New Roth IRA advice

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71GTO
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New Roth IRA advice

Post by 71GTO »

I've been going back and forth and sitting on this for to long and I think I need to just jump in. I was trying to get the funds together and open an Roth IRA with Vanguard an invest into their mutual funds (VSTAX, VIAX, etc) so that after I opened them I could invest set dollar amounts and I liked the idea of Vanguards business model even though there are a lot of complaints about the website and customer service.

Now, I just feel like its taking me to long to get this going and I think I'd like to open the IRA with Fidelity so I can open it with no minimum and just buy the fractional shares. Maybe my kind of middle ground compromise is to buy Vanguard ETFs... I am am 43 currently vested in a public pension, I have a government 457b that I contribute to as well that is set up with the best options available for a three fund portfolio thanks to the help of this forum and I've been ramping up the contributions as I feel comfortable obligating through payroll deductions. Part of the reason I'd also like the IRA outside of my work option is that I would be able to contribute as I have the funds. instead of a payroll deduction that takes time to change if something comes up.

So my two part question is since I'll have a pension and I'm buying bonds at 20% in the 457b can I just purchase VTI and VXUS in the IRA to be a little more aggressive to try to make up some ground since I am very behind on this and would there be better ETF/Index/mutual fund options with Fidelity? From reading other topics it seems like there isn't a huge difference between the total market options, but I'd like to ask. Thank you in advance for any help!
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arcticpineapplecorp.
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Re: New Roth IRA advice

Post by arcticpineapplecorp. »

71GTO wrote: Wed May 11, 2022 8:11 pm So my two part question is since I'll have a pension and I'm buying bonds at 20% in the 457b can I just purchase VTI and VXUS in the IRA to be a little more aggressive to try to make up some ground since I am very behind on this and would there be better ETF/Index/mutual fund options with Fidelity?
yes you can do that and many say you should have if you're thinking of asset location, it's preferable to have stocks in Roth IRA and bonds in 457b like you have that. It's not always easy like that. You might have to have stocks and bonds in 457b but all stocks in Roth IRA. Don't put bonds in Roth IRA because that's a waste of tax free growth there.

regarding the differences in funds, you can do well with fidelity or vanguard.

fwiw the global ex US index fund (FSGGX) contains emerging markets like Vanguard's total international whereas Fidelity International Index fund (FSPSX) does not contain emerging markets.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
mega317
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Re: New Roth IRA advice

Post by mega317 »

You can hold any ETF at any broker.

If what you want to own are Vanguard mutual funds, you’d want to use vanguard brokerage. Don’t let the minimums factor into your decision, you will very soon have enough.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
Topic Author
71GTO
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Re: New Roth IRA advice

Post by 71GTO »

arcticpineapplecorp. wrote: Wed May 11, 2022 9:15 pm
71GTO wrote: Wed May 11, 2022 8:11 pm So my two part question is since I'll have a pension and I'm buying bonds at 20% in the 457b can I just purchase VTI and VXUS in the IRA to be a little more aggressive to try to make up some ground since I am very behind on this and would there be better ETF/Index/mutual fund options with Fidelity?
yes you can do that and many say you should have if you're thinking of asset location, it's preferable to have stocks in Roth IRA and bonds in 457b like you have that. It's not always easy like that. You might have to have stocks and bonds in 457b but all stocks in Roth IRA. Don't put bonds in Roth IRA because that's a waste of tax free growth there.

regarding the differences in funds, you can do well with fidelity or vanguard.

fwiw the global ex US index fund (FSGGX) contains emerging markets like Vanguard's total international whereas Fidelity International Index fund (FSPSX) does not contain emerging markets.
Thank you! My 457b has a Roth and traditional option. I'm using the Roth 457b currently I should have put that, but the limit is higher and I'm no where near maxing it...
Topic Author
71GTO
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Re: New Roth IRA advice

Post by 71GTO »

mega317 wrote: Wed May 11, 2022 9:20 pm You can hold any ETF at any broker.

