Roth IRAs - A Retirement Thread

Hello Everyone!

As I am in countdown mode to retirement (okay, 3 years away but stilll . . .) I am always looking to make sure all my ducks are in a row as best I can. Once I retire, I plan to roll my company-matched 401k account to a Roth IRA. I've been checking out different financial firms for the best rates/reviews.

If this is not too personal of a question to you and if you have experience with this, which financial firm seems a good fit for you? Ideally, I would like access to my funds at any time, without or little penalty.

Thanks!

 

I took advantage of a Chase IRA self directed promo and rolled over my company account. Got $600 for rolling over 250k+. The process was straight forward and I did it completely online without customer service.

Since it’s self directed I haven’t really had to deal with customer service too much. The app is good and allows for light trading but on heavy days it tends to lag and have glitches refreshing. This is a retirement account and you should be buying and holding long term anyways. I like that my credit cards, banking, savings, and retirement account is integrated in one place.

 

Just about all of my equity is with ML, and they've been great. Easy to sell shares, usually settles within a day or so, and it takes about 30 seconds on the phone to get a check cut (they can do wire transfers that are pretty much immediate, but it's like an extra $6 and I'm cheap). Customer service is really friendly and efficient.

Unfortunately can't be of much help on IRAs, since mine kept getting moved around. I have one with Schwab and another with I-have-no-idea, but none of them started there. I'm trying to avoid touching them, anyway, so I haven't really had occasion to transact.

 

If your 401k is a traditional 401k and not a Roth 401k, you will need to pay income tax on the rollover into a Roth IRA, since the traditional 401k money has not been taxed yet, whereas Roth accounts are post tax. Alternatively you can rollover to a traditional IRA and you pay the income tax when you draw down your account in retirement. It has to be subject to tax once.

If your 401k is a Roth 401k, you already paid the income tax so you can rollover to the Roth IRA without being taxed again.

If you aren't sure which type of 401k you have, it's most likely a traditional. You usually have to opt in to a Roth 401k and aren't offered by all retirement plans.
This is the sort of thing you may want to speak to a professional about, as opposed to a bunch of gambling enthusiasts.

 

I find most of the full service firms are mostly the same, I would think about limiting your reviews to the ones that have a physical location close to where you live. For me Schwab is only a couple miles away and I have found them to be acceptable for my needs.

 

I use vanguard for their low costs and simple approach, but they might not be right for you. With a 3 year horizon, costs are less consequential since there is less time for compounding. They seem to be aggressively encouraging clients to use their professional advisors, which is worth considering if you need help.

 

I very much agree with this except for the physical location part -- in all my years of having bank accounts, the only times I've had to visit a physical location are (1) when I needed to make a deposit above the ATM/mobile limit, and (2) when I had to fill out a bunch of paperwork for a wire transfer to buy an engagement ring (and that fell apart, but at least I got some exercise out of it). You do want to have one that's accessible, but not necessarily right next door. But yeah, they're all pretty similar, and if you have a decent amount of money involved, you get better customer service.

 

I also like ML-

if the IRA will be used to buy/sell stock, very good execution/price improvement/dividend reinvestment program and they do not pay for order flow like some brokers.

Also, as they are a market maker, many times my trades were done in house

You may also want to open a checking account/credit card with Bank Of America-

Fund transfers on line to my checking account-so no need to request a check.

Depending on the size of the account, if you qualify for their preferred tiers, increased credit card cash back rewards (I get a 1.75 % bonus-so their 3% cash back category becomes 5.25%)

 

I was with Vanguard for decades until they screwed up their features on their cash management account. So 4 years ago I moved everything to Fidelity. At the time I thought having a local office was a bonus, but I have only been there twice and realize I like doing everything online, not in person. But, in general, i am happy with their fees and their app is very handy. Trade account and both Roth and regular IRAs.

 

At the company that I worked for, Fidelity was managing our traditional 401k. I also have a personal investment account with Fidelity and a Roth IRA. As was pointed out in an earlier post, if you have a traditional 401k, you will have to pay taxes on the proceeds if you convert it over to a Roth IRA, but any future earnings will grow tax-free. That's one of the benefits of the Roth, but depending on your tax bracket, you may be paying more up front in taxes.

When the time came, I had Fidelity roll over my 401k into what they called a Rollover IRA. How you want your funds invested is up to you. Most full service investment firms also have managed accounts where they'll handle how your funds are invested for a fee, if you don't feel comfortable doing everything on your own. My traditional bank accounts and non-retirement investments are with Chase/JP Morgan, since I didn't want to keep everything under one banking/investment company and Chase has locations conveniently located near my home.

