Resurrecting a dormant Roth account

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Topic Author
BlackbirdKM
Posts: 3
Joined: Wed May 25, 2022 10:15 pm

Resurrecting a dormant Roth account

Post by BlackbirdKM »

Questions:

1. I've had a Roth IRA invested RPGMX which I have contributed to since 2008. I am trying to get back on track, but would it be wise to switch to the three fund approach: Total Equity Market Index Fund (POMIX), International Equity Index Fund (PIEQX), QM U.S. Bond Index Fund (PBDIX)?

2. Should I leave things in TRP or move to Vanguard or Fidelity for the lower costs? I currently have my 401k in Vanguard, but I don't have any issues holding investments in different places if Fidelity is preferred.

3. I still have some extra money to put away. I believe the advice is to max out HSA, then max out 401k, then perhaps a taxable brokerage account. Is that correct?

Thanks!
_______________________________________________________________
Emergency funds: Yes - 6 months

Debt:
Mortgage - 2.8%
School - 3.9%
Solar - 1.99%
Credit - Paid off each month

Tax Filing Status: Married Filing Jointly
State of Residence: Mid-Atlantic
Age: 40s

Desired Asset allocation: unsure
Desired International allocation: unsure

Approximate size of your total portfolio: $250k

Current retirement assets:

Taxable
4% cash

His 401k
65% Vanguard Target 2045 Trust Select (1681)
Company match: 6%

His Roth IRA at TRP
20% Mid-Cap Growth Fund (RPMGX) (0.72%)

His Crypto
<0.5% BTC, ETH, few others

Her State Retirement Pension
11% Employees' Pension Plan

_______________________________________________________________
Contributions

New annual Contributions
8% to His 401k (6% company match)
$6k/yr to His Roth IRA
$6k/yr to 529 plans

_______________________________________________________________

[Edited post to add more information]
Last edited by BlackbirdKM on Fri May 27, 2022 12:12 pm, edited 1 time in total.
exodusNH
Posts: 10249
Joined: Wed Jan 06, 2021 7:21 pm

Re: Resurrecting a dormant Roth account

Post by exodusNH »

BlackbirdKM wrote: Wed May 25, 2022 10:25 pm My father setup a Roth for me at TRP in 2002, and I contributed for a few years, but not since 2008. I just got into the account and see that it's 100% invested in RPMGX and seems to have actually done quite well. Now that I have money to start contributing again, is it wise to leave it in RPGMX or use the three fund approach (POMIX, PIEQX, PBDIX)? Follow-up question, should I leave things in TRP or move to Vanguard or Fidelity for the lower costs? Thanks!
You probably don't want to hold bonds in that account, since you really want your assets with the highest expected returns in there.

I'd probably pull it into Fidelity if you don't already have an account with Vanguard. Then hold whatever US and international total market ETFs you prefer in it.
Doctor Rhythm
Posts: 3034
Joined: Mon Jan 22, 2018 2:55 am

Re: Resurrecting a dormant Roth account

Post by Doctor Rhythm »

Welcome to the forum

You may get more replies if you spell out the names of the mutual funds that you’ve listed by ticker symbol.

What you hold in your Roth should not be considered in isolation, but rather in the context of your entire portfolio. I recommend using this format to get the best advice.

Short of that, I only looked up RPMGX, which invests in a small segment of the entire stock market (mid-cap growth) — in other words, it lack diversification by itself. It also has a high expense ratio compared to the funds that are recommend here. Moving to Fidelity is a reasonable decision.
sycamore
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Joined: Tue May 08, 2018 12:06 pm

Re: Resurrecting a dormant Roth account

Post by sycamore »

Agree with previous replies that it's best to consider how to manage your portfolio as a whole, and not just one account in isolation.

If you do end up transferring your Roth to a brokerage, note that some brokerages offer a transfer bonus. Schwab and ETrade almost always have a bonus offer going, so you may want to consider them. Fidelity sometimes does; you'd have to call to find out. But Vanguard does not do bonuses. Check the Doctor of Credit website for current bonuses -- https://www.doctorofcredit.com/best-bro ... p-to-3500/.
rkhusky
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Joined: Thu Aug 18, 2011 8:09 pm

Re: Resurrecting a dormant Roth account

Post by rkhusky »

BlackbirdKM wrote: Wed May 25, 2022 10:25 pm My father setup a Roth for me at TRP in 2002, and I contributed for a few years, but not since 2008. I just got into the account and see that it's 100% invested in RPMGX and seems to have actually done quite well. Now that I have money to start contributing again, is it wise to leave it in RPGMX or use the three fund approach (POMIX, PIEQX, PBDIX)? Follow-up question, should I leave things in TRP or move to Vanguard or Fidelity for the lower costs? Thanks!
It depends on what other investments you have, perhaps in a 401k.

I would go with (POMIX, PIEQX, PBDIX) over RPMGX. If you move to Vanguard/Fidelity/Schwab you would save on the order of 0.2% on the ER, which works out to about $200/year for a $100,000 portfolio. Whether that is worth it to you or not is a personal decision.

Welcome to Bogleheads!
Topic Author
BlackbirdKM
Posts: 3
Joined: Wed May 25, 2022 10:15 pm

Re: Resurrecting a dormant Roth account

Post by BlackbirdKM »

Thank you all for the replies. Sorry for the delay in responding - I didn't set notifications and assumed no one responded!

I edited the original post with as much info as I could gather right now, and slid in a 3rd question.

I don't have a lot going on right now and I have been very passive (because of ignorance) about investment thus far. Now that I'm making more money I want to make sure I'm at least following the general rules of thumb. I have an emergency fund and I get my full company 401k match. Sounds like the next step is the Roth IRA, which I just happened to have, but ignored it. So I want to first correct that, then move on to the next steps in the "financial advice for dummies" workflow!

thanks again.
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retired@50
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Location: Living in the U.S.A.

