Help with rollover into IRA and future retirement plans

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NBKCF
Posts: 44
Joined: Wed Aug 01, 2018 6:14 pm

Help with rollover into IRA and future retirement plans

Post by NBKCF » Wed Aug 01, 2018 9:04 pm

Updated 08/03/2018 with more information
Emergency funds: Yes
Debt: Mortgage of $199,000 at 3.625% and a vehicle loan of $23,000 at 2.25%
Tax Filing Status: Married filing jointly
Tax Rate: 22% Federal, 7% State
State of Residence: South Carolina
Age: 31 (both of us)
Desired Asset allocation: I need help/suggestions here
Desired International allocation: I need help/suggestions here

Current retirement assets
His previous employer traditional 401k
$68,500

His previous employer Roth 401k
$20,300
Both of the above accounts are with a Fidelity 2050 Target Retirement Fund (ER 0.04%)

Her Roth 401k
$15,000 + $6,000 (company match)
This one is yielding a 0.31% annual growth, has not been contributed to in 7 years, and is with Prudential. I can't decipher an ER.

His current employer Roth 401k
$3,440 with FFLDX (ER 0.14%), contributing 6% to gain 4.5% of company match

Questions
1. Looking to roll my Roth 401k from my previous employer to a Roth IRA and contribute $5,500 annually for a retirement fund. Any suggestions here?

2. What should I do to my traditional 401k from my previous employer? I was thinking about rolling it into my current employer's 401k, but unsure. My current employer offers: FFGFX, FFWTX, FIWFX, FIWTX, FFEDX, FFEGX, FFEZX, FFIZX, FFOLX, FFOPX, FFLDX (my current election), FFLEX, and FFGZX
and some Mix Your Own Core Options of: FCNKX, VINIX, VWNAX, FSEVX, FLPKX, WIAEX, MIDLX, AEMGX, DODFX, VFWSX, VWILX, VGSNX, FPUKX, VBTIX, VIPIX, AND FRGXX.

3. How should I handle her Roth 401k and associated company match? We thought it might be wise to open her own Roth IRA, roll it over, and start contributing to this when we free up payments from the vehicle loan.


Initial post below left for reference
Hey folks! Stumbled across this forum after doing some digging on Reddit and hoping y'all can help me out. I have a Fidelity retirement fund that I need to rollover from a previous job that consists of:
  • $50.8k in a traditional 401k
  • $20.3k in a Roth 401k
  • $17.7k in company matches
I am curious as to the best approach on how to handle this situation (disclaimer: I am new to investing and only ever did pre-selected funds based on what my company offered). My spouse and I are 31 years old with a joint gross income of $135k ($87.5k for me and $47.5k for my spouse). We just had a child and are initially looking to set ourselves up for retirement at 60 years old and with any remaining money we will save for our child's college tuition. Our current debts are a mortgage at $199k (3.625%) and vehicle at $23k (2.25%). My initial plans are:
  • Roll my Roth 401K to a Roth IRA in a VTSAX or a comparable Fidelity index fund. We will then contribute $5,500 annually to this account as long as it remains sustainable. Does this seem like a reasonable approach? Do y'all have any suggestions for a Fidelity account that would be comparable? Or suggestions for what else to do here?
  • Roll my traditional 401k into a traditional IRA. I am thinking upon retirement, I can withdrawal these funds at $10k/year to avoid taxes (let's assume tax laws don't change) and supplement my remaining income with Roth withdrawals. Does this seem smart? Should I convert these to a Roth IRA instead? Any suggestions on funds to invest in here or other approaches?
Lastly, I am currently contributing to a Roth 401k at my current company to obtain the max company match of 4.5% for the 6% I contribute. I am in a Fidelity Freedom Index 2055 (FFLDX). Should I switch this up some to be more aggressive?

How does our plan look for retirement? Any idea how much our retirement account will be come time for retirement? I am learning so much every time I read, but I am not keen on diversifying and making sure I am investing properly.
Last edited by NBKCF on Fri Aug 03, 2018 7:23 pm, edited 1 time in total.

mhalley
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Re: Help with rollover into IRA and future retirement plans

Post by mhalley » Thu Aug 02, 2018 1:38 am

Rolling the 401k over to an Ira might not be the best thing. You are ok to contribute to Roth IRA at your current income, but as your salary increases you will exceed the limits and need to do backdoor Roth. Having money in a traditional Ira would preclude that. If the funds are ok, keep the 401k where it is or roll it into your current 401k. If you post the funds available we can help with the decision. You could go ahead and roll the Roth over. 401ks also offer better creditor protection than IRAs
I wouldn’t contribute to a 529 until you are maxing retirement accounts.
Use one of the online calculators like firesim to project future retirement savings.

http://www.cfiresim.com/

https://www.i-orp.com/Dividend/index.html
A general rule of thumb in retirement is to withdraw from taxable, then tax deferred then tax free. Too soon to say what will be best in 30 yrs due to tax rates being unknown. Roth conversions might also come into play.
https://www.kitces.com/blog/tax-efficie ... ing-needs/

Fidelity just announced it is coming out with zero fee funds, and reducing fees on many others, so keeping your Roth at fidelity would be good. Freedom index funds are good.

NBKCF
Posts: 44
Joined: Wed Aug 01, 2018 6:14 pm

Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Thu Aug 02, 2018 7:56 am

Just to make sure I understand what you're saying:
  • Roll my Roth 401k from my previous employment to a Roth IRA and contribute $5,500 annually
  • Keep my traditional 401k as is or roll it over to my current company's 401k
Is that correct? Shouldn't I roll my traditional 401k over just to get it out of the old company's portfolio since I can no longer contribute?
My funds for the traditional 401k is a 2050 Target Retirement Date Fund. It doesn't show a ticker symbol.

The funds available with my current employer are Pre-mix Options of: FFGFX, FFWTX, FIWFX, FIWTX, FFEDX, FFEGX, FFEZX, FFIZX, FFOLX, FFOPX, FFLDX (my current election), FFLEX, and FFGZX
and some Mix Your Own Core Options of: FCNKX, VINIX, VWNAX, FSEVX, FLPKX, WIAEX, MIDLX, AEMGX, DODFX, VFWSX, VWILX, VGSNX, FPUKX, VBTIX, VIPIX, AND FRGXX.

Thanks for your response and the links. Do you also have a recommendation for which fund I should roll my Roth 401k?

NBKCF
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Joined: Wed Aug 01, 2018 6:14 pm

Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Fri Aug 03, 2018 11:56 am

Bump. Anyone able to help me decide what to do with my traditional 401k? Should I roll it to my current company's plan?

ExitStageLeft
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Re: Help with rollover into IRA and future retirement plans

Post by ExitStageLeft » Fri Aug 03, 2018 1:14 pm

Welcome to the forum! What are the fees you are paying with the old 401k?

