Edward Jones advising roll over 401K to their IRA

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fourdogs111
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Edward Jones advising roll over 401K to their IRA

Post by fourdogs111 » Fri Aug 31, 2018 5:00 pm

I am not an educated investor by any means. My gut instinct tells me to veer away from my Edward Jones advisor. He is my advisor because that is who my employer uses to manage the Simple IRA (Guided Solutions Fund Account)that they use as a retirement vehicle. I invest an equal amount in the Simple IRA that my employer matches. I have two 401K accounts from previous employers that my Edward Jones advisor wants me to roll over into a Roth IRA that he will open and manage. As you probably already know, the advisor said he "only charges 2%" which from what I have read is unreasonable. I feel uneasy about this. He is licenced etc... but has only a high school education. This concerns me, as his lifelong profession has nothing to do with handling money. So to get to my question. Can I open a Roth IRA and manage it myself using programs that I believe charge significantly less. Should I just leave the funds in their current ADP and Fidelity 401K accounts? My apologies if these seem like very basic questions but I am just trying to figure things out and educate myself on the best course of action. Thanks

PFInterest
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Re: Edward Jones advising roll over 401K to their IRA

Post by PFInterest » Fri Aug 31, 2018 6:06 pm

I can't even.

mortfree
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Re: Edward Jones advising roll over 401K to their IRA

Post by mortfree » Fri Aug 31, 2018 6:11 pm

Lesson 1: never use Edward Jones. Or any place that charges AUM.

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RootSki
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Re: Edward Jones advising roll over 401K to their IRA

Post by RootSki » Fri Aug 31, 2018 6:13 pm

Yes you can do this your self. The Bogleheads are here to help.

retiredjg
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Re: Edward Jones advising roll over 401K to their IRA

Post by retiredjg » Fri Aug 31, 2018 6:17 pm

fourdogs111 wrote:
Fri Aug 31, 2018 5:00 pm
I am not an educated investor by any means. My gut instinct tells me to veer away from my Edward Jones advisor. He is my advisor because that is who my employer uses to manage the Simple IRA (Guided Solutions Fund Account)that they use as a retirement vehicle. I invest an equal amount in the Simple IRA that my employer matches. I have two 401K accounts from previous employers that my Edward Jones advisor wants me to roll over into a Roth IRA that he will open and manage. As you probably already know, the advisor said he "only charges 2%" which from what I have read is unreasonable. I feel uneasy about this. He is licenced etc... but has only a high school education. This concerns me, as his lifelong profession has nothing to do with handling money. So to get to my question. Can I open a Roth IRA and manage it myself using programs that I believe charge significantly less. Should I just leave the funds in their current ADP and Fidelity 401K accounts? My apologies if these seem like very basic questions but I am just trying to figure things out and educate myself on the best course of action. Thanks
We cannot reliably answer your "should I" questions with so little information.

We can tell you that moving your money to Edward Jones is not a good idea. And 2% is completely outrageous. Even more, that is only the start of what you will be paying them if you go there. Just don't.

Your instincts are right. Don't do anything just yet. Start your education here. https://www.bogleheads.org/wiki/Getting_started

When you are ready, post more information in the format shown in the link at the bottom of this message and you should get plenty of help.
The closer you follow the format, the easier it is to help you.

Yes, you can do this. People here will help. Welcome to the forum.

PS. Put this in your to do a little later file - move your SIMPLE IRA for lower costs. The type of SIMPLE IRA you have and how long you have had it will determine what you can do...but yes, it can be done.

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Raymond
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Re: Edward Jones advising roll over 401K to their IRA

Post by Raymond » Fri Aug 31, 2018 6:21 pm

PFInterest wrote:
Fri Aug 31, 2018 6:06 pm
I can't even.
Indeed.

Of course the EJ guy would love for you to roll over your previous employers' 401(k)s and get his sticky hands on your money.

Your gut instinct is right - you can open up your Roth IRA and manage it yourself; you could leave your money where it is, but I personally like to move money away from previous employers, unless they have excellent low-cost plans.

You know, just because of his crappy self-serving recommendation, you might consider moving out all your money that you have with him - that'll teach him to be greedy :greedy
"Ritter, Tod und Teufel"

Beehave
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Re: Edward Jones advising roll over 401K to their IRA

Post by Beehave » Fri Aug 31, 2018 6:32 pm

My opinion is do not move anything until you understand what you are moving your money away from and what you are moving it to.

Your 401K funds have federal government-level protections against lawsuits and seizures that IRA funds do not have. IRA assets are protected by state law, and may be less protective than the federal-level of protection. If you do choose to move out of the 401k funds (maybe the fees are high and maybe the investment choices are not so good), then my suggestion would be to move them to Vanguard or Fidelity and manage them yourself. Preferably find a target retirement date fund or life-strategy fund that has a mix of US and foreign stocks and bonds that will automatically rebalance. Once you learn more about investing, you can move the funds to fine-tune your investments.

Without knowing a huge amount of information about you (income, investments, age, level of job security, spouse/family info etc.,) it is not really possible to recommend whether to move money out of 401k plans and into a Roth IRA.