Re: Resurrecting a dormant Roth account

Post by retired@50 »

BlackbirdKM wrote: Fri May 27, 2022 12:29 pm I don't have a lot going on right now and I have been very passive (because of ignorance) about investment thus far. Now that I'm making more money I want to make sure I'm at least following the general rules of thumb. I have an emergency fund and I get my full company 401k match. Sounds like the next step is the Roth IRA, which I just happened to have, but ignored it. So I want to first correct that, then move on to the next steps in the "financial advice for dummies" workflow!

thanks again.
You might benefit from reviewing the Prioritizing Investments wiki page.

Link: https://www.bogleheads.org/wiki/Priorit ... nvestments

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
rkhusky
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Re: Resurrecting a dormant Roth account

Post by rkhusky »

I would max the 401k and Roth IRA before contributing to the 529.

I would max the 401k rather than putting more money into the TRP Roth IRA, unless you are paying a lot for the TR 2045 fund.

If you move the Roth to Vanguard, putting it into Target Retirement 2045 would make things easy.

I prefer to have all stocks in taxable for tax efficiency, once you are comfortable about handling emergency expenses and have enough in cash to pay expenses for several months. You can withdraw contributions from the Roth IRA tax and penalty free in a real unexpected emergency.

You can also contribute to a Roth IRA for her.
Topic Author
BlackbirdKM
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Joined: Wed May 25, 2022 10:15 pm

Re: Resurrecting a dormant Roth account

Post by BlackbirdKM »

I was going by the r/personalfinance flowchart that recommends maxing out the 401k after everything else, including 529 plans. Why would you recommend maxing out the 401k first?

How would you prioritize maxing out an HSA? My employer contributes $1k and I contribute $2k. I honestly had never considered maxing this out, because I wasn't aware of all the benefits until recently. So that's $4k short of the $7300 limit. Should I max that out before the 401k or Roth?

Thanks!
Doctor Rhythm
Posts: 3034
Joined: Mon Jan 22, 2018 2:55 am

Re: Resurrecting a dormant Roth account

Post by Doctor Rhythm »

401k before 529 because you can get a loan and financial aid to pay for college, but not for your retirement.

The 401k vs Roth choice is often more complicated. You don’t indicate your tax bracket, but in general, the higher your current tax rate is, the more beneficial it is to save pre-tax dollars. You’re guessing that you’ll be paying a lower tax rate during retirement when you withdraw.
JonnyBeRetired
Posts: 40
Joined: Tue Jan 15, 2019 10:49 am

Re: Resurrecting a dormant Roth account

Post by JonnyBeRetired »

BlackbirdKM wrote: Wed May 25, 2022 10:25 pm Questions:

1. I've had a Roth IRA invested RPGMX which I have contributed to since 2008. I am trying to get back on track, but would it be wise to switch to the three fund approach: Total Equity Market Index Fund (POMIX), International Equity Index Fund (PIEQX), QM U.S. Bond Index Fund (PBDIX)?

2. Should I leave things in TRP or move to Vanguard or Fidelity for the lower costs? I currently have my 401k in Vanguard, but I don't have any issues holding investments in different places if Fidelity is preferred.

3. I still have some extra money to put away. I believe the advice is to max out HSA, then max out 401k, then perhaps a taxable brokerage account. Is that correct?

Desired Asset allocation: unsure
Welcome to the forum, here are a few references to Bogleheads Wiki Pages to get you started.

Q1. Yes, the Three Fund Portfolio concept https://www.bogleheads.org/wiki/Three-fund_portfolio is a good choice, but all three types of asset don’t have to be in each type of account. For example, some people choose to hold 100% equities in Roth accounts (to concentrate growth in a tax-free space), nearly 100% equities in taxable accounts (to improve tax efficiency), and a mixture of asset types in deferred tax accounts (to facilitate rebalancing). See the Tax-efficient Fund Placement wiki https://www.bogleheads.org/wiki/Tax-eff ... _placement for guidance on which types of assets to hold in which type of account.

Q2. Lower costs are very important, especially over long periods of time, so do take some action to reduce the cost of your holdings. Shop the brokerages just like anything else - cost, convenience, service and bonuses/perks (as mentioned previously). We added a brokerage account inside of our TRP account and shifted our expensive mutual fund holdings into a single low-cost equity ETF because we receive a few nice perks from the TRP account. And in the case of a 401k roll-over we went with one of the major brokerages that was offering a nice bonus. We like both accounts, but TRP’s user interface is a bit more dated and less intuitive.

Q3. +1 to the advice above. Prioritizing Investments wiki https://www.bogleheads.org/wiki/Priorit ... nvestments for guidance on what order to fund various account types.

Q Asset Allocation. Many people are unsure about their asset allocation. Check out the Asset Allocation wiki https://www.bogleheads.org/wiki/Asset_allocation for guidance on choosing a personal asset allocation.

And for guidance on creating a statement of investment goals and objectives which is useful for recording your thoughts and decisions the Investment Policy Statement wiki https://www.bogleheads.org/wiki/Investm ... _statement is very useful.
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celia
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Location: SoCal

Re: Resurrecting a dormant Roth account

Post by celia »

I agree with someone above that you should be maxing out your spouse’s Roth IRA at the same time you are maxing yours. That will give you twice as much room for Roth contributions. And the Roth accounts should only hold stock funds as you want to maximize the tax-free growth in them. (Maximizing growth in tax-deferred accounts just means you are increasing your tax hit later on when you withdraw from those accounts.) :oops: So keep all the bond funds in tax-deferred — as well as other assets that don’t fit anywhere else.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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