Edit to add: There are so many conditional factors to consider that it almost always come down to knowing the nitty gritty details of your portfolio and financial situation as outlined in this thread. If you update your original post to add that information you can get very detailed and specific advice that will allow you to optimize your portfolio in the Boglehead way.

Short of that, we need to at least know what the fund expenses are with your old 401k and with the new 401k. It wouldn't hurt to let us know if you have any IRAs, and what the relatives size is among all your retirement accounts.

Arpanet
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Re: Help with rollover into IRA and future retirement plans

Post by Arpanet » Fri Aug 03, 2018 1:29 pm

As ExitStageLeft pointed out, the decision on whether or not to roll your old 401k over depends largely on the fees you're paying in the old plan. If you can reduce your fees by rolling it over, it probably makes sense to do so. If your fees will go up, it might make sense to hold off.

Taking the fees out of the equation for a moment, I think there are two other factors that make rolling it over attractive:

1. You can't take a loan out from a 401k once you've left the company it's attached to. You probably shouldn't do this anyway, but it's a consideration - that money is really and truly locked down until you're 55. Rolling it into your current 401k adds it to the pot of money you can take a loan against.
2. You'll have a much wider range of fund options if you roll your old 401k into an IRA with, say, Vanguard or Fidelity. This will give you more flexibility when trying to get your overall portfolio to the right asset allocation, and will obviously open up more specialized investments if you want to go that route.

NBKCF
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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Fri Aug 03, 2018 7:24 pm

ExitStageLeft, thank you for the response and the link. I have updated my original post with the information.

Arpanet, thank you as well. I hope my updated posted up top helps clarify things for suggestions.

ExitStageLeft
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Re: Help with rollover into IRA and future retirement plans

Post by ExitStageLeft » Fri Aug 03, 2018 8:47 pm

The old 401k totals $88,800 and has an ER of 0.04%. That amounts to an annual cost of $35.52.

If you roll that over to your current 401k and put it in FFLDX, it will incur a yearly fee of $124.32. The FFLDX fund is all but identical to the 2050 fund and is yielding identical returns. So you would be paying more for the same returns. From a pure dollars standpoint you are better off leaving it where it is for now.

You can keep your funds in the old 401k plan up until you reach age 70. I'm not advocating you do that, just suggesting that you shouldn't make a change just for the sake of change.

I would proceed with starting Roth IRA savings for you and your wife. That can be done without doing anything to the existing 401k accounts. I would also start building a long-term savings plan. I believe you both are missing out on substantial tax-advantaged savings that are available each year. If you can become extreme savers, you could be putting up to $48k per year into the 401ks and IRAs. It seems I know. But if you gradually increase your 401k percent contributions every year, it won't take long to get to where you are saving to the max.

NBKCF
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Joined: Wed Aug 01, 2018 6:14 pm

Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Fri Aug 03, 2018 9:17 pm

Thank you for the reply.

Are you suggesting I don't rollover my Roth 401k contributions to a Roth IRA? If so, why? I can understand leaving the traditional 401k as is since the ER is lower. I was wanting to rollover the Roth 401k to a Roth IRA so I was eligible for VTSAX or FSTVX with $10,000 minimums. Does that seem like the wrong approach?

I am currently up-ing my annual contribution in my current employer's Roth 401k by 1%/year, but I don't think it is within our means to get near the $48,000 tax advantaged savings per year due to the new child and upcoming daycare expenses ($1100/month). Currently, we can afford to fund a Roth IRA at $5,500/year and myself continuing to contribute to my company Roth 401k. Once her vehicle is paid off (3 years) we will fund her Roth IRA as well.

What are your thoughts on rolling her Roth 401k to a Roth IRA?

mhalley
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Re: Help with rollover into IRA and future retirement plans

Post by mhalley » Fri Aug 03, 2018 10:19 pm

No question that a prudential Roth 401k will have high fees and should be rolled over, UNLESS it is a traditional 401k and you want to preserve the possibility of backdoor Roth in the future if your income exceeds the Roth limit. Keeping old 401ks is fine as they have greater creditor protection and prevent future back door roth problems. It makes it a little more complicated to rebalance your aa, but with spreadsheets and aggregators it’s not that difficult.
Look at it this way: having a small amount of money in a high er 401k might be worthwhile to preserve the backdoor Roth. You consider the overall er of your portfolio, just as you consider the overall asset allocation of the entire portfolio.

gostars
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Re: Help with rollover into IRA and future retirement plans

Post by gostars » Fri Aug 03, 2018 10:41 pm

Rolling over a Roth 401k to a Roth IRA would have no impact on the ability to do a backdoor Roth. Only traditional to traditional would matter for that. Note that employer matching contributions are always traditional, even when the employee is contributing Roth. In order to avoid pro-rata issues when dealing with matching contributions, one would either need to roll only the Roth side (if possible), roll both into the Roth IRA and pay the taxes on the conversion of the traditional to Roth, or roll Roth to Roth and traditional into a current 401k/403b plan.

NBKCF
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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Sat Aug 04, 2018 6:16 am

Thank you. So it sounds like I should roll my Roth 401k portion to a Roth IRA and leave the company contribution and remaining traditional 401k untouched. Likewise for my wife’s account. Does that seem accurate?

I was also leaning toward VTSAX, but I see Fidelity offers similar funds (like FSTVX). Keeping at Fidelity would make things easier for me. Should I consider one over the other? Or a different Fidelity fund than FSTVX for the Roth IRA?

Lastly, are there recommended asset allocations I should chose since this will be a retirement savings Roth IRA?

gostars
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Re: Help with rollover into IRA and future retirement plans

Post by gostars » Sun Aug 05, 2018 12:33 am

If possible. Check the plan documents on how distributions work, they may require that if you do a rollover that you do it for everything.

FSTVX is a great fund and I own the institutional version of it in a workplace plan at Fidelity. Fidelity just announced that they're eliminating the different fund classes on their index funds and treating everything the same as the highest class (usually institutional premium), with the new lower ERs and elimination of fund minimums effective now, and all the lower funds merging in to the highest class starting in November. FSTMX, FSTVX, and FSKTX will cease to exist and will be replaced with FSKAX. FSKAX has already had the minimum investment removed, so you might as well just buy it now and not have to redo any spreadsheets or other tracking you have when FSTVX changes over.

You can also look at the new fund FZROX, which is another total US market index fund, except it tracks a proprietary Fidelity index instead of the Dow Jones U.S. Total Stock Market Index, and has an expense ratio of 0. Only time will tell which will perform better.

NBKCF
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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Sun Aug 05, 2018 7:54 am

That’s interesting. I haven’t read that. Do you know why Fidelity would do that? It makes me want to consider Vanguard since there doesn’t seem to be many changes. Although, the changes appear favorable as of now.