 

Also if you have existing 401k accounts from previous employers, you could open an account somewhere and roll them over to an IRA now. (same type; i.e. traditional 401k > traditional IRA or roth 401k > roth IRA) As long as you are not converting a tax-deferred (traditional) to a tax-exempt (roth), you won't be subject to any income tax. You don't really need an advisor for this - you can just call the company where you want your new account and they can help you with the paperwork to fill it out. This might be a good way to see if you like them, and some of them might even give you an advisor and/or financial plan as a free tryout, in the hope that you will engage their services down the road. I have found this to be very valuable.

Keep in mind that there will be a few weeks starting the day your money has been cashed out of your old account and is moving to your new account, and ending the day your purchases in the new funds close. You won't be subject to any market swings up or down in this interim period since your money will be in cash. (not literal cash, but some kind of savings account)

 

Also keep in mind if you roll a regular 401k into a Roth IRA, not only will you have to pay taxes on it, it can push up your income to the point that you have to pay extra for Medicare. If you're close to qualifying age, that is.

 

I have multiple accounts at both Fidelity and Schwab. They are both very good.

Be careful of tax issues and Roth contribution limits when you convert your 401k. Any of the big firms can guide you through the process. If your 401k is a traditional 401k (funded with pre-tax dollars) you will likely need to convert your 401k to a Rollover IRA and then convert that to a Roth IRA. As noted by Azlefty above the conversion to a Roth IRA is taxable. Also, if you want to spread out the tax hit you don't need to convert the Rollover to a Roth all at once.

 

I may over value a physical location, but I would never use a discount on-line only broker like Robinhood.

 

You will need to also double check, when you open a Roth IRA, it will need to stay in the account for 5 years before you can make a withdraw.
You may want to only move a part of it to a Roth.

 

Access to funds are generally easy to get to - depending on what you have invested in. Some funds take a few days.

About 80% of ours in a managed fund. The rest is is self directed where I can buy and sell stocks whenever I want. I can also do online transfers that tend to take about 2 days into my checking account. I have some with Fidelity, Schwab and Etrade. All are pretty much equal.

 

All of the big players are very good if your plan is to hold an IRA with basic mutual funds/stocks/cash. Fees are very, very low now, and the technology is very good. Personally, I like Fidelity's tech better than Vanguard, but I also think the BofA credit card rewards spiff is very valuable and Merrill is also fine.

The question you need to answer is if you have other needs that matter, such as Joe's desire to have a cash management account work a certain way. Do you care about a local branch? Do you have a trust or something else that you'd want to handle as well? Do you want them to manage your invests via a roboadvisor or an actual personal managed account service? Do you have TOD/Will needs that are unique? Etc. Figure out what your needs are for the account/accounts, then I recommend you go read a few online reviews with pros/cons and reasons to pick different places. Also, consider looking at Bogleheads and doing a search of the forums for feedback.

Please, please, please, do read the advice in this thread on Roth vs. traditional - make sure your plan makes sense from a tax management standpoint. Most notably, company matches to a 401(k) are NEVER funded on a Roth basis due to Federal law, so make sure your ducks are in a row.

 

Robinhood isn't set up for IRAs; it's a setup to front run $100 GME stock trades by 25 year olds.

 

FYI, some 401(k) plans allow in-plan Roth conversions. It is rising in prevalence, especially in the large employer space.

 

I've got several years before I have to cross that bridge, but I've thought about leaving my 401k where it's at instead of rolling it over. I'm fairly happy with the management and the returns I get with my Company sponsored setup thru Principal.

That being said, I also have a traditional IRA that I max out each year to help lower my current taxes thru Ally to buy and sell stocks. I like them because they don't charge commission and any fees they charge on selling stocks have always been way under $1 even for large trades. Being a traditional IRA I can't pull my money out without taking a beating right now, but I have no intention of doing anything with it except playing the market. They don't bother me with "you should look at this stock/fund" which is the way I like it. No maintenance fees either.

My stepdad rolled his over to Edward Jones a long time ago. After my Mom passed and I started helping him with his finances, I looked into them. I don't like how they charge a commission for buying and selling anything and talking to an advisor just makes my skin crawl. After talking with my stepdad about what his plans for his money and stock trades were, I pointed him to Ally to just setup a regular trade account with some of the distributions from his EJ 401k. After seeing how much money he was paying them to give him advise he wasn't going to follow anyway, he's been weaning himself off them as quickly as he can take distributions without having to pay too much in taxes.

I guess what I'm trying to say it, how hands on with your retirement finances do you want to be? If you are going to dump money into funds for your ROTH and not touch it until you need money, then I'd look into systems like Ally where you don't have to pay them for every little thing. If you are going to be more hands on and make stock trades often, Ally is a cheaper way to go too. It comes down to, how comfortable you are managing your own retirement If you go with Ally.

Edit to add
I suggest to all my coworkers to make an IRA contribution every year to maximize retirement savings while they can. Even dumping the max for the next 3 years will add to your retirement savings and you may not even miss that $6000+ each year, but $18-20k in 3 years sure is a nice bonus.