ING Or Fidelity for Roth 401K??

[Ankh]

My wife's current job does not offer a 401K program. We are looking to open a Roth 401K for her (25 yrs. old). We don't have much money to invest into it right now and we will probably be rolling over the little she has from her previous job. We were looking into ING and Fidelity. Anyone have any suggestions on which company might be the better choice?

[kv968]

I would definitely say Fidelity. Someone just asked me this morning if they should open an IRA with ING and after looking it over I suggested they go with T Rowe Price, Vanguard or Fidelity. Not that there's anything dramatically wrong with ING's funds, but there's nothing special about them and the expense ratios are too high for what they are. The large-, mid- and small-cap funds are really nothing more than over-priced index funds. They don't offer anything great that Fidelity doesn't have and it's cheaper. Fidelity also has a monthly automatic account builder program you could use if you don't have all the money at once. That's my opinion

[TBH]

I don't think you can open a Roth 401k unless your employer offers it. 401k plans are still all available through employers. Someone please correct me if I'm wrong.

I think you're looking to open a Roth IRA. If you're going to roll an old workplace plan into it, you'll need to roll it into a Rollover IRA first, then convert that to a Roth.

Again, I could be wrong, but that was my impression.

I'm a happy Fidelity customer. You do need $2500 to open an account unless you sign up for an automatic investment plan (I think it's at least $50 monthly). If you don't have much to invest right now, I'd recommend going with one of their target-date retirement funds. I think your wife would be in the 2050 target date fund.

[Squantum]

I agree with TBH. I think that your only options if your employer does not offer a work-sponsored retirement plan is the IRA (either traditional or Roth). If you (in the generic sense, I realize you're talking about your wife) had some self employment income, that would open up additional options such as SEP IRAs and such. IRA contribution limits are lower than 401k contribution limits, unfortunately.

I also agree that Fidelity has a lot more options than ING, so I think that is better of the two things you are considering.

[kv968]

I totally missed the "Roth 401k" part. Thanks for pointing that out

[Ankh]

Thanks guys. Your advice is much appreciated. So let me make sure I understand something though. Are you saying that her old 401K plan from a previous employer is not transferable to a personal Roth 401K plan??

[sweeps]

Does your wife own a business? Only then would you want to consider an individual 401k plan. And I don't know of any major company offering individual Roth 401k's (yet).

Roll the 401k over to a Rollover IRA. And optionally convert that to a Roth IRA -- especially if your income is relatively low. Note that you'll have to pay some taxes upfront if you convert to a Roth.

[Ankh]

No, she works for a small company that does not offer a retirement plan. Okay, so we would have to pay some taxes upfront if we rollover to an IRA and then convert to a Roth IRA. Thanks...

[kv968]

Originally Posted by Ankh

No, she works for a small company that does not offer a retirement plan. Okay, so we would have to pay some taxes upfront if we rollover to an IRA and then convert to a Roth IRA. Thanks...

If you wouldn't mind and could leave the money in her 401k for another year, you would then be able to roll it right over into a Roth without going through the step process of a traditional to a Roth. In 2008 the law changes and allows a one-step conversion from an employer plan to a Roth. You'd still have to pay taxes on it but you wouldn't have to do all the paperwork on the two-step conversion. Just a thought.

[Ankh]

Thats a great idea. I think I will do that. This might be a dumb question but, Could we open up a Roth 401K for her now and when the time comes (2008) rollover the old employer 401K to the Roth 401K?

[kv968]

Originally Posted by Ankh

Thats a great idea. I think I will do that. This might be a dumb question but, Could we open up a Roth 401K for her now and when the time comes (2008) rollover the old employer 401K to the Roth 401K?

It's not a dumb question, but you can't open a Roth 401k for her. She can only have a Roth 401k if her employer offers one. I missed that in your original post, but others here have pointed it out and they're right.

Roth 401k = employer retirement plan
Roth IRA = individual retirement plan

I know it may all sound the same but it's not. You would be opening a Roth IRA and with that you can roll over the 401k from her previous job (paying taxes on it in doing so). You said that her current employer doesn't offer a retirement plan so there is no 401k. I know it's confusing, I had to recheck my wording to see if I kept it straight. I think I did and if not someone please correct me

[Ankh]

I didn't even realize that there was a difference. I understand now. We will be opening a Roth IRA for her. Thank you for clarifying that.

[kv968]

No problem, you're welcome. And thanks to the others who pointed out the "Roth 401k" thing from the original post. I missed it