There is no good reason for you to pay anyone from Edward Jones a 2% fee. If you feel you need help, consider Vanguard's advisory services. Vanguard is not a for-profit organization. Their advisors are not on commission and for an inexperienced person needing assistance, they would be my solid recommendation for maximizing the likelihood that someone knowledgable will listen to you and try to understand your situation and desires and try to help you pick a path that makes sense for you for your benefit. You can check out their fees -- I think they are in the range of one-third of one percent, but you'd really need to check on that.

I'm sure others will chime in here with suggestions. What I've written is simply my opinion. And welcome to the bogleheads board!

Good luck and best wishes!

retiredjg
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Re: Edward Jones advising roll over 401K to their IRA

Post by retiredjg » Fri Aug 31, 2018 7:17 pm

BTW, rolling from traditional 401k to Roth IRA is a taxable event. Even if you do decide to roll to IRA, Roth IRA may not be the best choice.

Lots of red flags in the EJ advisor's suggestions.

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dratkinson
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Re: Edward Jones advising roll over 401K to their IRA

Post by dratkinson » Fri Aug 31, 2018 7:26 pm

1. Do it yourself. Don't use EJ.

2. Assuming your 401ks are pre-tax---you didn't pay tax to put money into them, and maybe got a tax deduction for the contributions---then converting any of them into a rIRA (Roth IRA) will result in a tax bill next April. So may not want to do that.

But if your 401ks contain bad/expensive options now, can convert them to a tIRA (traditional IRA) for better/cheaper options... and continue to delay paying taxes until later.

Bottom line. We don't know enough about your financial situation to offer good advice.



Simple action steps.
--Read the "Boglehead's Guide to Investing". (Get book from local public library.) When done....
--Copy the sticky "Asking Portfolio Questions"---linked above. Edit it offline with your information. When done....
--Click the "Edit" button in your OP (original post, original poster) to update your information. (Paste your new information into the bottom of your OP.) Submit your changed OP.
--Create a "New reply" telling us you've updated your OP. (The system sends out an email notifying us of new replies received, but not when a post is edited. So your new reply tells the system to call us back.)
--And we'll resume from there.

You can also begin reading the Wiki while waiting for your book. Read "Getting Started"---linked above---and all else that interests you.



Extra credit. After you get your retirement investing in order, then you can learn what others have done to improve their employer's retirement plan options. In this case, you'll encourage your employer to switch away from EJ.

The dollars you save will benefit everyone in your employer's Simple IRA.



Welcome.
Last edited by dratkinson on Fri Aug 31, 2018 7:47 pm, edited 2 times in total.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.

radiowave
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Re: Edward Jones advising roll over 401K to their IRA

Post by radiowave » Fri Aug 31, 2018 7:30 pm

Hope I'm not piling on, but don't use EJ. Lots of other options, including keeping your money in the old 401k plans.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

Kevin8696
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Re: Edward Jones advising roll over 401K to their IRA

Post by Kevin8696 » Fri Aug 31, 2018 7:55 pm

Welcome to the Forum !!

Yes you absolutely can manage the money yourself. Lots of folks here to help as well. Paying any management fee is unnecessary.

Pick up a copy of "The Coffeehouse Investor" by Bill Schultheis... a recovering Smith Barney Broker. Amazon $15.00

It's a quick and easy read (about 190 pages) with some funny stories along the way (and a pumpkin pie recipe, too).

The author lays out the case that Wall Street wants you to believe that you can't do it, but of course you can do it.

After all, you're now a Boglehead !!

Go for it !!

Kevin

Spirit Rider
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Re: Edward Jones advising roll over 401K to their IRA

Post by Spirit Rider » Fri Aug 31, 2018 8:15 pm

fourdogs111 wrote:
Fri Aug 31, 2018 5:00 pm
I am not an educated investor by any means. My gut instinct tells me to veer away from my Edward Jones advisor. He is my advisor because that is who my employer uses to manage the Simple IRA (Guided Solutions Fund Account)that they use as a retirement vehicle. I invest an equal amount in the Simple IRA that my employer matches.
In addition to the fact that you absolutely should not rollover your 401k accounts to the parasite at EJ. It as almost certain that you do not have to keep investing your SIMPLE IRA at EJ either. You either have a 5304 or 5305 SIMPLE IRA.

A 5304-SIMPLE IRA must allow you to select your own custodian. You could select Vanguard, Fidelity, etc... as your custodian instead of EJ.

It is much more likely with EJ as a custodian, that you have a 5305-SIMPLE IRA. Your contributions must go to EJ. However, EJ MUST allow you to elect to rollover without cost or fees at least monthly to another custodian.

Others can help with the details. Get working on this Tuesday morning.

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oldcomputerguy
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Re: Edward Jones advising roll over 401K to their IRA

Post by oldcomputerguy » Fri Aug 31, 2018 8:31 pm

fourdogs111 wrote:
Fri Aug 31, 2018 5:00 pm
I have two 401K accounts from previous employers that my Edward Jones advisor wants me to roll over into a Roth IRA that he will open and manage.
Of course he does. And why does he want you to do that? Drumroll, please...
he "only charges 2%"
Rolling your other accounts over to EJ puts more of your money directly into his pocket.
Can I open a Roth IRA and manage it myself using programs that I believe charge significantly less.
You most certainly can. The people here will help.
Should I just leave the funds in their current ADP and Fidelity 401K accounts?
Unless there is some provision in the 401k plan(s), there is no reason you can't. Some folks do roll their 401k's over to traditional IRAs after retiring, for a variety of reasons. (In fact I did that myself, as I retired just as our company was being acquired, and I didn't like the investment choices in the 401k plan offered by the acquiring company.)

