Vanguard/Fidelity/TD Ameritrade 18/19 contribution

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Topic Author
myretirement
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Joined: Sun Apr 14, 2019 12:39 am

Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by myretirement » Sun Apr 14, 2019 1:59 am

Hello all!! I am very new to investing and these are my options:

Emergency Fund: Do not have one besides the money I am trying to invest for retirement.
Debt- Credit cards use monthly but pay off before next billing to help rebuild credit. Mortgage owe 102,000/worth approx 145,000
Tax Filing Status: Married filing jointly
Tax Rate: 10% Federal ; 07% State; FICA 7.65%
State of Residence: South Carolina
Age: 47 and husband 42
Desired Asset Stocks: 80% / 20% Bonds

Current retirement assets:

Taxable established retirement accounts:
Her:
Vanguard Target fund 2045 VTIVX $12,200 available balance with a 0.15% expense ratio can not contribute anything only grows

South Carolina State Pension: $1200 approx. monthly but goes my income and yrs worked calculation when retire.

His:
No retirement in place / hurt out of work (unknown if going back to work)


Available money to invest:
- $25,000 left in Money market acct with bank @ gaining 1% interest a year
- Funded $5500 for the year 2018-Roth IRA with Vanguard but have not invested yet.





Retirement Funds available from Her job. No employee match .. The below options are available for me to choose from job with the supplemental Deferred Retirement Plan of SC. that would be deducted from my paycheck in either a 457b, 401k, or 403b acct.I would have to chose what percentage in the funds I choose.

Fixed -
South Carolina Stable Value Fund SCSVF expense ratio .16%

Bond-
Fidelity Inflation- prot Bd Idx Instl FIPBX expense ratio 0.05%
Baird Aggregate Bond Inst BAGIX expense ratio 0.30%

Large Cap-
Dodge & Cox stock DC-SF, expense ratio 0.52%
T Rowe Price Growth PRGFX, expense ratio 0.67%
Vanguard Institutional Index Instl Pl VIIX expense ratio 0.020%

Mid Cap-
Hartford Midcap R6. HFMVX expense ratio 0.75%
T Rowe Price Mid Cap Value I TRMIX expense ratio 0.79%

Small Cap-
AB Small Cap Growth I QUAIX or OUAIX expense ratio 1.15%
American Beacon Small Cap Val Inst AVFIX expense ratio 0.80%
TIAA-Cref small cap blend inx Inst. TISBX expense ratio 0.06%

International-
American Funds EuroPacific Gr R6 RERGX expense ratio 0.49%
American Funds New Perspective R6 RNPGX expense ratio 0.75%
Fidelity Diversified Int’l Commingled Tr. FIDCIT expense ratio 0.81%

Asset Allocation
SSgA Target retirement Income NL fund W SRINCW expense ratio 0.09%
SSgA Target Retirement 2030 NL fund W. S2030W expense ratio 0.09%
SSgA Target Retirement 2035 NL fund W. S2035W expense ratio 0.09%
SSgA Target Retirement S2040 fund W S2040 W expense ratio 0.09%
SSgA Target Retirement S2045 fund w W S2045W expense ratio 0.09%


I started my State job in 2015 and I had initially signed up for a matched State ORP plan with Valic that invested in the Vanguard Target fund 2045 mutual fund worth approx $12,200. My contribution was approx $7,500 and job match $4,500. I switched my retirement plan at work (same job) in 2017 to the State pension option instead of the ORP Valic -Vanguard fund option. I can’t switch back as it’s too late since I had 2 years to change or stay with original chosen option. I did switch without proper research into the State of SC PENSION plan (that is under funded as most States) but I am in that plan now and can’t switch back!

1st Question: Should I rollover Vanguard Target fund 2045 into a 401k then a convert to a 403b Roth after tax acct with the SC Deffered compensation program through my job? This way when I retire I won’t have to pay taxes on the higher growth of the 12k.( I was thinking it may be better to pay the taxes on it now since I am in lower tax bracket and the extra income won’t bring me into next one, since this yr. my husband /out of work.) The Retirement Deferred plan rep told me that after rolling over to a 401k, I would pay taxes on the 12k and then it can be rolled over to my choice of the 403b or 457b Roth after tax option. VALIC rep and 800 # disagrees and said I can only switch my ORP fund acct to another vendor like TIAAF or MetLife. Also which funds would be best to pick from list?