NBKCF
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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Sun Aug 05, 2018 3:00 pm

Any recommendations on funds for the Roth IRA's? Would it be wise to do 100% VTSAX in my Roth IRA? What about my wife's? I am trying to find out the best asset allocation since I am new to IRA's.

NBKCF
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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Mon Aug 06, 2018 6:46 pm

Bump. Can anyone help with asset allocations for our Roth IRA's? Sorry, I am learning so much as I get through Boglehead's Guide to Investing and reading this forum.

ExitStageLeft
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Re: Help with rollover into IRA and future retirement plans

Post by ExitStageLeft » Mon Aug 06, 2018 7:22 pm

Since it's tax-advantaged, you can put anything in a Roth IRA and not have to worry about tax consequences. Ever.

That makes a Roth IRA handy for keeping anything that yields dividend or interest payments. But bonds and income funds have lower anticipated returns than a 100% stock fund. Since you'll never have to pay taxes on the earnings, most folks will put high-yielding fund in their Roth accounts.

If you are wanting to build a three-fund portfolio, you would do well to have your bonds allocation in your 401k and have your international allocation in your Roth IRA. Fill up the rest with a total stock market fund. Paycheck contributions can be set up in the 401k to maintain your bonds allocation. You rebalance the Roth IRAwhen you make your yearly contribution, buying whatever is needed to keep it in balance.

gostars
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Re: Help with rollover into IRA and future retirement plans

Post by gostars » Tue Aug 07, 2018 12:04 am

It's all part of Fidelity's new push to further lower the cost of investing. I see it as an acknowledgement that Vanguard's basic theories are a good idea, but that Fidelity thinks they can do it better and cheaper. I, a an investor, am happy to take advantage of anything that benefits me. I have money spread all over the place working to the maximum advantage, and have no particular loyalties to anyone. With the recent changes, Fidelity leads in most categories I value, and that's where I would put money if I was just starting out. If you asked me before these changes, it would have been Schwab, Vanguard, Merrill Edge, or Fidelity, depending on the goal.

In a Roth IRA, I would be holding a broad US stock market fund unless there's a good reason not to. VTSAX, FSKAX, FZROX, SWTSX, VTI, ITOT, SCHB. Any of these 7 are close enough to be effectively interchangeable in an IRA. Whatever slight differences they might have is not something anyone will know until decades of data are present, and even then, it won't necessarily predict future performance.

NBKCF
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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Tue Aug 07, 2018 7:27 am

If you are wanting to build a three-fund portfolio, you would do well to have your bonds allocation in your 401k and have your international allocation in your Roth IRA. Fill up the rest with a total stock market fund. Paycheck contributions can be set up in the 401k to maintain your bonds allocation. You rebalance the Roth IRAwhen you make your yearly contribution, buying whatever is needed to keep it in balance.
gostars wrote:
Tue Aug 07, 2018 12:04 am
In a Roth IRA, I would be holding a broad US stock market fund unless there's a good reason not to. VTSAX, FSKAX, FZROX, SWTSX, VTI, ITOT, SCHB. Any of these 7 are close enough to be effectively interchangeable in an IRA.
Thank you for the replies. Few questions:

I will continue to contribute the 6% in my company Roth 401k (for company match), but should I change it to another fund offered from my original post? Currently in FFLDX which is:
  • 63.5% domestic
  • 26.5% international
  • 9.97% bonds
  • 0.02% short-term investment
I guess I have not considered a three-fund portfolio (yet). My initial goal was to get a Roth IRA created and to dump money into it for retirement through VTSAX. However, I am confused if I should go 100% VTSAX or not. If not 100% VTSAX, which Vanguard funds and % should I pursue in the Roth IRA?

The only thing that scares me about the FZROX is its infancy and seems "too good to be true" so I wanted to wait awhile to see how it does. Is the irrational?

Thank you all so much for your help and sorry if I am missing some underlying points you all are making. I would like to get the Roth IRA going so I can make money and then reassess my portfolio after I finish flooding myself with literature on investing.

ExitStageLeft
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Re: Help with rollover into IRA and future retirement plans

Post by ExitStageLeft » Tue Aug 07, 2018 9:47 am

NBKCF wrote:
Tue Aug 07, 2018 7:27 am
If you are wanting to build a three-fund portfolio, you would do well to have your bonds allocation in your 401k and have your international allocation in your Roth IRA. Fill up the rest with a total stock market fund. Paycheck contributions can be set up in the 401k to maintain your bonds allocation. You rebalance the Roth IRAwhen you make your yearly contribution, buying whatever is needed to keep it in balance.
gostars wrote:
Tue Aug 07, 2018 12:04 am
In a Roth IRA, I would be holding a broad US stock market fund unless there's a good reason not to. VTSAX, FSKAX, FZROX, SWTSX, VTI, ITOT, SCHB. Any of these 7 are close enough to be effectively interchangeable in an IRA.
Thank you for the replies. Few questions:

I will continue to contribute the 6% in my company Roth 401k (for company match), but should I change it to another fund offered from my original post? Currently in FFLDX which is:
  • 63.5% domestic
  • 26.5% international
  • 9.97% bonds
  • 0.02% short-term investment
I guess I have not considered a three-fund portfolio (yet). My initial goal was to get a Roth IRA created and to dump money into it for retirement through VTSAX. However, I am confused if I should go 100% VTSAX or not. If not 100% VTSAX, which Vanguard funds and % should I pursue in the Roth IRA?

The only thing that scares me about the FZROX is its infancy and seems "too good to be true" so I wanted to wait awhile to see how it does. Is the irrational?

Thank you all so much for your help and sorry if I am missing some underlying points you all are making. I would like to get the Roth IRA going so I can make money and then reassess my portfolio after I finish flooding myself with literature on investing.
Pumping money into a low-cost target date fund is an excellent way to save for your retirement. It works great in a tax-deferred account or a Roth account. My explanation about a three-fund was about fine tuning an allocation. It can shave a small amount off the expense ratio but it comes with the price of having to do the re-balance yourself. With a target date fund the fund managers do that work.

You're wise to be cautious with a new fund like Fidelity just introduced. But with a reputable company offering an indexed fund, I think the risks are much less than if this were a new actively managed fund. If I had a tax-advantaged account with Fidelity I would tryu it for a quarter and see if it returns the same as FSKAX.

NBKCF
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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Tue Aug 07, 2018 9:24 pm

ExitStageLeft wrote:
Tue Aug 07, 2018 9:47 am
Pumping money into a low-cost target date fund is an excellent way to save for your retirement. It works great in a tax-deferred account or a Roth account. My explanation about a three-fund was about fine tuning an allocation. It can shave a small amount off the expense ratio but it comes with the price of having to do the re-balance yourself. With a target date fund the fund managers do that work.