By the way, if the EJ guy in fact suggested you roll your old 401k accounts into a Roth IRA, he's given you bad advice. As others have pointed out, although legally you can roll a traditional 401k account over to a Roth account, you really, really don't want to. You (and your previous employers, if they matched contributions) put money into the 401k that had not yet been taxed. If you roll over to a Roth, then the amount you roll over is treated by the IRS the same as regular income, and is taxed as such. That can be a whopper of a tax hit if you have a significant amount in your 401k. You can roll it over to a traditional IRA and keep the money's tax-deferred status without incurring a tax hit, but not into a Roth.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

student
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Re: Edward Jones advising roll over 401K to their IRA

Post by student » Fri Aug 31, 2018 8:33 pm

As you can see from other comments that rolling over your 401k is likely not a good idea, unless he gives convincing reasons. This alone tells me that he is not looking out for your interests. He is simply trying to transfer money from you to him.

Topic Author
fourdogs111
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Re: Edward Jones advising roll over 401K to their IRA

Post by fourdogs111 » Fri Aug 31, 2018 8:35 pm

I want to thank everyone for the knowledge and advice. I will start with the suggestions this weekend. I feel much better about calling EJ and telling the advisor I won't be turning over my money currently in the 401Ks.

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badbreath
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Re: Edward Jones advising roll over 401K to their IRA

Post by badbreath » Fri Aug 31, 2018 9:07 pm

I would talk to whoever is in charge of you 401k plan as to what this adviser recommended and how wrong the advice was as a fiduciary adviser for a 401k plan. I would also point out that that they could be sued due to non fiduciary, high cost advice from the adviser.
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

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9-5 Suited
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Re: Edward Jones advising roll over 401K to their IRA

Post by 9-5 Suited » Fri Aug 31, 2018 9:17 pm

Sighhhhh. One of my family members is an EJ advisor. She is broke, in debt, a complete moron, and an identity thief. But hey, she has a nice smile.

Glad you found the Bogleheads forum and won’t be getting involved with EJ. It is difficult to hear your story because for everyone smart enough to seek help like you did there are many more very less fortunate folks out there. I second the advice given above to move slowly and only make your choices of company and funds when you feel you have a sound understanding.

radiowave
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Re: Edward Jones advising roll over 401K to their IRA

Post by radiowave » Fri Aug 31, 2018 9:49 pm

fourdogs111 wrote:
Fri Aug 31, 2018 8:35 pm
I want to thank everyone for the knowledge and advice. I will start with the suggestions this weekend. I feel much better about calling EJ and telling the advisor I won't be turning over my money currently in the 401Ks.
No reason to call EJ back.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

Topic Author
fourdogs111
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Joined: Fri Aug 31, 2018 4:41 pm

Re: Edward Jones advising roll over 401K to their IRA

Post by fourdogs111 » Sat Sep 01, 2018 9:29 am

radiowave wrote:
Fri Aug 31, 2018 9:49 pm
fourdogs111 wrote:
Fri Aug 31, 2018 8:35 pm
I want to thank everyone for the knowledge and advice. I will start with the suggestions this weekend. I feel much better about calling EJ and telling the advisor I won't be turning over my money currently in the 401Ks.
No reason to call EJ back.
[/

The advisor is a friend of my employer. He also manages the IRA that houses the retirement plan for my employer. In order to keep things running smoothly, I think it will be best to let the advisor know that I am keeping my 401K accounts intact until I feel comfortable moving them. I am blown away by all the support in this forum and I am motivated to get a head full of knowledge. I am just about finished with If You Can this morning and will start on the next book today.

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dratkinson
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Re: Edward Jones advising roll over 401K to their IRA

Post by dratkinson » Sat Sep 01, 2018 7:31 pm

fourdogs111 wrote:
Sat Sep 01, 2018 9:29 am
radiowave wrote:
Fri Aug 31, 2018 9:49 pm
fourdogs111 wrote:
Fri Aug 31, 2018 8:35 pm
I want to thank everyone for the knowledge and advice. I will start with the suggestions this weekend. I feel much better about calling EJ and telling the advisor I won't be turning over my money currently in the 401Ks.
No reason to call EJ back.
The advisor is a friend of my employer. He also manages the IRA that houses the retirement plan for my employer. In order to keep things running smoothly, I think it will be best to let the advisor know that I am keeping my 401K accounts intact until I feel comfortable moving them. I am blown away by all the support in this forum and I am motivated to get a head full of knowledge. I am just about finished with If You Can this morning and will start on the next book today.

FA (financial advisor) fee math.

I use to have a HS friend that, in later years, I came to refer to as my WB (worthless brother). Turns out I was only renting his friendship. My victimhood ended when I understood the magnitude of just how much he had cost me... directly and indirectly in lost income and increased costs... year after year. (Some of us are slow learners.)

FAs wants you to believe 1-2% is small. It is when compared to 100% in a HS math class. But the market does not return 100%/yr; it more realistically only returns ~7%/yr. So....

Here's the correct FA fee logic. Assume: 7%/yr market return, 3% inflation, 25% fed tax bracket, and 1% FA fee. So....