2nd Question: I am trying to figure out if I should split $25,000 between brokers to get better ratio on chosen ETFs and avoid transaction fees with TD Ameritrade and Fidelity Roths. I need to move money market to something that will grow for retirement. So far with Vanguard was thinking buying into the VTSAX and VBMFX.. If I fund Fidelity, which zero ratio ETFs/Bonds are better long term than others? With TD Ameritrade I get 300 free trades in 90 days once I Fund but have no clue on what ETF or Bonds I should go with them.... Or do I just put all into Vanguard over next few years. Right now Vanguard has me in a Roth settlement acct $5500 but I noticed there is a estimated ratio on that of 0.11 so I need to figure out a lower ratio investment fund on that money... I plan on funding the $6000 from the 25,000 for 2019 in Vanguard, Fidelity or TD Ameritrade...


Thanks for all your help!
Last edited by myretirement on Mon Apr 15, 2019 8:49 pm, edited 3 times in total.

Topic Author
myretirement
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Joined: Sun Apr 14, 2019 12:39 am

Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by myretirement » Sun Apr 14, 2019 12:29 pm

I also wanted my daughter to setup a Roth IRA she is almost 26 and I don’t want her to end up like her mom in this aspect. Currently she can’t contribute much maybe $20 a month but I figured it was better than nothing.. So should she open starter Roth with Vanguard it Fidelity? Thanks again! :happy

Topic Author
myretirement
Posts: 9
Joined: Sun Apr 14, 2019 12:39 am

Did I post this incorrectly?Re:Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by myretirement » Mon Apr 15, 2019 4:06 pm

Being a newbie, I was wondering if I posted this post incorrectly or out of bounds since no one replied and all other posts had a lot of responses? Thanks 🙂

lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by lakpr » Mon Apr 15, 2019 5:01 pm

I think you will get more specific and personalized responses if you edit your first post in the format specified in the Stickie post at the top of the forum, "Asking Portfolio Questions". We need to know at the minimum the expense ratios of all fund choices in your plan.

Topic Author
myretirement
Posts: 9
Joined: Sun Apr 14, 2019 12:39 am

Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by myretirement » Mon Apr 15, 2019 6:47 pm

Thank you!

lakpr
Posts: 1141
Joined: Fri Mar 18, 2011 9:59 am

Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by lakpr » Mon Apr 15, 2019 7:03 pm

Let me answer the easy question first. Vanguard has a $1000 minimum for IRA accounts. So for your daughter, if she is going to open a Roth IRA, she will need to go to Fidelity, invest her money into FZROX (Fidelity Zero index fund) which had a $0 minimum. Or Schwab, I think they have a couple of funds with $1 minimum. I take it that your daughter has earned income, right? And filing her own tax return? The amount she contributes to Roth IRA will be limited by the amount she reports in Line 1 on her tax return.

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Wiggums
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Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by Wiggums » Mon Apr 15, 2019 7:18 pm

1st Question: should I rollover Vanguard Target fund 2045 into a 401k then a convert to a 403b Roth after tax acct with the SC Deffered compensation program through my job?

If you think you will be in a higher tax bracket in retirement (10% federal) It would make sense to pay the tax now. I am not familiar with the plan you are in and if that is allowed.





2nd Question: I am trying to figure out if I should split money market funds between brokers to get better ratio on ETFs and avoid transaction fees etc.

Are you paying transaction fees now?

You mention money market funds (Vanguard has best rate).
Last edited by Wiggums on Mon Apr 15, 2019 7:29 pm, edited 5 times in total.

lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by lakpr » Mon Apr 15, 2019 7:18 pm

To tackle your other questions.

1. I cannot really answer your questions about the South Carolina ORP plan, it sounds like there are restrictions to roll the money you contributed out of the plan. That is not an uncommon restriction. To fully answer that question, you may want to post what choices you have with both VALIC and other providers. Please don’t forget the expense ratios of the funds!

2. Regarding the money market funds, given your low tax bracket I suggest you choose Vanguard Money Market fund that has the highest SEC yield. Check each fund’s minimum though. Best bet is Vanguard for you, Fidelity funds have slightly lower yields, this is a function of Vanguard’s unique structure where the company is owned by the funds which in turn are owned by shareholders. So all cost savings are ultimately returned to shareholders: you and me.

Related question is why are you keeping such a high amount in Money Market and not investing it? What are your approximate monthly expenses? I would suggest you keep 3 months of expenses, no more, in MM funds. Invest the rest in Roth IRA for yourself. You can have the 493b plan and Roth account both, you know?

lakpr
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Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by lakpr » Mon Apr 15, 2019 7:20 pm

Wiggums wrote:
Mon Apr 15, 2019 7:18 pm
What is your tax bracket?
How much money are we talking about?
Wiggums,

She did answer that question in her post; 10% federal and $25k respectively.