You're wise to be cautious with a new fund like Fidelity just introduced. But with a reputable company offering an indexed fund, I think the risks are much less than if this were a new actively managed fund. If I had a tax-advantaged account with Fidelity I would tryu it for a quarter and see if it returns the same as FSKAX.
Do you think it is smart to go 100% VTSAX for the Roth IRA's (at least to start)? As I understand, and please correct me if needed, I should allocate some bonds as I age so is that something I should do now as I create my Roth or not yet?

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celia
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Re: Help with rollover into IRA and future retirement plans

Post by celia » Tue Aug 07, 2018 10:41 pm

Our wiki page about the 401(k) discusses pros and cons of some of the things you are asking about.

I would like to remind you that although you may have made Roth contributions to a 401(k), the employer's match for those contributions had to go into the tax-deferred part of the account. So rolling over the Roth part of the 401(k) to a Roth IRA is often advisable so you can get a better choice of investment options and often lower fees. That rollover will also be tax-free as taxes were already paid on the Roth contributions for the year of the contribution.

However, rollover of any other part of the 401k to a Roth IRA will be a taxable event (ie, a Roth conversion). You should pay the taxes out of your cash flow (payroll withholding) or from a taxable account, instead of withholding from the Roth conversion. But if you rollover any part of the 401k to a traditional IRA, you will complicate the future Backdoor Roth process. That is because the conversion part of the backdoor Roth will have the pro rata rule applied in calculating the taxes.

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celia
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Re: Help with rollover into IRA and future retirement plans

Post by celia » Tue Aug 07, 2018 10:56 pm

NBKCF wrote:
Tue Aug 07, 2018 9:24 pm
Do you think it is smart to go 100% VTSAX for the Roth IRA's (at least to start)?
That is a good choice and will give you a good amount of growth over the long term (but not necessarily each year) in an account where the growth will not be taxed (as long as the account has been opened at least 5 years and you are over 59.5 at the time of withdrawal).
As I understand, and please correct me if needed, I should allocate some bonds as I age so is that something I should do now as I create my Roth or not yet?
Bonds will make your overall portfolio less risky, but don't put them in a Roth if you have tax-deferred space in an IRA or 401K. Save the Roth space for assets that are expected to grow the most. See Tax-efficient Fund Placement for a further explanation of WHY assets should be held in certain kinds of accounts, but not in others.

gostars
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Re: Help with rollover into IRA and future retirement plans

Post by gostars » Tue Aug 07, 2018 10:58 pm

It's fine to be cautious about Fidelity's new funds. I'm planning to hold out for a while to see how they do before moving some money in to them. There's no need to be cautious about their existing funds, which were always competitive with Vanguard, and now have no minimums and even lower ERs. So, go with FSTVX instead of FZROX. Since you're already at Fidelity, you might as well keep it there and be able to see everything in one place.

My preference is to split up the three-fund portfolio and spread it across different accounts. Since I'll never have to pay any taxes on it, I want my Roth to grow the most, so it's 100% total US stock market. Since I will eventually have to pay income taxes on it, all my bond holdings are in pre-tax employer plans (401k and 403b); less growth means less to pay taxes on one day. My international holdings are mostly in taxable.

For him, if his current employer's plan charges no fees, I would roll the previous employer's plan as-is (traditional to traditional, Roth to Roth). Put the traditional in as much VBTIX as you need to meet your desired bond allocation. Split the Roth 401k between VINIX/FSEVX (80% VINIX plus 20% FSEVX roughly equates to total stock market) and VFWSX (international).

For her, the Roth 401k would probably be best moved. Is there a chance she will want/need to do a backdoor Roth in the future? If so, you could roll it all to a Roth IRA, converting the employer portion to Roth as part of it. Since it doesn't look like you are planning to max out your contributions this year, you could take that money that was earmarked for a Roth contribution and instead put an extra $6000 in his 401k, except as traditional instead of Roth. That will erase the tax hit of her conversion, and you end up in basically the same place you would have been except the money is in a more advantageous place and leaving the backdoor Roth as an option in the future.

NBKCF
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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Wed Aug 08, 2018 7:58 am

celia wrote:
Tue Aug 07, 2018 10:41 pm
Our wiki page about the 401(k) discusses pros and cons of some of the things you are asking about.

I would like to remind you that although you may have made Roth contributions to a 401(k), the employer's match for those contributions had to go into the tax-deferred part of the account. So rolling over the Roth part of the 401(k) to a Roth IRA is often advisable so you can get a better choice of investment options and often lower fees. That rollover will also be tax-free as taxes were already paid on the Roth contributions for the year of the contribution.

However, rollover of any other part of the 401k to a Roth IRA will be a taxable event (ie, a Roth conversion). You should pay the taxes out of your cash flow (payroll withholding) or from a taxable account, instead of withholding from the Roth conversion. But if you rollover any part of the 401k to a traditional IRA, you will complicate the future Backdoor Roth process. That is because the conversion part of the backdoor Roth will have the pro rata rule applied in calculating the taxes.
Thank you for the links! That was very informative. I was aware of the company match being tax-deferred so I was only interested in converting the Roth 401k contributions to a Roth IRA. I like the idea of having the backdoor Roth an option for the future, so I would prefer to leave the tax-deferred contributions as is (or rollover to my current company's 401k).

NBKCF
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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Wed Aug 08, 2018 8:17 am

gostars wrote:
Tue Aug 07, 2018 10:58 pm
My preference is to split up the three-fund portfolio and spread it across different accounts. Since I'll never have to pay any taxes on it, I want my Roth to grow the most, so it's 100% total US stock market. Since I will eventually have to pay income taxes on it, all my bond holdings are in pre-tax employer plans (401k and 403b); less growth means less to pay taxes on one day. My international holdings are mostly in taxable.
Can I benefit from a three-fund portfolio now? I ask because we will for sure max out one Roth IRA and work towards maxing the other Roth IRA as we pay off her vehicle. That still leaves us room in my company Roth 401k since I am only contributing 6% (i.e. another ~$12,000 that can be added).
For him, if his current employer's plan charges no fees, I would roll the previous employer's plan as-is (traditional to traditional, Roth to Roth). Put the traditional in as much VBTIX as you need to meet your desired bond allocation. Split the Roth 401k between VINIX/FSEVX (80% VINIX plus 20% FSEVX roughly equates to total stock market) and VFWSX (international).
Why not roll the Roth 401k to a Roth IRA? I was looking to roll it so I could meet the minimum requirement of $10,000 for the VTSAX. Are you just mentioning I can mimic the total stock market with 80%VINIX/20%FSEVX so I can keep it all at fidelity in my current employer's offerings? VINIX has an ER of 0.035% and FSEVX has an ER of 0.045%. Sorry, I should have mentioned that earlier. Am I missing an advantage of having the Roth 401k rolled into my current employer's options versus going with VTSAX or FSTVX outside of my company?
For her, the Roth 401k would probably be best moved. Is there a chance she will want/need to do a backdoor Roth in the future? If so, you could roll it all to a Roth IRA, converting the employer portion to Roth as part of it. Since it doesn't look like you are planning to max out your contributions this year, you could take that money that was earmarked for a Roth contribution and instead put an extra $6000 in his 401k, except as traditional instead of Roth. That will erase the tax hit of her conversion, and you end up in basically the same place you would have been except the money is in a more advantageous place and leaving the backdoor Roth as an option in the future.
Excellent advice - thank you. Unlikely she will need a back Roth in the future. Does that change your recommendation on how to handle hers?
Last edited by NBKCF on Wed Aug 08, 2018 10:19 am, edited 1 time in total.