7%, market return
-3%, inflation
4%, your return after inflation

-1%, 25% fed tax on your above 4% market return after inflation
3%, your return after inflation + fed tax

-1%, FA AUM fee
2%, your return after inflation + fed tax + FA fee

Notice, you put up all the money, take all the risk, and FA gets half of what you expect to make: FA makes 1% vs your 2%. (This is in an average year. In a bad year, you lose money but the FA still gets paid.)

Lather, rinse, repeat above with EJ 2% fee and the logic gets worse: FA makes 2% vs your 1%, in an average year.

Bottom line. Your boss is paying a very high fee to rent his EJ friend.



Old 401ks. I overlooked something above.
--Fidelity is known for good investments and low cost---as long as you choose the correct products. So you could keep your Fidelity 401k. Maybe only only need to tweak your holdings.
--I don't know about the quality of an ADP 401k. So you'll need to take what you learn here and decide this for yourself: keep vs move.

Idea: When you post your full situation for review, provide all of the requested information for your EJ simple IRA plan options, and Fidelity/ADP 401k plan options. We'll help you sift through it.

Pay particular attention to how often you can rollover contributions to your EJ simple IRA into something else. The idea here is to get money into your EJ simple IRA*, and then to roll it over into something else as soon a possible. (* Why? More TA (tax-advantaged) space is better then less. So get the TA contribution, then get it into something better.)

Bottom line. You don't need to do anything today. Just keep reading for now.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.

ThePrince
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Re: Edward Jones advising roll over 401K to their IRA

Post by ThePrince » Sat Sep 01, 2018 7:34 pm

fourdogs111 wrote:
Fri Aug 31, 2018 5:00 pm
I am not an educated investor by any means. My gut instinct tells me to veer away from my Edward Jones advisor. He is my advisor because that is who my employer uses to manage the Simple IRA (Guided Solutions Fund Account)that they use as a retirement vehicle. I invest an equal amount in the Simple IRA that my employer matches. I have two 401K accounts from previous employers that my Edward Jones advisor wants me to roll over into a Roth IRA that he will open and manage. As you probably already know, the advisor said he "only charges 2%" which from what I have read is unreasonable. I feel uneasy about this. He is licenced etc... but has only a high school education. This concerns me, as his lifelong profession has nothing to do with handling money. So to get to my question. Can I open a Roth IRA and manage it myself using programs that I believe charge significantly less. Should I just leave the funds in their current ADP and Fidelity 401K accounts? My apologies if these seem like very basic questions but I am just trying to figure things out and educate myself on the best course of action. Thanks

Turn around and run.

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JaneyLH
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Re: Edward Jones advising roll over 401K to their IRA

Post by JaneyLH » Sat Sep 01, 2018 7:49 pm

I can only tell you, I was in your shoes once. I found this wonderful group of people who gave me the advice and encouragement I needed to fire my financial advisor ( not nearly as bad as an EJ agent) and strike out on my own with a simple strategy of indexed funds. I have probably saved $200,000... thank you, my friends. You can do better on your own with the help of Bogleheads.

Kevin8696
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Re: Edward Jones advising roll over 401K to their IRA

Post by Kevin8696 » Sat Sep 01, 2018 8:20 pm

JaneyLH wrote:
Sat Sep 01, 2018 7:49 pm
I can only tell you, I was in your shoes once. I found this wonderful group of people who gave me the advice and encouragement I needed to fire my financial advisor ( not nearly as bad as an EJ agent) and strike out on my own with a simple strategy of indexed funds. I have probably saved $200,000... thank you, my friends. You can do better on your own with the help of Bogleheads.
I think it was the comedian Henny Youngman who once said... "My portfolio put 2 kids through college... my broker's kids !! "

baritone
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Re: Edward Jones advising roll over 401K to their IRA

Post by baritone » Sat Sep 01, 2018 9:01 pm

fourdogs111 wrote:
Fri Aug 31, 2018 5:00 pm
I am not an educated investor by any means. My gut instinct tells me to veer away from my Edward Jones advisor. He is my advisor because that is who my employer uses to manage the Simple IRA (Guided Solutions Fund Account)that they use as a retirement vehicle. I invest an equal amount in the Simple IRA that my employer matches. I have two 401K accounts from previous employers that my Edward Jones advisor wants me to roll over into a Roth IRA that he will open and manage. As you probably already know, the advisor said he "only charges 2%" which from what I have read is unreasonable. I feel uneasy about this. He is licenced etc... but has only a high school education. This concerns me, as his lifelong profession has nothing to do with handling money. So to get to my question. Can I open a Roth IRA and manage it myself using programs that I believe charge significantly less. Should I just leave the funds in their current ADP and Fidelity 401K accounts? My apologies if these seem like very basic questions but I am just trying to figure things out and educate myself on the best course of action. Thanks
Figure out how much EJ is costing you for the next, say, 20 years. Then, soon, tell the EJ guy good-bye and DON'T wish him well. He doesn't deserve it.

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oldcomputerguy
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Re: Edward Jones advising roll over 401K to their IRA

Post by oldcomputerguy » Sat Sep 01, 2018 9:05 pm

dratkinson wrote:
Sat Sep 01, 2018 7:31 pm
FA (financial advisor) fee math.

I use to have a HS friend that, in later years, I came to refer to as my WB (worthless brother). Turns out I was only renting his friendship. My victimhood ended when I understood the magnitude of just how much he had cost me... directly and indirectly in lost income and increased costs... year after year. (Some of us are slow learners.)

