Should I rollover VTSAX into 401k to do backdoor Roth? [Vanguard Total Stock]

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financeforthefamily
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Should I rollover VTSAX into 401k to do backdoor Roth? [Vanguard Total Stock]

Post by financeforthefamily » Tue May 22, 2018 12:07 pm

So I have about $700k in a rollover IRA...all of it is in VTSAX. I’m thinking of rolling it over to my company 401k plan so that I can do a backdoor Roth. My company’s 401k plan is administered by Fidelity. There’s no option within the 401k that’s similar to VTSAX.

In the longrun, is this worth it? I’ll be paying more in fees and possibly not getting similar investment returns as VTSAX. The benefit is that I’ll be able to do the backdoor Roth year after year....I’m currently 41...thanks!

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Duckie
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Re: Should I rollover VTSAX into 401k to do backdoor Roth? [Vanguard Total Stock]

Post by Duckie » Tue May 22, 2018 4:38 pm

financeforthefamily wrote:In the longrun, is this worth it? I’ll be paying more in fees and possibly not getting similar investment returns as VTSAX.
What are the options in the 401k plan? List the fund names, ticker symbols, and plan expense ratios.

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David Jay
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Re: Should I rollover VTSAX into 401k to do backdoor Roth? [Vanguard Total Stock]

Post by David Jay » Tue May 22, 2018 4:42 pm

Duckie wrote:
Tue May 22, 2018 4:38 pm
financeforthefamily wrote:In the longrun, is this worth it? I’ll be paying more in fees and possibly not getting similar investment returns as VTSAX.
What are the options in the 401k plan? List the fund names, ticker symbols, and plan expense ratios.
^ ^ ^ This. Without knowing the 401K options and Expense Ratios (ERs), we can’t give useful input.
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Alan S.
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Re: Should I rollover VTSAX into 401k to do backdoor Roth? [Vanguard Total Stock]

Post by Alan S. » Tue May 22, 2018 6:17 pm

VTSAX ER is .04%. For 700k in your plan each additional .01 will cost you 70 per year. If the plan equivalent option has an ER of .14 you will pay 700 more per year. And there could be additional costs in the 401k beside just the ER for the equivalent option. Your employer will probably have to be quite large to even have a 401k plan offering ERs anywhere close to the .04 of VTSAX, and the closest investment option may not measure up either.

retiredjg
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Re: Should I rollover VTSAX into 401k to do backdoor Roth? [Vanguard Total Stock]

Post by retiredjg » Tue May 22, 2018 6:29 pm

financeforthefamily wrote:
Tue May 22, 2018 12:07 pm
In the longrun, is this worth it?
As mentioned above, the only way to know is for you to list what is available in your 401k. You don't have to list everything. How about the 10 lowest cost (lowest ER) items on the list? Or the 3 lowest cost in each asset class.

Getting money into Roth is nice, but paying more on that $700k may not be worth it.

financeforthefamily
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Re: Should I rollover VTSAX into 401k to do backdoor Roth? [Vanguard Total Stock]

Post by financeforthefamily » Wed May 23, 2018 8:15 am

Ok, here are the options. I’m not including the target date fund or the actively managed fund. That said, the passive options in the 401k are as follows through Fidelity:

1. US Large Cap Equity Index - ER of 0.013%
2. US Small/Mid Cap Equity Indes - ER of 0.032%
3. International Equity Index - ER of 0.091%
4. Fixed Income Index - ER of 0.042%

The ER’s are comparable to VTSAX, but I just don’t know if they’re as diversified.

retiredjg
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Re: Should I rollover VTSAX into 401k to do backdoor Roth? [Vanguard Total Stock]

Post by retiredjg » Wed May 23, 2018 1:41 pm

Those are excellent choices. Large Cap Equity Index combined with Small/Mid cap index (80/20) should be the same thing as your Total Stock Index. I would have no problem rolling $700k into those choices if the plan has otherwise been easy or satisfactory for you to use.

Not sure why you think the fees would be higher. They look lower to me.

If you are still concerned you can check to see if you have the ability to roll that money (not other money) back out in the future. Many plans (all?) allow this.

MotoTrojan
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Re: Should I rollover VTSAX into 401k to do backdoor Roth? [Vanguard Total Stock]

Post by MotoTrojan » Wed May 23, 2018 3:14 pm

retiredjg wrote:
Wed May 23, 2018 1:41 pm
Those are excellent choices. Large Cap Equity Index combined with Small/Mid cap index (80/20) should be the same thing as your Total Stock Index. I would have no problem rolling $700k into those choices if the plan has otherwise been easy or satisfactory for you to use.

Not sure why you think the fees would be higher. They look lower to me.

If you are still concerned you can check to see if you have the ability to roll that money (not other money) back out in the future. Many plans (all?) allow this.
Seconded. I usually say large-cap is close enough but it isn’t difficult to add the 80/20 distribution here since the expsenses are low for both.

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