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Re: Help with rollover into IRA and future retirement plans

Post by BL » Wed Aug 08, 2018 8:44 am

I just wanted to comment that I don't understand contributing to a Roth 401k vs. traditional tax-deductible 401k when you are not contributing the maximum possible. It will lower your tax so you will have more money to contribute now instead of paying more tax now. I agree that it might be a good choice (search Wiki for Roth vs trad. 401k) when you can fill everything, as you can pack more into a Roth because you won't owe future tax on it.

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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Wed Aug 08, 2018 10:41 am

BL wrote:
Wed Aug 08, 2018 8:44 am
I just wanted to comment that I don't understand contributing to a Roth 401k vs. traditional tax-deductible 401k when you are not contributing the maximum possible. It will lower your tax so you will have more money to contribute now instead of paying more tax now. I agree that it might be a good choice (search Wiki for Roth vs trad. 401k) when you can fill everything, as you can pack more into a Roth because you won't owe future tax on it.
Honestly, it was suggested by a coworker years ago and I didn't give it much thought (ignorant, I know, but true). However, my thoughts are to pull from my already traditional accounts in retirement up to the tax bracket that doesn't require taxes to be paid (e.g. $10,000) and supplement the rest with Roth withdrawals. Is traditional a better approach still given that info? It looks like I will yield approximately $80 per paycheck take-home if I switch to traditional now.

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Re: Help with rollover into IRA and future retirement plans

Post by ExitStageLeft » Wed Aug 08, 2018 2:42 pm

A $5,000 contribution to the Roth 401k this year will be taxed at 22%, resulting in $1,100 in federal tax.

A $5,000 withdrawal from a tax-deferred 401k at age 60 will be subject to federal income tax. How much depends on a lot of things, but you can come up with a reasonable estimate. Looking at current tax law, if you are living off your tax-deferred savings for all of your needs then you will have to pay taxes on all of it, less the standard deduction.

If when you retire you spend $80k per year (in 2018 dollars) and that all comes from tax-deferred then the AGI is $80k. After taking the standard deduction the taxable income is $56k. Federal income tax would be $6,339. If in addition to spending $80k you also convert $5,000 from tax-deferred to Roth then the taxable income increases to $61k and the resulting federal income tax is $6.939. You would pay $600 in federal tax to convert $5,000 from tax-deferred to Roth savings.

In this scenario you pay $1,100 in tax today or you pay $600 in thirty years. I know which one I prefer.

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Re: Help with rollover into IRA and future retirement plans

Post by celia » Wed Aug 08, 2018 7:54 pm

NBKCF wrote:
Wed Aug 08, 2018 7:58 am
Thank you for the links! That was very informative. I was aware of the company match being tax-deferred so I was only interested in converting the Roth 401k contributions to a Roth IRA....
You are eligible to rollover not only the contributions made to the Roth 401K, but also the growth on those contributions, since they are Roth money too. (This differs from a post-tax contribution to a 401k, where only the contributions can be rolled over to a Roth IRA tax-free, while the growth part will be taxed.) Be sure you know which kind of plan your old 401K had.
NBKCF wrote:
Wed Aug 08, 2018 8:17 am
gostars wrote:
Tue Aug 07, 2018 10:58 pm
For her, the Roth 401k would probably be best moved. Is there a chance she will want/need to do a backdoor Roth in the future? If so, you could roll it all to a Roth IRA, converting the employer portion to Roth as part of it. Since it doesn't look like you are planning to max out your contributions this year, you could take that money that was earmarked for a Roth contribution and instead put an extra $6000 in his 401k, except as traditional instead of Roth. That will erase the tax hit of her conversion, and you end up in basically the same place you would have been except the money is in a more advantageous place and leaving the backdoor Roth as an option in the future.
Excellent advice - thank you. Unlikely she will need a back Roth in the future. Does that change your recommendation on how to handle hers?
When you file jointly, when you become ineligilble to contribute to a Roth due to high income, your spouse also becomes ineligible since the combined income is taken from your tax return. This is true even if there is only one wage earner in the family. For MFJ in 2018, the family earned income must be under $189K. (You are severely limited if you file separately, since then the earned income is under $10K.)

If your wife is still employed at the company that sponsors her 401K, she will have to wait until she leaves the company or turns 59.5 to do the rollover, unless they have an in-service (still employed) exception (which is rare).

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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Wed Aug 08, 2018 9:26 pm

Thank you, folks. Can I get confirmation on my approach below?
  • Change my contributions to my company Roth 401k to traditional 401k. Use additional money in take-home income to invest in Roth IRA.
  • Roll traditional 401k form previous employer to current employer.
  • Roll Roth 401k from previous employer to Roth IRA. Is it wise to go 100% VTSAX here at our age?
Last edited by NBKCF on Wed Aug 08, 2018 10:32 pm, edited 1 time in total.

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Re: Help with rollover into IRA and future retirement plans

Post by gostars » Wed Aug 08, 2018 10:22 pm

I suggest rolling 401k to 401k for simplicity. Having multiple accounts spread all over just complicates things. Right now I have my money spread over 7 accounts at 5 different brokerages (8 and 6 if you count a brokerage link on one of the workplace plans), and I have to use a spreadsheet to calculate my AA. Most of them have a specific reason for existing that way, but it's still a pain. If you can get yours down to his and hers Roth IRAs plus his 401k split between traditional and Roth, that's way simpler. I wouldn't bother with Vanguard at all if everything is already at Fidelity. You can set it up so you can track and manage all the accounts under one login. Adding a separate brokerage just adds more complication, and it's not like Vanguard is going to give you money for choosing them.

Even if you're not planning on needing backdoor Roth contributions, I'd still convert the employer contributions from her 401k to Roth just to not have to track a separate account. Whether you decide to pay the taxes on it or just contribute extra to his traditional 401k to wipe out those taxes is up to you; in a 22% bracket it could realistically go either way in retirement. If you do choose to wipe them out, just remember that you will have $1320 that you were previously having withheld will not get taken out. If you normally get a big tax refund (over $1000) then the only effect is that you'll get less back or might have to pay a bit. The IRS has specific rules about penalties if you end up way under on your taxes for the year, so if you usually owe or come close to even, he may need to cut back on the W4 exemptions or add some additional withholding for the rest of the year to balance out. Mostly the IRS is looking to prevent chronic underpayment and doesn't care too much about people who have one weird year.

