I know I am being dim, but I have the TIRA set up but not the roth and it doesn't; seem to let me convert by the convert to to roth button LOL. , I assumed I just did a conversion from the TIRA to magically become a roth but actually I still need to open a roth to do that? That is what is tripping me up.
I really appreciate the steps. I have tried multiple times and it doesn't seem to be right, as it tells my I have no available accounts for conversion.

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FiveK
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Re: Real newb. Help with a check up.

Postby FiveK » Thu Apr 20, 2017 10:07 pm

Alfonsia wrote:Thanks, I know I am being dim, but I have the TIRA set up but not the roth and it doesn't; seem to let me convert by the convert to to roth button LOL. , I assumed I just did a conversion from the TIRA to magically become a roth but actually I still need to open a roth to do that? That is what is tripping me up.
I really appreciate the steps. I have tried multiple times and it doesn't seem to be right, as it tells my I have no available accounts for conversion.

Have you taken the "few extra steps" required by the instructions (copied below). Note that the actual instructions include a link....

If you want to open a new Roth IRA

You need to have a Vanguard Roth IRA already set up in order to receive converted assets. So there are a few extra steps.

Begin the process to open an account online

When asked to select your funding method, choose Exchange and then follow the remaining instructions.

If there's more than one Vanguard mutual fund in your traditional IRA, you can only exchange one fund when you first open the Roth IRA. Once the account is set up, you can exchange the remaining funds by following the instructions in the section above.

Alfonsia
Posts: 11
Joined: Thu Mar 23, 2017 1:47 pm

Re: Real newb. Help with a check up.

Postby Alfonsia » Fri Apr 21, 2017 3:13 pm

Thanks for your help. I think I have it down now. @@. Really, it was me being a dumbass.

Alfonsia
Posts: 11
Joined: Thu Mar 23, 2017 1:47 pm

Re: Real newb. Help with a check up.

Postby Alfonsia » Sun May 07, 2017 12:33 pm

So I was looking at making the 2017 IRA-backdoor roth contribution, the first and only ever 2016 contribution was to a VTHRX, am I actually better off considering non target fund that can be at admiral costs? The sole earner is 48, non working spouse 52, BTW, and I know this is late in the game. Can i choose the IRA to be an admiral option or is it of little consequence and just continue with the IRA (backdoor roth) as a target fund? The plan is to maximally fund every year.
Thanks!

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FiveK
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Re: Real newb. Help with a check up.

Postby FiveK » Sun May 07, 2017 12:44 pm

Alfonsia wrote:...am I actually better off considering non target fund that can be at admiral costs?
"Better off" is a subjective term with a variety of possible meanings. For a quick comparison, admiral funds might save you ~0.1% over the cost of VTHRX. On a $10,000 investment, that's $10/yr. It's up to you....


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