Retirement Plans

[NetSkyBlue]

I'm on the verge of changing jobs, and I'm considering what to do about my retirement savings. I currently have a 401(k) with Fidelity, but my new employer does not offer a 401(k) plan. I want to open a Roth IRA and keep contributing the same amount I was contributing to the 401(k). I believe I can move the 401(k) to a Rollover IRA.

The problem is, Fidelity's minimum requirement to open a Roth IRA is $2500 or $200/month deposit. I'm looking at only being able to contribute about $110 a month, and it will take me over a year to save up $2500.

Do you think it's possible to distribute part of my 401(k) to the Roth, and the rest to the Rollover IRA? I can stomach paying taxes on an extra $2500, but not an extra $12k.

What do you think is my best option here?

[disneysteve]

Once you roll over the 401k to an IRA, you could then do a partial conversion to a Roth with some of the money (and pay taxes on that amount). I believe that would work and would accomplish your goal.

One thing to keep in mind is that you contribute to the 401k pre-tax and will have to fund the Roth post-tax so putting the same amount into the Roth as you were putting into the 401k will be a bit more difficult.

[NetSkyBlue]

Originally Posted by disneysteve

One thing to keep in mind is that you contribute to the 401k pre-tax and will have to fund the Roth post-tax so putting the same amount into the Roth as you were putting into the 401k will be a bit more difficult.

This is true, but I'm looking at a $3000/year raise, and I'm in negotiations now, so hopefully I will be able to talk them into signing an agreement to increase my pay by certain amounts when x, y, & z happens. I can afford the same amount even without the tax savings right now, and hopefully more later.

[kv968]

Originally Posted by NetSkyBlue

The problem is, Fidelity's minimum requirement to open a Roth IRA is $2500 or $200/month deposit. I'm looking at only being able to contribute about $110 a month, and it will take me over a year to save up $2500.

What do you think is my best option here?

If you're not dead set on staying with Fidelity and don't want to pay taxes on the $2500, the minimum requirement to open a Roth IRA at T Rowe Price is $1000 and the minimum additional investment is $100/ month. Vanguard also offers the same requirements on their target retirement funds and their STAR Fund.

[NetSkyBlue]

Originally Posted by kv968

If you're not dead set on staying with Fidelity and don't want to pay taxes on the $2500, the minimum requirement to open a Roth IRA at T Rowe Price is $1000 and the minimum additional investment is $100/ month. Vanguard also offers the same requirements on their target retirement funds and their STAR Fund.

I have been happy with Fidelity so far and their customer service has been very good (though maybe that was because they wanted to stay in good with my employer, rather than for my paltry investments?)

I don't know that paying tax on an additional $1500 this year is really going to be that much of a difference in the long run, and maybe I'd be better off with an additional $1500 in the Roth? I think that's about a $400 difference, in the 25% tax bracket. Plus wouldn't there be fees to transfer it to a new company?

Truly, I'd just as soon put it all in the Roth for the ease of looking after only one account, but that's just too big of a tax hit.

Should I consider switching to a different company for a better selection of funds? I'm not a savvy investor, and it's most important to me to have someone to guide me towards the best investment decisions for my goals. Have you worked with T Rowe Price or Vanguard? Is this something I can expect from them?

[jpg7n16]

Originally Posted by NetSkyBlue

Should I consider switching to a different company for a better selection of funds? I'm not a savvy investor, and it's most important to me to have someone to guide me towards the best investment decisions for my goals. Have you worked with T Rowe Price or Vanguard? Is this something I can expect from them?

Why do you think Fidelity doesn't have a good selection of funds?

You've probably been previously limited to the options allowed by your 401k, but that's by no means all the funds they have available.

Using their MF screener, there are 1,712 different MFs you can buy at Fidelity with no commission. And a total of 9,700 funds offered by Fidelity. That should be plenty of options for whatever you're looking to do.

Fidelity Investments: Research - Mutual Funds

They also have free investment guidance no matter how much you have in your account. There are some free portfolio tools online, and I know you can call and ask to speak with someone too.

https://guidance.fidelity.com/retirement-guidance

[NetSkyBlue]

Originally Posted by jpg7n16

Why do you think Fidelity doesn't have a good selection of funds?

I don't think they don't have a good selection of funds. I thought the previous poster might be suggesting that the other companies DO have a better selection, I have never looked into any other companies.

[kv968]

Originally Posted by NetSkyBlue

I have been happy with Fidelity so far and their customer service has been very good (though maybe that was because they wanted to stay in good with my employer, rather than for my paltry investments?)

I don't know that paying tax on an additional $1500 this year is really going to be that much of a difference in the long run, and maybe I'd be better off with an additional $1500 in the Roth? I think that's about a $400 difference, in the 25% tax bracket. Plus wouldn't there be fees to transfer it to a new company?

Truly, I'd just as soon put it all in the Roth for the ease of looking after only one account, but that's just too big of a tax hit.

Should I consider switching to a different company for a better selection of funds? I'm not a savvy investor, and it's most important to me to have someone to guide me towards the best investment decisions for my goals. Have you worked with T Rowe Price or Vanguard? Is this something I can expect from them?

I wasn't saying that Fidelity isn't a good company or that they don't have a good selection of funds. As jpg said, they have plenty and you might just be looking at what they make available to you in your 401k. Heck, they probably have more in-house funds than T Rowe and Vanguard combined. I was just showing you other fund families that don't require the initial $2500 contribution which I though was a problem for you. I personally have my Roth with T Rowe Price and my 401k is through Fidelity, but either of them and Vanguard are all good companies.

And as far as fees, I don't know if your 401k plan would charge anything for moving it, but none of the fund families you go to will charge you anything to roll it over to them.

What you could do tax-wise regardless of which company you go with is, as DisneySteve pointed out, roll your 401k into a rollover IRA and then every year convert some of that money (whatever you feel you can pay taxes on) into a Roth.