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Wiggums
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Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by Wiggums » Mon Apr 15, 2019 7:24 pm

lakpr wrote:
Mon Apr 15, 2019 7:20 pm
Wiggums wrote:
Mon Apr 15, 2019 7:18 pm
What is your tax bracket?
How much money are we talking about?
Wiggums,

She did answer that question in her post; 10% federal and $25k respectively.
Thank you. Will update my response

Topic Author
myretirement
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Joined: Sun Apr 14, 2019 12:39 am

Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by myretirement » Mon Apr 15, 2019 9:31 pm

lakpr wrote:
Mon Apr 15, 2019 7:18 pm
To tackle your other questions.

1. I cannot really answer your questions about the South Carolina ORP plan, it sounds like there are restrictions to roll the money you contributed out of the plan. That is not an uncommon restriction. To fully answer that question, you may want to post what choices you have with both VALIC and other providers. Please don’t forget the expense ratios of the funds!

Thanks, If I rolled over the $12,000 from the Broker -Valic acct which is invested currently in the Vanguard target fund 2045, I would have to chose one of the listed funds offered by my jobs supplemental retirement deferred compensation plan. After roll over I need to fill out what percent in each fund I want applied.. I would also have to fill out seperate form to set up a automatic paycheck "after tax" withdrawal in either the 403b or 457b or both to fund the chosen funds they offer in that list.. I was thinking the Viiix was the best option but wasn't sure if I should chose 2 or 3 of those funds to mix it up a little for diversity.

2. Regarding the money market funds, given your low tax bracket I suggest you choose Vanguard Money Market fund that has the highest SEC yield. Check each fund’s minimum though. Best bet is Vanguard for you, Fidelity funds have slightly lower yields, this is a function of Vanguard’s unique structure where the company is owned by the funds which in turn are owned by shareholders. So all cost savings are ultimately returned to shareholders: you and me.
Yes, that was one reason I loved Vanguard "owned by shareholders" ... I only had it in money market acct with bank while I figure out what fund I should invest in long term. Thats why I opened the Roth with Vanguard and Fidelity, and TD Ameritrade but ended up only funding Vanguard after some research. With the $5500 I already deposited in Vanguard I need to pick a fund to invest in I want it out of money market accts so it can grow. The Vanguard rep said it is better to sit in the settlement acct while I decide since it will make more interest.


Related question is why are you keeping such a high amount in Money Market and not investing it? What are your approximate monthly expenses? I would suggest you keep 3 months of expenses, no more, in MM funds. Invest the rest in Roth IRA for yourself. You can have the 493b plan and Roth account both, you know?
Yes, my plan is to transfer all money to my Roth IRA with Vanguard, and the rest into a 403b or 457b after tax acct from that deferred compensation plan offered from my job. They would have to take from my paycheck to contribute to the 403b and 457b so I dont have to worry about taxes when I retire.. My monthly expenses are $3000 a month, which Vanguard etf or mutual do you think is best for long term? So eventually I will have money transfered into a Roth IRA , 403b, 457b and I will be contributing into the 403b and 457b monthly after all is said and done. I just need to pick the best funds and watch them but not move them hopefully. I hope this makes better sense.. Thanks for all your help!

Topic Author
myretirement
Posts: 9
Joined: Sun Apr 14, 2019 12:39 am

Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by myretirement » Mon Apr 15, 2019 9:34 pm

lakpr wrote:
Mon Apr 15, 2019 7:03 pm
Let me answer the easy question first. Vanguard has a $1000 minimum for IRA accounts. So for your daughter, if she is going to open a Roth IRA, she will need to go to Fidelity, invest her money into FZROX (Fidelity Zero index fund) which had a $0 minimum. Or Schwab, I think they have a couple of funds with $1 minimum. I take it that your daughter has earned income, right? And filing her own tax return? The amount she contributes to Roth IRA will be limited by the amount she reports in Line 1 on her tax return.

Yes she works and lives on her own, just didnt want her to learn this lesson later in life as I am right now.. That sounds like a plan for her Thanks!!!