FAs wants you to believe 1-2% is small. It is when compared to 100% in a HS math class. But the market does not return 100%/yr; it more realistically only returns ~7%/yr. So....

Here's the correct FA fee logic. Assume: 7%/yr market return, 3% inflation, 25% fed tax bracket, and 1% FA fee. So....

7%, market return
-3%, inflation
4%, your return after inflation

-1%, 25% fed tax on your above 4% market return after inflation
3%, your return after inflation + fed tax

-1%, FA AUM fee
2%, your return after inflation + fed tax + FA fee

Notice, you put up all the money, take all the risk, and FA gets half of what you expect to make: FA makes 1% vs your 2%. (This is in an average year. In a bad year, you lose money but the FA still gets paid.)

Lather, rinse, repeat above with EJ 2% fee and the logic gets worse: FA makes 2% vs your 1%, in an average year.

Bottom line. Your boss is paying a very high fee to rent his EJ friend.
And none of this even takes into account the (typically horrible) expense ratios that accompany the funds most often chosen by EJ "advisors".

There goes the rest of the 7%!
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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Re: Edward Jones advising roll over 401K to their IRA

Post by AlphaLess » Sat Sep 01, 2018 9:21 pm

A. 401Ks have better protections from various asset-seizure events, such as a bankruptcy, or lawsuit. I would much rather keep money in a 401K ( a former employers 401K) than convert to an IRA,

B. Converting a 401K into a Roth IRA is rarely a good move, in terms of tax consequences. This type of move needs to be evaluated very, very careful. Like they say, measure 7 times, and then cut,

C. Edward Jones advisors do not have a good reputation in the industry. They pillage investor funds, and totally mismanage,

D. 2% advisor fee, per year, is a lot of money. Many withdrawal methods advocate something like 3-4% annual withdrawal from ones portfolio to support retirement, etc. a 2% advisor fee is akin to a 75% tax on that withdrawal. An analogy is this: an Edwards Jones advisor becomes your bank account doorman, and for that service, charges you an extra 75% tax (on top of what government charges). Do you think it is a good idea?

E. Likely, if you keep your former employer 401k just as it is for now, that would be the best decision, until you get more educated. People here would be happy to help you with this.

For now, kindly decline the EJ advisor offer, and also tell him that you are never planning to do that, so he can stop salivating over that prospect.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.

jacoavlu
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Re: Edward Jones advising roll over 401K to their IRA

Post by jacoavlu » Sat Sep 01, 2018 9:24 pm

fourdogs111 wrote:
Fri Aug 31, 2018 5:00 pm
I invest an equal amount in the Simple IRA that my employer matches.
It would be difficult to do otherwise. :beer

AlphaLess
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Location: Kentucky

Re: Edward Jones advising roll over 401K to their IRA

Post by AlphaLess » Sat Sep 01, 2018 9:25 pm

dratkinson wrote:
Sat Sep 01, 2018 7:31 pm
fourdogs111 wrote:
Sat Sep 01, 2018 9:29 am
radiowave wrote:
Fri Aug 31, 2018 9:49 pm
fourdogs111 wrote:
Fri Aug 31, 2018 8:35 pm
I want to thank everyone for the knowledge and advice. I will start with the suggestions this weekend. I feel much better about calling EJ and telling the advisor I won't be turning over my money currently in the 401Ks.
No reason to call EJ back.
The advisor is a friend of my employer. He also manages the IRA that houses the retirement plan for my employer. In order to keep things running smoothly, I think it will be best to let the advisor know that I am keeping my 401K accounts intact until I feel comfortable moving them. I am blown away by all the support in this forum and I am motivated to get a head full of knowledge. I am just about finished with If You Can this morning and will start on the next book today.

FA (financial advisor) fee math.

I use to have a HS friend that, in later years, I came to refer to as my WB (worthless brother). Turns out I was only renting his friendship. My victimhood ended when I understood the magnitude of just how much he had cost me... directly and indirectly in lost income and increased costs... year after year. (Some of us are slow learners.)

FAs wants you to believe 1-2% is small. It is when compared to 100% in a HS math class. But the market does not return 100%/yr; it more realistically only returns ~7%/yr. So....

Here's the correct FA fee logic. Assume: 7%/yr market return, 3% inflation, 25% fed tax bracket, and 1% FA fee. So....

7%, market return
-3%, inflation
4%, your return after inflation

-1%, 25% fed tax on your above 4% market return after inflation
3%, your return after inflation + fed tax

-1%, FA AUM fee
2%, your return after inflation + fed tax + FA fee

Notice, you put up all the money, take all the risk, and FA gets half of what you expect to make: FA makes 1% vs your 2%. (This is in an average year. In a bad year, you lose money but the FA still gets paid.)

Lather, rinse, repeat above with EJ 2% fee and the logic gets worse: FA makes 2% vs your 1%, in an average year.

Bottom line. Your boss is paying a very high fee to rent his EJ friend.



Old 401ks. I overlooked something above.
--Fidelity is known for good investments and low cost---as long as you choose the correct products. So you could keep your Fidelity 401k. Maybe only only need to tweak your holdings.
--I don't know about the quality of an ADP 401k. So you'll need to take what you learn here and decide this for yourself: keep vs move.