I would prefer holding FTIPX (total international market) in the Roth IRA, up to the limit of the asset allocation. You can effectively match total US market with the funds in his 401k, but cannot match total international market. VFWSX is a good fund, but it's missing small caps, or about 10% of the non-US market. You can ignore that if you'd like, and some do, but many would argue that small companies have the largest potential for future growth, and actually prefer to hold more of them than just market weight.

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Re: Help with rollover into IRA and future retirement plans

Post by celia » Thu Aug 09, 2018 1:25 am

NBKCF wrote:
Wed Aug 08, 2018 9:26 pm
Thank you, folks. Can I get confirmation on my approach below?
  • Change my contributions to my company Roth 401k to traditional 401k. Use additional money in take-home income to invest in Roth IRA.
  • Roll traditional 401k form previous employer to current employer.
  • Roll Roth 401k from previous employer to Roth IRA. Is it wise to go 100% VTSAX here at our age?
Good, but I would do everything in the reverse order. Roll over the Roth part to a Roth IRA first. 100% VTSAX is good, too. Then roll the rest to your new plan.

Now, if you've already made Roth contributions to your new 401k, you will be stuck with a small balance in the Roth there, until you leave the company. Not really a problem except that it probably makes your 401k statements a little more complicated. After you go one paycheck to see how your paycheck changes, you will know exactly how much you can easily contribute to the Roth IRA. Be sure you will be eligible income-wise. If there is any chance your joint earned income could reach $189K, start doing backdoor Roths instead of making direct contributions.

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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Thu Aug 09, 2018 7:47 am

Good, but I would do everything in the reverse order. Roll over the Roth part to a Roth IRA first. 100% VTSAX is good, too. Then roll the rest to your new plan.

Now, if you've already made Roth contributions to your new 401k, you will be stuck with a small balance in the Roth there, until you leave the company. Not really a problem except that it probably makes your 401k statements a little more complicated. After you go one paycheck to see how your paycheck changes, you will know exactly how much you can easily contribute to the Roth IRA. Be sure you will be eligible income-wise. If there is any chance your joint earned income could reach $189K, start doing backdoor Roths instead of making direct contributions.
Noted, thank you. Since I am in a target retirement fund with my company (giving me Domestic, International, and Bond allocations) and my Roth IRA will be a 100% total market index fund, around what age should I consider adjusting my portfolio with more bonds? My current approach is rather aggressive, no?

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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Thu Aug 09, 2018 7:52 am

gostars wrote:
Wed Aug 08, 2018 10:22 pm
I suggest rolling 401k to 401k for simplicity. Having multiple accounts spread all over just complicates things. Right now I have my money spread over 7 accounts at 5 different brokerages (8 and 6 if you count a brokerage link on one of the workplace plans), and I have to use a spreadsheet to calculate my AA. Most of them have a specific reason for existing that way, but it's still a pain. If you can get yours down to his and hers Roth IRAs plus his 401k split between traditional and Roth, that's way simpler. I wouldn't bother with Vanguard at all if everything is already at Fidelity. You can set it up so you can track and manage all the accounts under one login. Adding a separate brokerage just adds more complication, and it's not like Vanguard is going to give you money for choosing them.

Even if you're not planning on needing backdoor Roth contributions, I'd still convert the employer contributions from her 401k to Roth just to not have to track a separate account. Whether you decide to pay the taxes on it or just contribute extra to his traditional 401k to wipe out those taxes is up to you; in a 22% bracket it could realistically go either way in retirement. If you do choose to wipe them out, just remember that you will have $1320 that you were previously having withheld will not get taken out. If you normally get a big tax refund (over $1000) then the only effect is that you'll get less back or might have to pay a bit. The IRS has specific rules about penalties if you end up way under on your taxes for the year, so if you usually owe or come close to even, he may need to cut back on the W4 exemptions or add some additional withholding for the rest of the year to balance out. Mostly the IRS is looking to prevent chronic underpayment and doesn't care too much about people who have one weird year.

I would prefer holding FTIPX (total international market) in the Roth IRA, up to the limit of the asset allocation. You can effectively match total US market with the funds in his 401k, but cannot match total international market. VFWSX is a good fund, but it's missing small caps, or about 10% of the non-US market. You can ignore that if you'd like, and some do, but many would argue that small companies have the largest potential for future growth, and actually prefer to hold more of them than just market weight.
Good points and you're making me strongly consider staying with Fidelity. I really like Vanguard's approach of being owned by their investors, but monetarily (and for simplicity) you make a strong argument to stay with Fidelity.

I also appreciate your comments about adjusting my taxes to offset converting her traditional 401k contributions to the Roth IRA. I will adjust my W4 down for the 2019 tax year and make the conversion then.

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Asset Allocation for Newbie

Post by NBKCF » Fri Aug 10, 2018 10:46 am

[Thread merged into here, see below. --admin LadyGeek]

Hey folks,

I posted in a previous thread and was able to get extremely helpful advice (viewtopic.php?f=1&t=255433). I do, however, have a few more questions. Quick summary of my plan based from my previous thread:
  • Rolling his previous employer t401k from 2050 TRF to current employer's t401k in FFLDX 2055 TRF (including company matches).
  • Rolling her previous employer Roth 401k to a Roth IRA as well as converting her company match to same Roth IRA.
  • Rolling his previous employer's Roth 401k to a Roth IRA
My questions are:
  1. I am in an FFLDX with my current employer which is 60/30/10 domestic/int'l/bonds. Considering going with 100% FSTVX to stay within Fidelity. I was previously wanting VTSAX. Is FSTVX a comparable fund? Any other funds I should consider? And should I add more bonds to my portfolio (we are 31 years old, targeting to retire at 65)?
  2. Considering we are to open a Roth IRA for her as well, which fund would be wise here?
    We will be contributing 6% to his company FFLDX 401k (to obtain company match) and maxing out his Roth IRA for the foreseeable future. Her Roth IRA will be added to as we pay of a vehicle loan until we max it out. We will then contribute more to his company FFLDX 401k until we hit the legal max. I say this because we will only be able to contribute to retirement through his company 401k and the Roth IRA vehicles. I am trying to ensure we have a balanced (enough) portfolio for our retirement at our current age since it seems stock heavy with the above approach.
  3. Lastly, when should we consider introducing more bonds (if not now)? And which funds should those be?

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Re: Asset Allocation for Newbie

Post by mega317 » Fri Aug 10, 2018 12:25 pm

Disclaimer: I only glanced at your other thread.

1. Yes. Not for US stocks at Fidelity IMO. I don't know how many bonds you have now but I would have more than 10%.
2. A stock fund. I prefer going for the most growth in the Roth because it will not be taxed.
3. I like roughly age-10 in bonds. A total bond index fund in a tax advantaged account. I use FSITX at Fidelity.