If what you want to own are Vanguard mutual funds, you’d want to use vanguard brokerage. Don’t let the minimums factor into your decision, you will very soon have enough.
I'm sure you're right, but its getting a little frustrating. If ETF's aren't much different then maybe I should get over wanting the mutual funds... As far as the brokerages, I guess too I do see people praise Fidelity more than Vanguard for there service and other products they offer, so I was thinking of taking advantage of that if it makes sense.
PersonalFinanceJam
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Re: New Roth IRA advice

Post by PersonalFinanceJam »

In your situation in the year 2022, I would open the Roth at Fidelity. I would use whatever combination of FSKAX (total US market) and FTIHX (total international) mutual funds I wanted and move on. The fidelity mutual funds provide the same market exposure at dirt cheap costs as their Vanguard equivalents. ETFs are great and I think Fidelity is the best place to purchase ETFs because of their fractional trading ability. However, it seems you have already had some analysis paralysis and perhaps now isn’t the time to learn about buying and selling ETFs?

For full disclosure I use Fidelity index mutual funds in my tax advantaged accounts and a mix of Vanguard and Schwab ETFs in my taxable account.
AC1984
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Re: New Roth IRA advice

Post by AC1984 »

arcticpineapplecorp. wrote: Wed May 11, 2022 9:15 pm
71GTO wrote: Wed May 11, 2022 8:11 pm So my two part question is since I'll have a pension and I'm buying bonds at 20% in the 457b can I just purchase VTI and VXUS in the IRA to be a little more aggressive to try to make up some ground since I am very behind on this and would there be better ETF/Index/mutual fund options with Fidelity?
yes you can do that and many say you should have if you're thinking of asset location, it's preferable to have stocks in Roth IRA and bonds in 457b like you have that. It's not always easy like that. You might have to have stocks and bonds in 457b but all stocks in Roth IRA. Don't put bonds in Roth IRA because that's a waste of tax free growth there.

regarding the differences in funds, you can do well with fidelity or vanguard.

fwiw the global ex US index fund (FSGGX) contains emerging markets like Vanguard's total international whereas Fidelity International Index fund (FSPSX) does not contain emerging markets.
Why is it preferable to have stocks in Roth IRA and bonds in 475b if they're both tax protected?
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arcticpineapplecorp.
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Re: New Roth IRA advice

Post by arcticpineapplecorp. »

AC1984 wrote: Thu May 12, 2022 7:45 am
arcticpineapplecorp. wrote: Wed May 11, 2022 9:15 pm
71GTO wrote: Wed May 11, 2022 8:11 pm So my two part question is since I'll have a pension and I'm buying bonds at 20% in the 457b can I just purchase VTI and VXUS in the IRA to be a little more aggressive to try to make up some ground since I am very behind on this and would there be better ETF/Index/mutual fund options with Fidelity?
yes you can do that and many say you should have if you're thinking of asset location, it's preferable to have stocks in Roth IRA and bonds in 457b like you have that. It's not always easy like that. You might have to have stocks and bonds in 457b but all stocks in Roth IRA. Don't put bonds in Roth IRA because that's a waste of tax free growth there.

regarding the differences in funds, you can do well with fidelity or vanguard.

fwiw the global ex US index fund (FSGGX) contains emerging markets like Vanguard's total international whereas Fidelity International Index fund (FSPSX) does not contain emerging markets.
Why is it preferable to have stocks in Roth IRA and bonds in 475b if they're both tax protected?
you want the asset that will grow more to be tax free rather than just tax deferred.

while a 457b (I'm assuming we're talking pretax 457b and not Roth 457b) is "tax protected", taxes will be owed upon withdrawal.

that being said do you want to pay more or less tax from accounts that will eventually owe taxes on (pretax accts)? If you want to pay less tax, that means putting bonds in pretax and stocks in Roth accts.