Topic Author
myretirement
Posts: 9
Joined: Sun Apr 14, 2019 12:39 am

Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by myretirement » Mon Apr 15, 2019 9:46 pm

Wiggums wrote:
Mon Apr 15, 2019 7:18 pm
1st Question: should I rollover Vanguard Target fund 2045 into a 401k then a convert to a 403b Roth after tax acct with the SC Deffered compensation program through my job?

If you think you will be in a higher tax bracket in retirement (10% federal) It would make sense to pay the tax now. I am not familiar with the plan you are in and if that is allowed.

Unsure if tax bracket will go higher but figured since only valued at 12k I would rollover to a taxfree acct to grow and not pay taxes on the growth over next 22 yrs. Thanks



2nd Question: I am trying to figure out if I should split money market funds between brokers to get better ratio on ETFs and avoid transaction fees etc.

Are you paying transaction fees now? No fees but I do get a 1099 on the 1% interest it makes currently..

You mention money market funds (Vanguard has best rate).

Yes it's sitting in money market temporarily until I am able to transfer it over to one of the untaxed accts mentioned. I need to pick the best long term fund to invest between the 403b and 457b accts from that long list of funds the "Supplemental Deferred Retirement plan" offers from my job. I need to submit the percentages for each chosen company for both 403 and 457.. My goal is to have this tax free money in a tax free retirement account. Thanks again!

lakpr
Posts: 1141
Joined: Fri Mar 18, 2011 9:59 am

Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by lakpr » Tue Apr 16, 2019 7:13 am

myretirement,

I took a look at your supplemental defined contribution plan options. These below options look excellent:
myretirement wrote:
Sun Apr 14, 2019 1:59 am
Asset Allocation
SSgA Target retirement Income NL fund W SRINCW expense ratio 0.09%
SSgA Target Retirement 2030 NL fund W. S2030W expense ratio 0.09%
SSgA Target Retirement 2035 NL fund W. S2035W expense ratio 0.09%
SSgA Target Retirement S2040 fund W S2040 W expense ratio 0.09%
SSgA Target Retirement S2045 fund w W S2045W expense ratio 0.09%
Given that you will get a pension from the state of South Carolina (however underfunded it might be, I am sure SC will not be allowed to go bankrupt), I suggest you choose a target retirement fund that is about 5 years less than your actual retirement date. That is, if you are retiring in 2035, say, choose the 2030 fund. Simplicity ... set it and forget it, you don't need to ever bother about this fund until you retire.

But if you do want to do-it-yourself, you can contribute to the below funds in the percentages shown; you will save about 0.03% in expenses, that's 30 dollars in a $100K portfolio per year :) Frankly I suggest it's not worth the headache for you, go with the SSgA funds.
myretirement wrote:
Sun Apr 14, 2019 1:59 am
Vanguard Institutional Index Instl Pl VIIIX expense ratio 0.020% <===== 45%
TIAA-Cref small cap blend inx Inst. TISBX expense ratio 0.06% <===== 15%
Fidelity Inflation- prot Bd Idx Instl FIPBX expense ratio 0.05% <===== 20%
Baird Aggregate Bond Inst BAGIX expense ratio 0.30% <===== 20%
As far as where your Roth IRA funds should go, simple answer: VTSAX (Vanguard Total Stock Market Index Admiral Shares). You want to have maximum growth in your Roth IRA, so invest everything in total stock market there.

Couple of additional comments:

1. You may have noticed that I split your 403b composition to a 60:40 ratio stocks to bonds, instead of a 80:20 ratio [ Or alternatively, recommending that you choose a target date fund that's earlier than your actual target date ]. The reason for this is "Tax Efficiency". In a 403b plan, when you withdraw funds, you will have to pay tax on it as ordinary income. Whereas in a Roth, when you withdraw funds, there is no tax. Given this tax structure, you want to put that asset class which has the highest expected return in Roth IRA (in this case total stock market), and since you want to pay minimum tax as possible, you want to constrain the growth of the fund in your tax-deferred account (the 403b plan, so increase the bonds percentage here). Your overall allocation, when you view the 403b + Roth as a single portfolio, it is still going to be 75:25 or 80:20.


Edited: Actually, if you are contributing to Roth 403b, please choose the Target Date fund that's 5 years more than your actual retirement date, or in a do-it-yourself plan, increase VIIIX to 65%, reduce BAGIX and FIPBX to 10% each


2. You may have also noticed that I did not allocate ANY percentage to international equities. The reason is two fold; one, I am not sure really if international funds are necessary in your small portfolio. Inclusion or exclusion of international equities is not going to move the needle much until you get to a portfolio size of about $200K; it's quite a bit away in the future for you. Secondly, over the last 20 years, international equities have lagged US equities by a 4% annualized, that's a serious performance drag. What they do offer is "diversification benefit", you get to own 8000+ stocks in a single portfolio than just US stocks which is about 5000 stocks. If you decide you do want international equities, we can revisit the allocation percentages.

