Moving old 401k. Is my investment thinking sound ?

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Gaspar18
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Joined: Sat Sep 08, 2018 7:33 pm

Moving old 401k. Is my investment thinking sound ?

Post by Gaspar18 » Mon Sep 10, 2018 10:55 am

Forgive me if this question is a little basic, I am a novice investor..

I had my nest egg in an old 401k plan which needed to be rolled over quickly because the company was bought out; I didn't have much time. So I went to my bank and rolled it into a traditional IRA. The investment person said I can move (rollover) the money from this IRA to another investment vehicle once I decide what it is. By the way, I did a trustee-to-trustee transfer (rollover check was made to the bank c/o me ). Note that I am quite far away from retirement.

My bank has an investment arm, Merrill Edge, which offers a number of mutual funds and ETFs. The Boglehead philosophy says to keep costs low and select passively managed index funds, and to cover as much of the market as possible (like the S&P 500). Following this philosophy, I am looking at the VT fund from Vanguard (Total world stock ETF which invests in US and foreign stocks.)

I thought of using Vanguard as my broker, but since Merril Edge offers the same index funds as Vanguard does (at the same rate), and since I am already a bank customer, I imagine I ought to use Merril Edge as my broker. The investment person at the bank probably can set this all up for me. Looks like there is no reason to go to Vanguard.

Two things I need: I want to be able to withdraw when I retire. I want to be able to change to Vanguard or another broker (if the bank becomes undesirable).

My question is this: Is there anything that I am overlooking ? Any pitfalls ?

Thanks for your time and information.
Last edited by Gaspar18 on Fri Sep 14, 2018 3:26 pm, edited 2 times in total.

ExitStageLeft
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Joined: Sat Jan 20, 2018 4:02 pm

Re: Moving old 401k. Is my investment thinking sound ?

Post by ExitStageLeft » Mon Sep 10, 2018 1:50 pm

Welcome to the forum!

There doesn't seem to be any issue with keeping your IRA with your bank, but I caution you to be certain you have identified all the potential fees. Provided you don't tie yourself up in a back-loaded fund, there should be no problem transferring your IRA assets to another broker in the future. If you are focused on low-cost indexed funds you should be able withstand your bank's efforts to sell you something that makes them more money.

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ruralavalon
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Location: Illinois

Re: Moving old 401k. Is my investment thinking sound ?

Post by ruralavalon » Mon Sep 10, 2018 8:42 pm

Welcome to the forum :) .

Gaspar18 wrote:
Mon Sep 10, 2018 10:55 am
Forgive me if this question is a little basic. When it comes to investing, I'm a novice.

I had my nest egg in an old 401k plan which needed to be rolled over quickly because the company was bought out; I didn't have much time. So I went to my bank and rolled it into a traditional IRA. The investment person said I can move (rollover) the money from this IRA to another investment vehicle once I decide what it is. By the way, I did a trustee-to-trustee transfer (rollover check was made to the bank c/o me ). Note that I am quite far away from retirement.

My bank has an investment arm, Merrill Edge, which offers a number of mutual funds and ETFs. The Boglehead philosophy says to keep costs low and select passively managed index funds, and to cover as much of the market as possible (like the S&P 500). Following this philosophy, I am looking at the VT fund from Vanguard (Total world stock ETF which invests in US and foreign stocks.)

I thought of using Vanguard as my broker, but since Merril Edge offers the same index funds as Vanguard does (at the same rate), and since I am already a Bank of America customer, I imagine I ought to use Merril Edge as my broker. The investment person at the bank probably can set this all up for me. Looks like there is no reason to go to Vanguard.

Two things I need: I want to be able to withdraw when I retire. I want to be able to change to Vanguard or another broker (if the bank becomes undesirable).

My question is this: Is there anything that I am overlooking ? Any pitfalls ?

Thanks for your time and information.
Merrill Edge is suitable for low expense Boglehead style investing. Wiki article, "Merrill Edge".

One thing that you are missing is a bond allocation. Graph, "An Efficient Frontier: the power of diversification". Please see the wiki articles Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk", and "Asset allocation".

I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Watty
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Re: Moving old 401k. Is my investment thinking sound ?

Post by Watty » Mon Sep 10, 2018 9:09 pm

Gaspar18 wrote:
Mon Sep 10, 2018 10:55 am
My question is this: Is there anything that I am overlooking ? Any pitfalls ?
Just a reminder, be sure that the beneficiary on your new IRA is set up correctly wherever you end up.

At many brokerages you can get a sign up bonus when you move money to them. Check to see if Merrill Edge(or where ever you end up) to see if you can get a signup bonus but you may have to ask for it.

Gaspar18
Posts: 12
Joined: Sat Sep 08, 2018 7:33 pm

Re: Moving old 401k. Is my investment thinking sound ?

Post by Gaspar18 » Tue Sep 11, 2018 10:36 am

Hello everyone and thanks for your input,

ExitStageLeft, I asked about fees. There fund has a 0.04% annual fee (expense ration) plus 20$ per trade. The investment guy at the bank will get a commission for transferring my money to Merril Edge, but he said the commission is paid by the bank, not by my fund.

RuralAvalon, the suggestion about the "three-fund portfolio" is an interesting one. I will take a look at the suggested Vanguard funds.

Watty, someone also suggested the same thing about the sign on bonus. The thing that I wonder about is this, shouldn't the priority be selecting the broker with good customer service ?

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