The Roth should grow more than the pretax, which means you have access to more money in Roth (tax free) accounts.

make sense?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Onlineid3089
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Re: New Roth IRA advice

Post by Onlineid3089 »

AC1984 wrote: Thu May 12, 2022 7:45 am
arcticpineapplecorp. wrote: Wed May 11, 2022 9:15 pm
71GTO wrote: Wed May 11, 2022 8:11 pm So my two part question is since I'll have a pension and I'm buying bonds at 20% in the 457b can I just purchase VTI and VXUS in the IRA to be a little more aggressive to try to make up some ground since I am very behind on this and would there be better ETF/Index/mutual fund options with Fidelity?
yes you can do that and many say you should have if you're thinking of asset location, it's preferable to have stocks in Roth IRA and bonds in 457b like you have that. It's not always easy like that. You might have to have stocks and bonds in 457b but all stocks in Roth IRA. Don't put bonds in Roth IRA because that's a waste of tax free growth there.

regarding the differences in funds, you can do well with fidelity or vanguard.

fwiw the global ex US index fund (FSGGX) contains emerging markets like Vanguard's total international whereas Fidelity International Index fund (FSPSX) does not contain emerging markets.
Why is it preferable to have stocks in Roth IRA and bonds in 475b if they're both tax protected?
The assumption was that the 457b was in pre-tax dollars that would be taxed as regular income when withdrawn. The Roth IRA is with post-tax dollars and not taxed at all on withdrawal. In that scenario you want to maximize your growth in the dollars that will come out tax free, and limit the growth in what will be taxed.

Since OP has updated that they are using Roth in the 457b it wouldn't matter for tax purposes. They should still consider any additional fees that they are paying in the 457b that they would not have in an IRA.
Topic Author
71GTO
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Joined: Fri Sep 11, 2020 10:10 am

Re: New Roth IRA advice

Post by 71GTO »

PersonalFinanceJam wrote: Thu May 12, 2022 7:06 am In your situation in the year 2022, I would open the Roth at Fidelity. I would use whatever combination of FSKAX (total US market) and FTIHX (total international) mutual funds I wanted and move on. The fidelity mutual funds provide the same market exposure at dirt cheap costs as their Vanguard equivalents. ETFs are great and I think Fidelity is the best place to purchase ETFs because of their fractional trading ability. However, it seems you have already had some analysis paralysis and perhaps now isn’t the time to learn about buying and selling ETFs?

For full disclosure I use Fidelity index mutual funds in my tax advantaged accounts and a mix of Vanguard and Schwab ETFs in my taxable account.
Thank you, I get what you're saying. Is it the some of the tax differences between the mutual funds and ETFs why you recommend a mutual fund over an ETF?
PersonalFinanceJam
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Re: New Roth IRA advice

Post by PersonalFinanceJam »

71GTO wrote: Thu May 12, 2022 4:04 pm
PersonalFinanceJam wrote: Thu May 12, 2022 7:06 am In your situation in the year 2022, I would open the Roth at Fidelity. I would use whatever combination of FSKAX (total US market) and FTIHX (total international) mutual funds I wanted and move on. The fidelity mutual funds provide the same market exposure at dirt cheap costs as their Vanguard equivalents. ETFs are great and I think Fidelity is the best place to purchase ETFs because of their fractional trading ability. However, it seems you have already had some analysis paralysis and perhaps now isn’t the time to learn about buying and selling ETFs?

For full disclosure I use Fidelity index mutual funds in my tax advantaged accounts and a mix of Vanguard and Schwab ETFs in my taxable account.
Thank you, I get what you're saying. Is it the some of the tax differences between the mutual funds and ETFs why you recommend a mutual fund over an ETF?
In a tax advantaged account like a Roth the tax efficiency of an ETF vs a mutual fund doesn't matter. My recommendation is based on the fact that even though the markets are closed as I type this, in the next 30 minutes you could:
1. Open the account at Fidelity
2. Link your bank account*
3. Put in a transfer request to move funds from the bank account to the Roth account
4. Put in a buy order for the mutual funds which will execute at the end of day price tomorrow.

In 4 steps and a minimal investment of time, you could be done with this. Using mutual funds also means in the future you could set up a recurring investment from your bank account every month and put your savings on autopilot while still maintaining the immediate control you don't have in the 457.

