Cut losses and move on to something better?

[kv968]

Well, today was almost break even day for the CGMFX so I decided to cash in 20K of it and use that 20K to fund a new Roth IRA for the wife and I for this year and next year.
I think I will get a Roth into a Targeted fund 2025 or 2030 date, and then use the other half to go a little more risk/reward in a separate ROTH.
Then after the first of the year, do some DCA in each one of them to have them fully funded next year, from the remainder of the 20K.

Glad to hear you were back to almost breakeven. Going with Vanguard was a good choice. A heck of a lot less expensive than CGMFX that's for sure.

You mentioned that you're going to go for more risk/reward in a SEPARATE Roth. Why are you going into a separate Roth? Are you going to open it with another fund family or brokerage?

[woodie96]

KV...My plan was to contribute the full 5K to one of the target date funds for myself, and contribute a full 5K to another fund for my wife with a more aggressive approach before the April 15th tax deadline.
.
I think for simplicity sake, I will go with Vanguard on both.

Doing it that way will lower our taxable income by 10K this year, and I will have the additional 10K in the bank (left over from the 20K CGM cashout) to fully fund them both next year doing a DCA type approach.

Elessar..Both of us turn 49 this year.

[woodie96]

OOPS....Moving the funds from the CGMFX fund to the Roth IRA will not lower my tax bracket. The wife and I can contribute up to 10K, but since we make above the threshold for contribution credit, we won't be seeing any of that, just tax breaks for later.

[Petunia 100]

The problem with work-based 401k plans is for some strange reason they don't seem to be administered by the "money minds" of the company. No offense to HR people, but they don't really seem to grasp the fundamentals of this stuff. The really rich guys in the company, have their own advisers so they are insulated from this problem.

As I and my wife have experienced with our own 401Ks through work, we are beholden to a set of funds that are tragically expensive to own. But how do you get around it when the company is matching?

The common belief is contribute up to the match and then go outside the company for the rest.

If you have a voice in your company, point out that if they are matching 4% then they're not even covering the load/buy-in fee (the math isn't spot on because you pay in year one, but you get the point). They are basically paying the management company and not helping secure their employees retirement years.

If the investor moves his money around a lot, he's constantly paying that sales fee.

This is bad math. Percentages can only be compared when they have a common base. A 4% match of your annual salary is not comparable to a 5.75% load of your 401k contribution, unless you are contributing your entire salary. In point of fact, the match is not 4%. The match is 100%, up to 4% of salary.

So if I contribute $100 and, receive a free $100, then lose $11.50 to a sales load, do I come out ahead? Yes, I do. Take any positive number, double it, and subtract 5.75% of the total and you will ALWAYS end up with a bigger number than you started with. It is a mathematical certainty.

Assuming that the loads are even being charged inside the 401k plan, which is uncommon.

[woodie96]

Comparing my statement and my pay stubs, the amount is the same.
So it appears that we have the fee waived.

Cool, now I get to keep that money...LOL

[Petunia 100]

OOPS....Moving the funds from the CGMFX fund to the Roth IRA will not lower my tax bracket. The wife and I can contribute up to 10K, but since we make above the threshold for contribution credit, we won't be seeing any of that, just tax breaks for later.

If you are over the income limits for contributing to a Roth, you can still contribute to a traditional IRA and then convert. (There are no income limits to convert a traditional IRA to a Roth). If you have no existing traditional, SEP, or Simple IRAs with deductible contributions, then converting is not a taxable event.