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Re: Asset Allocation for Newbie

Post by NBKCF » Fri Aug 10, 2018 2:21 pm

1. Yes. Not for US stocks at Fidelity IMO. I don't know how many bonds you have now but I would have more than 10%.
Currently the only bonds we have are through FFLDX, so 10%.

2. A stock fund. I prefer going for the most growth in the Roth because it will not be taxed.
Noted, thank you. So another FSTVX or should I do international?

3. I like roughly age-10 in bonds. A total bond index fund in a tax advantaged account. I use FSITX at Fidelity.
I like that approach. What would be the best way to introduce bonds into my current portfolio? FSITX is not available through my company's fund choices so should I add it to one of our Roth IRA's? Keep in mind we still have room to contribute in her Roth IRA and my company 401k since we are paying off her vehicle.

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Re: Asset Allocation for Newbie

Post by Peter Foley » Fri Aug 10, 2018 2:51 pm

There was a recent long thread about age in bonds not being suitable for many investors. You might want to read though the first page of posts, after which it gets a bit contentious. See: viewtopic.php?f=10&t=255850

My personal opinion is that when you are first starting out and your annual contribution match or exceed your holdings you don't have to diversify - your ongoing contributions can be redirected easily if you become uncomfortable with your AA. After you have about $20k or so you should certainly begin to diversify. I think young couples should aim for 20% bonds until well into middle age. Some posters in the thread mentioned above suggested that one should model their A/A after the A/A used by Target Retirement funds. Not a bad suggestion, and better than age in bonds.

My preference for a Roth holding is Total Stock Market. You can combine with Total International if you wish.

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Re: Asset Allocation for Newbie

Post by mega317 » Fri Aug 10, 2018 3:45 pm

What bond funds are available in your work plan?

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Re: Asset Allocation for Newbie

Post by NBKCF » Fri Aug 10, 2018 5:13 pm

Peter Foley wrote:
Fri Aug 10, 2018 2:51 pm
There was a recent long thread about age in bonds not being suitable for many investors. You might want to read though the first page of posts, after which it gets a bit contentious. See: viewtopic.php?f=10&t=255850

My personal opinion is that when you are first starting out and your annual contribution match or exceed your holdings you don't have to diversify - your ongoing contributions can be redirected easily if you become uncomfortable with your AA. After you have about $20k or so you should certainly begin to diversify. I think young couples should aim for 20% bonds until well into middle age. Some posters in the thread mentioned above suggested that one should model their A/A after the A/A used by Target Retirement funds. Not a bad suggestion, and better than age in bonds.

My preference for a Roth holding is Total Stock Market. You can combine with Total International if you wish.
Thank you for the link! In your opinion, what is the best way to obtain 20% bonds with my current set up? Please note my Roth 401k that will be rolled into a Roth IRA is valued at $20,000 so I am at your suggested balance to diversify. Any suggestions how I could do that?
Last edited by NBKCF on Fri Aug 10, 2018 8:03 pm, edited 1 time in total.

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Re: Asset Allocation for Newbie

Post by NBKCF » Fri Aug 10, 2018 5:13 pm

mega317 wrote:
Fri Aug 10, 2018 3:45 pm
What bond funds are available in your work plan?
VBTIX (0.04% ER) and VIPIX (0.07% ER).

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Re: Help with rollover into IRA and future retirement plans

Post by LadyGeek » Fri Aug 10, 2018 8:54 pm

NBKCF - In order to give appropriate advice, it's best to keep all the information in one spot. I merged your update back into your first thread. If you have any questions, ask them here. This isn't a big deal, don't worry about it.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Sat Aug 11, 2018 9:31 pm

LadyGeek, thanks for combining.

Does anyone have any suggestions how to allocate given my scenario of company 401k and Roth IRA contributions to get maximum benefits for retirement?

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Re: Asset Allocation for Newbie

Post by ExitStageLeft » Mon Aug 13, 2018 1:46 pm

NBKCF wrote:
Fri Aug 10, 2018 10:46 am
[Thread merged into here, see below. --admin LadyGeek]

Hey folks,

I posted in a previous thread and was able to get extremely helpful advice (viewtopic.php?f=1&t=255433). I do, however, have a few more questions. Quick summary of my plan based from my previous thread:
  • Rolling his previous employer t401k from 2050 TRF to current employer's t401k in FFLDX 2055 TRF (including company matches).
  • Rolling her previous employer Roth 401k to a Roth IRA as well as converting her company match to same Roth IRA.
  • Rolling his previous employer's Roth 401k to a Roth IRA
My questions are:
  1. I am in an FFLDX with my current employer which is 60/30/10 domestic/int'l/bonds. Considering going with 100% FSTVX to stay within Fidelity. I was previously wanting VTSAX. Is FSTVX a comparable fund? Any other funds I should consider? And should I add more bonds to my portfolio (we are 31 years old, targeting to retire at 65)?
  2. Considering we are to open a Roth IRA for her as well, which fund would be wise here?
    We will be contributing 6% to his company FFLDX 401k (to obtain company match) and maxing out his Roth IRA for the foreseeable future. Her Roth IRA will be added to as we pay of a vehicle loan until we max it out. We will then contribute more to his company FFLDX 401k until we hit the legal max. I say this because we will only be able to contribute to retirement through his company 401k and the Roth IRA vehicles. I am trying to ensure we have a balanced (enough) portfolio for our retirement at our current age since it seems stock heavy with the above approach.
  3. Lastly, when should we consider introducing more bonds (if not now)? And which funds should those be?
One option is to just contribute everything in the target date funds and total stock market funds, and once a year re-balance in the 401k by trading some FFLDX for VBTIX to keep it at 10%. Your portfolio would like like this (approximately).

His 401k
53% FFLDX Fidelity 2050 Target Retirement Fund (ER 0.04%)
10% VBTIX Vanguard Total Bond Instiutional (ER 0.04%)

His Roth 401k
3% FFLDX Fidelity 2050 Target Retirement Fund (ER 0.04%)

His Roth IRA
17% VTSAX Vanguard Total Stock Admiral (ER 0.04%)

Her Roth IRA
17% VTSAX Vanguard Total Stock Admiral (ER 0.04%)

This would give you about 15% bonds, 15% international stocks, and 70% US stocks. As you start building a big portfolio and need a larger bond portion you can gradually increase the 10% of VBTIX to whatever amount is appropriate.