Idea: When you post your full situation for review, provide all of the requested information for your EJ simple IRA plan options, and Fidelity/ADP 401k plan options. We'll help you sift through it.

Pay particular attention to how often you can rollover contributions to your EJ simple IRA into something else. The idea here is to get money into your EJ simple IRA*, and then to roll it over into something else as soon a possible. (* Why? More TA (tax-advantaged) space is better then less. So get the TA contribution, then get it into something better.)

Bottom line. You don't need to do anything today. Just keep reading for now.
Respectfully, your math is wrong.

The 25% tax applies on the 7% return, not the 4% inflation-adjusted return.

But to be even more accurate, it applies to neither. Taxes applied to either dividends, interest, or realized capital gains.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.

Topic Author
fourdogs111
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Re: Edward Jones advising roll over 401K to their IRA

Post by fourdogs111 » Sat Sep 01, 2018 9:46 pm

I'm feeling pretty good about my instinct to post on here and to ask for advice. I feel this is the best thing I've done financially in some time. I look forward to learning more each day.

Kevin8696
Posts: 155
Joined: Mon Oct 08, 2012 7:45 pm

Re: Edward Jones advising roll over 401K to their IRA

Post by Kevin8696 » Sat Sep 01, 2018 10:21 pm

:moneybag
fourdogs111 wrote:
Sat Sep 01, 2018 9:46 pm
I'm feeling pretty good about my instinct to post on here and to ask for advice. I feel this is the best thing I've done financially in some time. I look forward to learning more each day.
Congratulations on taking this step toward controlling your financial destiny !!I :moneybag

Glad you found us. :happy

I really do recommend "The Coffeehouse Investor" by Bill Schultheis. It's on Amazon for $15.00

I've given copies to friends who have dumped their financial advisors, and then they passed the book around to others.

And of course, you know that all of us Bogleheads are here anytime you need us.

Kevin

dia
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Location: a lively twirling planet located 93,000,000 miles from the Sun

Re: Edward Jones advising roll over 401K to their IRA

Post by dia » Sun Sep 02, 2018 6:39 am

AlphaLess wrote:
Sat Sep 01, 2018 9:21 pm
A. 401Ks have better protections from various asset-seizure events, such as a bankruptcy, or lawsuit. I would much rather keep money in a 401K ( a former employers 401K) than convert to an IRA,
The only other advantage I can think of in addition to what is listed here is that in a 401k you can withdraw at age 55 without penalty. In an IRA I believe it is 59.5

The only reason I mention that is these "advisors" that want the rollover NEVER mention these advantages over IRAs. I rolled over various 401k plans over the years and would still probably make the same decision, but I regret that I wasn't armed with all the knowledge that may have impacted my decision. That's my huge beef with advisors--I have since learned they don't tell the entire story and if you don't know to ask, watch out.

SELF EDUCATE. Simple as that.
What, Me Worry? --Alfred E. Neuman

student
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Re: Edward Jones advising roll over 401K to their IRA

Post by student » Sun Sep 02, 2018 6:57 am

9-5 Suited wrote:
Fri Aug 31, 2018 9:17 pm
Sighhhhh. One of my family members is an EJ advisor. She is broke, in debt, a complete moron, and an identity thief. But hey, she has a nice smile.

Glad you found the Bogleheads forum and won’t be getting involved with EJ. It is difficult to hear your story because for everyone smart enough to seek help like you did there are many more very less fortunate folks out there. I second the advice given above to move slowly and only make your choices of company and funds when you feel you have a sound understanding.
Identity thief? How can she still be working with EJ? Nobody reported her?

dia
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Joined: Sat Jun 24, 2017 8:19 am
Location: a lively twirling planet located 93,000,000 miles from the Sun

Re: Edward Jones advising roll over 401K to their IRA

Post by dia » Sun Sep 02, 2018 7:03 am

Kevin8696 wrote:
Sat Sep 01, 2018 10:21 pm
:moneybag
fourdogs111 wrote:
Sat Sep 01, 2018 9:46 pm
I'm feeling pretty good about my instinct to post on here and to ask for advice. I feel this is the best thing I've done financially in some time. I look forward to learning more each day.

I really do recommend "The Coffeehouse Investor" by Bill Schultheis. It's on Amazon for $15.00

I've given copies to friends who have dumped their financial advisors, and then they passed the book around to others.

And of course, you know that all of us Bogleheads are here anytime you need us.

Kevin
Thanks for mentioning this book. I recently ordered it.
What, Me Worry? --Alfred E. Neuman

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dratkinson
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Location: Centennial CO

Re: Edward Jones advising roll over 401K to their IRA

Post by dratkinson » Sun Sep 02, 2018 3:34 pm

AlphaLess wrote:
Sat Sep 01, 2018 9:25 pm
...
Respectfully, your math is wrong.

The 25% tax applies on the 7% return, not the 4% inflation-adjusted return.
(-1.75% = 7% x (-25%); so worse than illustrated above.)

But to be even more accurate, it applies to neither. Taxes applied to either dividends, interest, or realized capital gains.
I completely agree.
--For those who can do the math, they can figure it out for themselves.
--Ditto the understanding of un/realized capital gains. But where taxes may be delayed, FA fees can't be.
--Also omitted is FA's reported preference for expensive/load funds which further reduce investor return.