ETFs are just slightly more complicated in this regard than mutual funds. You have to place the orders when the markets are open. They also price throughout the trading day. Given your hesitancy in getting your Roth opened, how are you going to react if after you place the ETF order you see the price go down and you already lost money? In general this really doesn't matter but it can cause problems psychologically if you've never experienced it before. Some people also seem to obsess over it.

* Ok sometimes there can be a delay in linking an account because of additional verification, but that doesn't always happen
Topic Author
71GTO
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Joined: Fri Sep 11, 2020 10:10 am

Re: New Roth IRA advice

Post by 71GTO »

PersonalFinanceJam wrote: Thu May 12, 2022 5:07 pm
71GTO wrote: Thu May 12, 2022 4:04 pm
PersonalFinanceJam wrote: Thu May 12, 2022 7:06 am In your situation in the year 2022, I would open the Roth at Fidelity. I would use whatever combination of FSKAX (total US market) and FTIHX (total international) mutual funds I wanted and move on. The fidelity mutual funds provide the same market exposure at dirt cheap costs as their Vanguard equivalents. ETFs are great and I think Fidelity is the best place to purchase ETFs because of their fractional trading ability. However, it seems you have already had some analysis paralysis and perhaps now isn’t the time to learn about buying and selling ETFs?

For full disclosure I use Fidelity index mutual funds in my tax advantaged accounts and a mix of Vanguard and Schwab ETFs in my taxable account.
Thank you, I get what you're saying. Is it the some of the tax differences between the mutual funds and ETFs why you recommend a mutual fund over an ETF?
In a tax advantaged account like a Roth the tax efficiency of an ETF vs a mutual fund doesn't matter. My recommendation is based on the fact that even though the markets are closed as I type this, in the next 30 minutes you could:
1. Open the account at Fidelity
2. Link your bank account*
3. Put in a transfer request to move funds from the bank account to the Roth account
4. Put in a buy order for the mutual funds which will execute at the end of day price tomorrow.

In 4 steps and a minimal investment of time, you could be done with this. Using mutual funds also means in the future you could set up a recurring investment from your bank account every month and put your savings on autopilot while still maintaining the immediate control you don't have in the 457.

ETFs are just slightly more complicated in this regard than mutual funds. You have to place the orders when the markets are open. They also price throughout the trading day. Given your hesitancy in getting your Roth opened, how are you going to react if after you place the ETF order you see the price go down and you already lost money? In general this really doesn't matter but it can cause problems psychologically if you've never experienced it before. Some people also seem to obsess over it.

* Ok sometimes there can be a delay in linking an account because of additional verification, but that doesn't always happen
Lol, I get it, thank you. I don't think i'm that bad to obsess daily flucuations, but the mutual fund being a bit easier is appealing. I think I was holding up on getting rolling every time I read something negative or differing opinion changing my mind and then trying to reallocate. I try to read as much as I can on this forum and a few others and it can be a lot to take in and remember for later. I think I was holding out for the vanguard mutual funds since I haven't really seen anyone say anything bad about them other than the minimum balance to open.
AC1984
Posts: 81
Joined: Fri Aug 24, 2018 7:53 am

Re: New Roth IRA advice

Post by AC1984 »

arcticpineapplecorp. wrote: Thu May 12, 2022 9:01 am
AC1984 wrote: Thu May 12, 2022 7:45 am
arcticpineapplecorp. wrote: Wed May 11, 2022 9:15 pm
71GTO wrote: Wed May 11, 2022 8:11 pm So my two part question is since I'll have a pension and I'm buying bonds at 20% in the 457b can I just purchase VTI and VXUS in the IRA to be a little more aggressive to try to make up some ground since I am very behind on this and would there be better ETF/Index/mutual fund options with Fidelity?
yes you can do that and many say you should have if you're thinking of asset location, it's preferable to have stocks in Roth IRA and bonds in 457b like you have that. It's not always easy like that. You might have to have stocks and bonds in 457b but all stocks in Roth IRA. Don't put bonds in Roth IRA because that's a waste of tax free growth there.

regarding the differences in funds, you can do well with fidelity or vanguard.

fwiw the global ex US index fund (FSGGX) contains emerging markets like Vanguard's total international whereas Fidelity International Index fund (FSPSX) does not contain emerging markets.
Why is it preferable to have stocks in Roth IRA and bonds in 475b if they're both tax protected?
you want the asset that will grow more to be tax free rather than just tax deferred.

while a 457b (I'm assuming we're talking pretax 457b and not Roth 457b) is "tax protected", taxes will be owed upon withdrawal.

that being said do you want to pay more or less tax from accounts that will eventually owe taxes on (pretax accts)? If you want to pay less tax, that means putting bonds in pretax and stocks in Roth accts.