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Re: Asset Allocation for Newbie

Post by NBKCF » Tue Aug 14, 2018 12:30 pm

ExitStageLeft wrote:
Mon Aug 13, 2018 1:46 pm
NBKCF wrote:
Fri Aug 10, 2018 10:46 am
[Thread merged into here, see below. --admin LadyGeek]

Hey folks,

I posted in a previous thread and was able to get extremely helpful advice (viewtopic.php?f=1&t=255433). I do, however, have a few more questions. Quick summary of my plan based from my previous thread:
  • Rolling his previous employer t401k from 2050 TRF to current employer's t401k in FFLDX 2055 TRF (including company matches).
  • Rolling her previous employer Roth 401k to a Roth IRA as well as converting her company match to same Roth IRA.
  • Rolling his previous employer's Roth 401k to a Roth IRA
My questions are:
  1. I am in an FFLDX with my current employer which is 60/30/10 domestic/int'l/bonds. Considering going with 100% FSTVX to stay within Fidelity. I was previously wanting VTSAX. Is FSTVX a comparable fund? Any other funds I should consider? And should I add more bonds to my portfolio (we are 31 years old, targeting to retire at 65)?
  2. Considering we are to open a Roth IRA for her as well, which fund would be wise here?
    We will be contributing 6% to his company FFLDX 401k (to obtain company match) and maxing out his Roth IRA for the foreseeable future. Her Roth IRA will be added to as we pay of a vehicle loan until we max it out. We will then contribute more to his company FFLDX 401k until we hit the legal max. I say this because we will only be able to contribute to retirement through his company 401k and the Roth IRA vehicles. I am trying to ensure we have a balanced (enough) portfolio for our retirement at our current age since it seems stock heavy with the above approach.
  3. Lastly, when should we consider introducing more bonds (if not now)? And which funds should those be?
One option is to just contribute everything in the target date funds and total stock market funds, and once a year re-balance in the 401k by trading some FFLDX for VBTIX to keep it at 10%. Your portfolio would like like this (approximately).

His 401k
53% FFLDX Fidelity 2050 Target Retirement Fund (ER 0.04%)
10% VBTIX Vanguard Total Bond Instiutional (ER 0.04%)

His Roth 401k
3% FFLDX Fidelity 2050 Target Retirement Fund (ER 0.04%)

His Roth IRA
17% VTSAX Vanguard Total Stock Admiral (ER 0.04%)

Her Roth IRA
17% VTSAX Vanguard Total Stock Admiral (ER 0.04%)

This would give you about 15% bonds, 15% international stocks, and 70% US stocks. As you start building a big portfolio and need a larger bond portion you can gradually increase the 10% of VBTIX to whatever amount is appropriate.
Excellent advice - thank you. Breaking it down for me like that really helped. I will take this advice and I already changed my 401k from Roth to traditional so I can invest my delta take-home money in the Roth IRA's.

NBKCF
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Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Wed Aug 15, 2018 1:59 pm

BL wrote:
Wed Aug 08, 2018 8:44 am
I just wanted to comment that I don't understand contributing to a Roth 401k vs. traditional tax-deductible 401k when you are not contributing the maximum possible. It will lower your tax so you will have more money to contribute now instead of paying more tax now. I agree that it might be a good choice (search Wiki for Roth vs trad. 401k) when you can fill everything, as you can pack more into a Roth because you won't owe future tax on it.
Do you recommend I only switch to Roth 401k once we are able to fully fund our Roth IRA’s and fully fund our 401k? By doing traditional 401k now for more money to invest in a Roth IRA makes sense to me, is that the point you’re making?

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Re: Help with rollover into IRA and future retirement plans

Post by RIMDBogle » Wed Aug 15, 2018 2:44 pm

gostars wrote:
Wed Aug 08, 2018 10:22 pm
I suggest rolling 401k to 401k for simplicity. Having multiple accounts spread all over just complicates things. Right now I have my money spread over 7 accounts at 5 different brokerages (8 and 6 if you count a brokerage link on one of the workplace plans), and I have to use a spreadsheet to calculate my AA. Most of them have a specific reason for existing that way, but it's still a pain.
I am having the same situation of simplifying multiple accounts with different brokerages.

Do you mind sharing some steps/process to do this?

How did you achieve your simplification with 3 asset implementation?

Did you use Mutual funds or ETFs?

Thanks for sharing.

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Re: Help with rollover into IRA and future retirement plans

Post by BL » Thu Aug 16, 2018 6:27 pm

NBKCF wrote:
Wed Aug 15, 2018 1:59 pm
BL wrote:
Wed Aug 08, 2018 8:44 am
I just wanted to comment that I don't understand contributing to a Roth 401k vs. traditional tax-deductible 401k when you are not contributing the maximum possible. It will lower your tax so you will have more money to contribute now instead of paying more tax now. I agree that it might be a good choice (search Wiki for Roth vs trad. 401k) when you can fill everything, as you can pack more into a Roth because you won't owe future tax on it.
Do you recommend I only switch to Roth 401k once we are able to fully fund our Roth IRA’s and fully fund our 401k? By doing traditional 401k now for more money to invest in a Roth IRA makes sense to me, is that the point you’re making?
That is one of the points. This article in the Wiki discusses various advantages and when it makes sense to use Roth 401k:
https://www.bogleheads.org/wiki/Traditional_versus_Roth

I would plan to convert to Roth after early retirement when your income is low. Why pay less then and end up paying more tax when you start doing RMDs? Some also have higher earner hold off on SS until age 70.

Look for tax estimators later this year as there were a lot of changes with new laws. You might get close to 12% rate for most of your tax if you both fill 401ks with 18.5k each.

NBKCF
Posts: 44
Joined: Wed Aug 01, 2018 6:14 pm

Re: Help with rollover into IRA and future retirement plans

Post by NBKCF » Fri Aug 17, 2018 12:17 pm

BL wrote:
Thu Aug 16, 2018 6:27 pm
NBKCF wrote:
Wed Aug 15, 2018 1:59 pm
BL wrote:
Wed Aug 08, 2018 8:44 am
I just wanted to comment that I don't understand contributing to a Roth 401k vs. traditional tax-deductible 401k when you are not contributing the maximum possible. It will lower your tax so you will have more money to contribute now instead of paying more tax now. I agree that it might be a good choice (search Wiki for Roth vs trad. 401k) when you can fill everything, as you can pack more into a Roth because you won't owe future tax on it.
Do you recommend I only switch to Roth 401k once we are able to fully fund our Roth IRA’s and fully fund our 401k? By doing traditional 401k now for more money to invest in a Roth IRA makes sense to me, is that the point you’re making?
That is one of the points. This article in the Wiki discusses various advantages and when it makes sense to use Roth 401k:
https://www.bogleheads.org/wiki/Traditional_versus_Roth

I would plan to convert to Roth after early retirement when your income is low. Why pay less then and end up paying more tax when you start doing RMDs? Some also have higher earner hold off on SS until age 70.

Look for tax estimators later this year as there were a lot of changes with new laws. You might get close to 12% rate for most of your tax if you both fill 401ks with 18.5k each.
Thank you for the explanation! And good point at approaching 12% by contributing more in our 401k’s.

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