Now that I decided to roll my 401k into a traditional IRA, the next step is to figure out the company that I should roll the money into. As the funds will likely remain in the same place until I’m past 60 years old, it is a decision that I should carefully analyze. I managed to narrow the choices into three and here are some pros and cons of each.
E*Trade
As many of you know, I’m a customer of E*Trade Financial. Currently, I have a brokerage account, Roth IRA as well as an online savings account with them. Adding the traditional IRA account is only natural and it will also allow me to see all my investments in one screen, cutting down on administration.
On the other hand, E*Trade’s big loan portfolio and the current mortgage crisis could possibly (amid a very small chance) mean disaster for the brokerage firm one day. If I look at the situation on a strict risk analysis basis, I should open an account elsewhere. (Note that I know about being able to recoup the money through insurance and protection but why put yourself through trying to get back 5 different accounts equaling your life savings all at the same time?)
Vanguard
Vanguard index funds are the most popular way of index investing. By going to a reputable name like Vanguard for my traditional 401k, I cannot really go wrong. I don’t have much experience with them but I’m extremely confident that I will be happy with their service (the low fee index funds also doesn’t hurt).
My concern with putting my 401k into a Vanguard index fund is that I may not be maximizing my potential reward by being too conservative. In general, index funds are a pretty safe way to capture gains from a long term upward movement in the stock market. Since my 401k is not redeemable until I’m 59 years and a 1/2, this means that I won’t need the money for another 32 years! With this type of time horizon, perhaps funds/stocks with bigger price movements than an index fund are more suitable for me.
Wells Fargo
Even though they have ridicules fees, this option for me is not out of the question. I’ve been so impressed with Wells Fargo through banking with them for the last 5 years that I might be willing to play extra to have my money invested with them.
The only negative I see with this is really the cost. They charge something like $75 per year for maintaining the account and this just might be too much.
What Do You Think?
If you were me, what would you do?
- E*Trade IRA - Official Site
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Personally, we love TRowePrice, it’s where all our retirement and mutuals are.
I hesitate to offer this suggestion, but you should check out Fidelity or Schwab. Fidelity is not likely to fail (unless everybody else does) and it offers great choices and very low commissions, especially if you have a lot of funds to invest ($8 if over $1 million in assets, 10.95 if over $50k). I’d suggest putting a lot of your money in ETFs, as you pay a one-time fee of $8 or $10.95 no matter how many shares you buy (ETFs cost much less than even the lowest-cost index funds).
Hate to muddy the waters, but you could get some great ETFs “on sale” right now for next to nothing in fees.
david: Thanks for the suggestion! I will definitely check it out!
Bill Davis: Hmm $1 million might be a little too much for me right now but $10.95 isn’t bad I guess since I probably won’t treat that often with this account.
ETFs a good idea. I will look into it once I switch over and have access to stocks/funds/ETFs etc.
If you are already agressive with the Roth and the investments, it doesn’t hurt to have a conservative side to the three legged stool. I like vanguard. I like Van Kampen.
Thru my Edward Jones account, I have the option of splitting up my IRA into various components… part are in conservative funds, but some is in very agressive funds. I like being able to have that flexibility to move things around within the traditional IRA.
David,
I’m hurt. That is what we do. :O)
Actually our niche is CDs so at this point not a good option for you, given your age.
Our broker/dealer uses a lot of Charles Schwab’s products.
Honestly, since we mainly deal with CDs, I don’t check on most of the other things. Our company plan goes through Fidelity. There fees same high.
Good luck.
I love Vanguard and based on that list I would probably go with them. You do know that you can invest in more than just index funds with them of course, right? You’ve got access to stocks, bonds, funds… even options! Like I said if it was me I would go with them.
Otherwise T Rowe price is a good option as well.
I have heard that Fidelity is cheapest to open an IRA in terms of fees. But of course it all depends on what you want to invest your funds into. If you want to purchase individual stocks, you might want to open an acocunt at Zecco or sharebuilder. If you want to have mutual funds instead, then go for fidelity.
If Warren Buffet is happy with index returns, shouldn’t we all be?
Our stuff is with Vanguard.
I think that buying an index fund is fine for passive investing. Passive investing reulted in a 40% loss for “passive” investors in 2008. You would now need to make 65% to recover. I used to be a passive investor during the dot.com crash and vowed that never again would I take more time taking out the trash than I did managing my most critical assets. I learned how to use market timing techniques and made money last year.
There are groups of advisors in an organization called NAAIM. National Association of Active Investment Managers. Don’tt be passive. If you don’t have the tools to manage hire a professional that does. You may have to pay them more than a index fund but you will have someone that gets up every morning and thinks about where your money has to be to safely make money that day and every day. Even in Bear markets.
I personally believe in finding a financial advisor, i guess when i was young i was told that you dont go to a doctor to get your car fixed, and i guess my retirement and financial planning is more important to me then a cheap servicing fee. But that is just my opinion. The way I look at it i am willing to pay 1% to a advisor when it is his profession, alot of my friends try to do it themselves, but i always say..i would rather pay 1% more in fee to a professional advisor then have cheap fees and loss more. I feel a advisor protects me from losing to much on the downside, and also helps me on the upside to gain more of the profits. just my take on it, i stick with a advisor.