But for a quick simple example to illustrate the effect of FA fees, above is close enough, easy to remember, and works for us math-impaired visual learners*. Bottom line: Once you know a situation is BAD, the rest becomes only a matter of degree... which is not necessary to know.


* When speaking face-to-face to a person about investing, I've illustrated the effect of FA fees on raised fingertips, palms toward the viewer. I start with 7 fingers raised (7% market return) and drop fingers as I tick off each expense (inflation, taxes, FA fee), to illustrate the amount remaining... until I end with my two smallest fingers remaining raised---the investors share after all deductions.

I always end the example by reminding them of the FA's 1% fee, which by design, was ticked off on my raised "social" finger. And to clearly illustrate the situation as seen by the FA, I flip my palm toward me.

One picture being worth a thousand words... so this simple example makes a visceral impression on visual learners and drives home its point: investors put up all the money, take all the risk, and FA's inescapable fee takes half of what they expect to make.

Any argument that the effect of FA fees is lessened by delaying capital gains is only a matter of degree and attempts to put lipstick on this pig. :)



I also understand that the banking "Rule of 72"---interest rate vs time to double an investment---is inaccurate. For those who can do the math*, the answer is slightly less. But using "72" is close enough.

* I couldn't derive it, but someone in a long-past forum topic showed us how the rule was derived. Interesting.
Last edited by dratkinson on Mon Sep 03, 2018 6:38 pm, edited 1 time in total.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.

Topic Author
fourdogs111
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Re: Edward Jones advising roll over 401K to their IRA

Post by fourdogs111 » Sun Sep 02, 2018 8:18 pm

I'm going to order The Coffeehouse Investor" by Bill Schultheis after responding to this. Thanks again!

Kevin8696
Posts: 155
Joined: Mon Oct 08, 2012 7:45 pm

Re: Edward Jones advising roll over 401K to their IRA

Post by Kevin8696 » Sun Sep 02, 2018 8:25 pm

fourdogs111 wrote:
Sun Sep 02, 2018 8:18 pm
I'm going to order The Coffeehouse Investor" by Bill Schultheis after responding to this. Thanks again!
Good luck on your journey !! We'll be here for you.

Topic Author
fourdogs111
Posts: 6
Joined: Fri Aug 31, 2018 4:41 pm

Re: Edward Jones advising roll over 401K to their IRA

Post by fourdogs111 » Sun Sep 02, 2018 8:29 pm

Thanks, Kevin,
I just bought "The Coffeehouse Investor" and I should get it in 2 weeks. In the meantime, I will start reading all the other suggestions. I'm excited to be on my way.

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9-5 Suited
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Re: Edward Jones advising roll over 401K to their IRA

Post by 9-5 Suited » Sun Sep 02, 2018 8:35 pm

student wrote:
Sun Sep 02, 2018 6:57 am
9-5 Suited wrote:
Fri Aug 31, 2018 9:17 pm
Sighhhhh. One of my family members is an EJ advisor. She is broke, in debt, a complete moron, and an identity thief. But hey, she has a nice smile.

Glad you found the Bogleheads forum and won’t be getting involved with EJ. It is difficult to hear your story because for everyone smart enough to seek help like you did there are many more very less fortunate folks out there. I second the advice given above to move slowly and only make your choices of company and funds when you feel you have a sound understanding.
Identity thief? How can she still be working with EJ? Nobody reported her?
Unfortunately that’s correct. The victim was a family member who didn’t have the heart to turn her in. Her husband dropped off $1,000 in an envelope one night to settle the bad blood. They’ve been more or less estranged ever since except for awkward family get-togethers.

student
Posts: 4142
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Re: Edward Jones advising roll over 401K to their IRA

Post by student » Sun Sep 02, 2018 9:24 pm

9-5 Suited wrote:
Sun Sep 02, 2018 8:35 pm
student wrote:
Sun Sep 02, 2018 6:57 am
9-5 Suited wrote:
Fri Aug 31, 2018 9:17 pm
Sighhhhh. One of my family members is an EJ advisor. She is broke, in debt, a complete moron, and an identity thief. But hey, she has a nice smile.

Glad you found the Bogleheads forum and won’t be getting involved with EJ. It is difficult to hear your story because for everyone smart enough to seek help like you did there are many more very less fortunate folks out there. I second the advice given above to move slowly and only make your choices of company and funds when you feel you have a sound understanding.
Identity thief? How can she still be working with EJ? Nobody reported her?
Unfortunately that’s correct. The victim was a family member who didn’t have the heart to turn her in. Her husband dropped off $1,000 in an envelope one night to settle the bad blood. They’ve been more or less estranged ever since except for awkward family get-togethers.
Thanks for the story.

AlphaLess
Posts: 1616
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Location: Kentucky

Re: Edward Jones advising roll over 401K to their IRA

Post by AlphaLess » Sun Sep 02, 2018 10:04 pm

dratkinson wrote:
Sun Sep 02, 2018 3:34 pm
AlphaLess wrote:
Sat Sep 01, 2018 9:25 pm
...
Respectfully, your math is wrong.

The 25% tax applies on the 7% return, not the 4% inflation-adjusted return.
(-1.75% = 7% x (-25%); so worse than illustrated.)

But to be even more accurate, it applies to neither. Taxes applied to either dividends, interest, or realized capital gains.
I completely agree.
--For those who can do the math, they can figure it out for themselves.
--Ditto the understanding of un/realized capital gains.
--But where taxes may be delayed, FA fees can not be.