Hope this helps

Topic Author
myretirement
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Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by myretirement » Tue Apr 16, 2019 12:57 pm

lakpr,

Wow!! I really appreciate all your help :happy Thanks!

The "SSga target fund 2045" sounds good to me! However, If I decided to leave the current "Vanguard target 2045 fund " with Valic @ 0.15% expense ratio, there shouldn't be an issue with having two "target funds" even though the Vanguard isn't allowed anymore contributions correct? I thought I read some where; you never want to have the same type of funds that overlap each other.

As far as the other investment idea- I was thinking of opening both of the "after tax" accounts available through my employer-
1st - The " SSga target" into the 401k Roth (after tax option)
2nd - "The do it yourself" 65% VIIIX, 15% TISBX, 10% FIPBX, & 10% BAGIX in the 457b Roth (after tax option).

I believe the 401k will allow you to work and withdraw after 59 1/2 yrs old but the 457b you cannot. So that may or may not make a difference in which fund option I put in which account?

The Roth IRA at Vanguard will have a total of $11,000 as soon as I deposit the 2019 $6000 contribution. So fully investing in the VTSAX will be a lot easier so that works!

lakpr
Posts: 1141
Joined: Fri Mar 18, 2011 9:59 am

Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by lakpr » Tue Apr 16, 2019 1:37 pm

myretirement wrote:
Tue Apr 16, 2019 12:57 pm
The "SSga target fund 2045" sounds good to me! However, If I decided to leave the current "Vanguard target 2045 fund " with Valic @ 0.15% expense ratio, there shouldn't be an issue with having two "target funds" even though the Vanguard isn't allowed anymore contributions correct? I thought I read some where; you never want to have the same type of funds that overlap each other.
That is true, you really do not want to have overlapping funds. But with your VALIC account, you are stopping contributions and you are not allowed to roll it out -- so you just leave it there until you retire. Simply think of it as an extension of your SSga target fund 2045. Just check with your plan administrators if you are able to roll it over to the SSga fund, that will be the best outcome.
myretirement wrote:
Tue Apr 16, 2019 12:57 pm
As far as the other investment idea- I was thinking of opening both of the "after tax" accounts available through my employer-
1st - The " SSga target" into the 401k Roth (after tax option)
2nd - "The do it yourself" 65% VIIIX, 15% TISBX, 10% FIPBX, & 10% BAGIX in the 457b Roth (after tax option).

I believe the 401k will allow you to work and withdraw after 59 1/2 yrs old but the 457b you cannot. So that may or may not make a difference in which fund option I put in which account?
Sure, you can do that. Good idea too, in my opinion.

I am also a bit puzzled about what you said above. 401(k) plans, you can withdraw from them without any penalties (and if you are contributing to Roth 401k, no taxes either) after age 59.5. That is governed by the Federal ERISA law.

The 457(b) plans usually can have restrictions. Technically it is possible to withdraw from the plan once
- you reach age 55 OR you serve a required minimum number of years with the same employer (usually 10 or 15)
- you separate from the employer.

That event -- separation from the employer -- is the key difference. Whereas with 401k you can withdraw while still being employed, 457 plan you cannot. So when you say "with 457b you cannot", I think you mean at the age of 59.5 you still envision yourself as being employed with the same employer.

Contribution to 457b plan is encouraged usually before 401k because, god forbid you lose your employment beyond age 55 (actually at any age), you will have an income source that can take you until 59.5 or the "retirement age" without having to scramble for work.

Best of luck!

Topic Author
myretirement
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Re: Vanguard/Fidelity/TD Ameritrade 18/19 contribution

Post by myretirement » Tue Apr 16, 2019 2:24 pm

Yes, sorry I was referring to the "401k as you can withdraw while still being employed and the 457b you cannot if still employed or even with any employer".

"Contribution to 457b plan is encouraged usually before 401k because, god forbid you lose your employment beyond age 55 (actually at any age), you will have an income source that can take you until 59.5 or the "retirement age" without having to scramble for work."


The above ^^^ makes total sense and thank you for pointing that out.. So I will make sure I contribute more in the 457b than the 401k!

Thank you again! :happy

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