The Roth should grow more than the pretax, which means you have access to more money in Roth (tax free) accounts.

make sense?
Thanks, yeah that helps to clarify. Seems like it could be a wash in the end if the pre-tax deferred accounts have as much time to grow with the larger initial balance, but I haven't done any math and it's likely dependent on how much tax you owe when you do pull it. Is there also a consideration with the 457 vs a 401k asset allocation if you withdraw the 457 first? Thinking about that because I have both and there's no penalty for using the 457 early if you no longer work for the company (govt in my case). Not planning on using it early at this point but something to consider.
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arcticpineapplecorp.
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Re: New Roth IRA advice

Post by arcticpineapplecorp. »

AC1984 wrote: Fri May 13, 2022 4:38 am Why is it preferable to have stocks in Roth IRA and bonds in 475b if they're both tax protected?
arcticpineapplecorp. wrote: Thu May 12, 2022 9:01 am you want the asset that will grow more to be tax free rather than just tax deferred.

while a 457b (I'm assuming we're talking pretax 457b and not Roth 457b) is "tax protected", taxes will be owed upon withdrawal.

that being said do you want to pay more or less tax from accounts that will eventually owe taxes on (pretax accts)? If you want to pay less tax, that means putting bonds in pretax and stocks in Roth accts.

The Roth should grow more than the pretax, which means you have access to more money in Roth (tax free) accounts.

make sense?
AC1984 wrote: Fri May 13, 2022 4:38 am Thanks, yeah that helps to clarify. Seems like it could be a wash in the end if the pre-tax deferred accounts have as much time to grow with the larger initial balance, but I haven't done any math and it's likely dependent on how much tax you owe when you do pull it. Is there also a consideration with the 457 vs a 401k asset allocation if you withdraw the 457 first? Thinking about that because I have both and there's no penalty for using the 457 early if you no longer work for the company (govt in my case). Not planning on using it early at this point but something to consider.
what you're looking at is:
1. overall portfolio of all assets 401k/457b/Roth IRA/taxable (if any) should contain your overall mix of desired assets (stock to bond ratio) but Roth accounts favor stocks, not bonds. Other accts (401k/457b) should hold bonds, but might also need to hold stocks to get the overall allocation right for you.

2. RMDs. The reason to put bonds in tax deferred accts is to lower not raise the RMDs. You want to control your taxes in retirement to the extent you can. So if you don't draw from 457b and/or 401k until RMD time, the allocation of stocks/bonds in those accounts doesn't really matter except to the extent that the stocks in those accounts will likely raise, not lower your RMD, whereas bonds will keep RMDs lower because the account won't have grown as much.

If you want to draw from one (say 457b for instance) before RMD time, it could matter in the sense that you're drawing the acct down before RMDs so when you get to age 72 your RMD will be lower than it otherwise would have been. In that case, I suppose having stocks or more stocks than bonds in 457b is not a problem if you're going to reduce that account prior to age 72 anyway (and then make RMDs lower because you drew down the acct).

But then you have a different problem in that you're not giving the acct (457b) as much time to grow and stocks need long term to grow so if you're going to draw 457b at an earlier age (50s?) then there is some risk there in that would you sell stocks in 457b if you needed the money but the market were in a downturn?

People think, well I want my 457b and my 401k to grow (which favors stocks), don't I? But if you want to hold bonds to smooth sailing, the question is where to put them. They're better in tax deferred rather than tax free accounts if you have to put them somewhere.


just some things to think about.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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