So for a quick example to illustrate the effect of FA fees, above is close enough, easy to remember, and works for us math-impaired visual learners*.


* When speaking face-to-face to a person about investing, I've illustrated the effect of FA fees on raised fingertips, palms toward the viewer. I start with 7 fingers raised (7% market return) and drop fingers as I tick off each expense (inflation, taxes, FA fee), to illustrate the amount remaining....

I always end by reminding them of the FA's 1% fee, which by design, was ticked off on my raised "social" finger. And to illustrate the situation from the FA's point of view, I flip my palm toward me.

The example does make an impression and drives home its point: FA fees are inescapable, and take a large chunk of the expected average return.

An argument that the effect of FA fees is lessened by delaying capital gains only attempts to put lipstick on this pig. :)



I also understand that the banking "Rule of 72"---interest rate vs time to double an investment---is inaccurate. For those who can do the math*, the answer is slightly less. But using "72" is close enough.

* I couldn't derive it, but someone in a long-past forum topic showed us how the rule was derived. Interesting.
A much easier argument is to tie fees to withdrawals rates.

Most infinite-horizon, capital-preservation withdrawal rates are 3.00 to 3.50%.
If you pay an FA a 2.00% fee, that is akin to a very large tax.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.

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Earl Lemongrab
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Re: Edward Jones advising roll over 401K to their IRA

Post by Earl Lemongrab » Mon Sep 03, 2018 1:57 pm

My Transportation Adviser down at the Chevy dealership advised me to trade in my vehicle and buy a new Chevy.

passiveTiger
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Re: Edward Jones advising roll over 401K to their IRA

Post by passiveTiger » Mon Sep 03, 2018 3:14 pm

fourdogs111 wrote:
Sun Sep 02, 2018 8:29 pm
I just bought "The Coffeehouse Investor" and I should get it in 2 weeks.
Do you have a public library in your area?

If so, you may have already bought this book with your tax dollars. If they don’t have it, ask them to buy it.

If you don’t have a library, the library does not have it, or the library will not purchase it, then buy it.

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dratkinson
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Location: Centennial CO

Re: Edward Jones advising roll over 401K to their IRA

Post by dratkinson » Mon Sep 03, 2018 3:38 pm

passiveTiger wrote:
Mon Sep 03, 2018 3:14 pm
fourdogs111 wrote:
Sun Sep 02, 2018 8:29 pm
I just bought "The Coffeehouse Investor" and I should get it in 2 weeks.
Do you have a public library in your area?

If so, you may have already bought this book with your tax dollars. If they don’t have it, ask them to buy it.

If you don’t have a library, the library does not have it, or the library will not purchase it, then buy it.
Your public library is probably associated with an inter-library loan program... where they can request the book from another regional library if they don't have it. Meaning they can get it for you without needing to buy it.

Suggestion. Call your public library, get an account, and put your tax dollars to work.



Disclosure. My public library's PC media catalog system has the ability to search regional libraries if something (book, DVD, PC games,...) is not available in my library. So I can do the search for myself without the need to bother library staff*.

* Unless it's a request for an older book that requires a deeper search that they know how to make... which I've done once. Turns out I was requesting a reference book, and those can not be borrowed. So the deeper search is available, but it may not be successful in getting you the book. Unless you want to fly/drive to a distant library and view it there.

As part of my "inter-library loan" request, I tell the catalog system where I want the book delivered (Deliver to : my local public library). I receive an email telling me when it has arrived. I have one week to pick it up from the library's Hold area before it is sent back.

And since my public library's media catalog is a website---that's how the library's PC accesses it---it can also be accessed from my home. So no library trip is required to set up a request, and get an email telling me when it's available for pick up in the Hold area.

When the book is available, it takes ~5 minutes to walk in, pick it up, check it out, and walk out. (That's why library's have a few, close to the front door, 15-minute parking spots.) Easy peasy.
Last edited by dratkinson on Mon Sep 03, 2018 6:58 pm, edited 1 time in total.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.

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Earl Lemongrab
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Re: Edward Jones advising roll over 401K to their IRA

Post by Earl Lemongrab » Mon Sep 03, 2018 6:42 pm

dratkinson wrote:
Mon Sep 03, 2018 3:38 pm
When the book is available, it takes ~5 minutes to walk in, pick up the book, check it out, and walk out. (That's why library's have a few, close to the front door, 15-minute parking spots.) Easy peasy.
I wish mine had that. Parking has become worse after their remodeling because they've added a lot more computers for patrons, and those people hang out for long periods. Tough when you're just pickking up stuff.

mortfree
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Re: Edward Jones advising roll over 401K to their IRA

Post by mortfree » Mon Sep 03, 2018 6:53 pm

passiveTiger wrote:
Mon Sep 03, 2018 3:14 pm
fourdogs111 wrote:
Sun Sep 02, 2018 8:29 pm
I just bought "The Coffeehouse Investor" and I should get it in 2 weeks.
Do you have a public library in your area?

If so, you may have already bought this book with your tax dollars. If they don’t have it, ask them to buy it.

If you don’t have a library, the library does not have it, or the library will not purchase it, then buy it.
:oops:

Tough crowd - can’t even buy/hold an Investing book

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