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To the financial gurus out there:

I'm switching jobs and looking to rollover my roth 403B. New employer offers a 401K but what are the benefits of rolling the money to an IRA? Is an IRA from one place e.g. Fidelity better than others? I'm far from retiring. What questions should I asking or what things should I be considering? 

Thanks!

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I would roll it over into a Roth IRA if it’s a Roth 401k-like instrument. It gives you investment flexibility and probably lower fees than where it is now. Leaving stranded 401ks all over when you change jobs just makes your financial life more complicated that it needs to be.

I would compare Fidelity and Vanguard. Both have been good for us.


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Definitely roll it over, and I would absolutely recommend rolling it into an IRA.  As UGoLong said, being in a personal IRA you will likely have lower fees and you will have more investment fund options.

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By the way, wherever you decide to move it, the new firm can handle all of the paperwork. You don't have to deal with the firm holding the 401-k. In fact, you want to be hands-off so the money goes from the old firm to the new one without flowing through you and forcing you to pay taxes on it now.

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13 hours ago, mgriffiths said:

Definitely roll it over, and I would absolutely recommend rolling it into an IRA.  As UGoLong said, being in a personal IRA you will likely have lower fees and you will have more investment fund options.

 

12 hours ago, UGoLong said:

By the way, wherever you decide to move it, the new firm can handle all of the paperwork. You don't have to deal with the firm holding the 401-k. In fact, you want to be hands-off so the money goes from the old firm to the new one without flowing through you and forcing you to pay taxes on it now.

Thank you both. I ended up calling Fidelity to speak with their financial planner and he actually recommended I reach out to the firm holding my 403B to initiate the rollover.  🤔 He also mentioned that the IRA is more vulnerable to claims like lawsuits.  How do you protect yourselves from that? 

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12 minutes ago, MSPAC2 said:

 

Thank you both. I ended up calling Fidelity to speak with their financial planner and he actually recommended I reach out to the firm holding my 403B to initiate the rollover.  🤔 He also mentioned that the IRA is more vulnerable to claims like lawsuits.  How do you protect yourselves from that? 

Sounds like strange advice actually. You might call Vanguard and see what they say. I've rolled over a couple of times and never had to initiate anything.

As far as shielding resources from a malpractice claim, I don't know what to tell you since I've not been sued to this point. If you're worried, I would talk to a lawyer.

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With one plan, you enter pre-tax money – 403(b). With the other plan, you enter post-tax money – Roth IRA. Tax savings is going from one pocket into the other. Thus, it’s splitting strategies.

What I tell people is to take a step back and look at all of their strategies. It’s hard for us to compartmentalize each financial action…but all are related and affected by one another.

How you pay off your mortgage will affect your retirement. How you plan for retirement will affect your liquidity. How high or low your credit score is will affect your credit card payment. And so on…

For me, I think it’s best to take a macro view of our finances to make sure that everything is firing on all cylinders. Just something to consider…

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The main benefit to rolling over to a roll over. IRA is that you maintain complete control.  I think the advisor at Fidelity  is  wrong about the IRA being exposed in a law suit. My understanding is that all retirement assets are protected. Just make sure you have your own malpractice insurance 

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5 minutes ago, VeryOldPA said:

My understanding is that all retirement assets are protected. Just make sure you have your own malpractice insurance

I believe this is state dependent.  Generally speaking it is my understanding that 401k/403bs are more protected, but only certain states make them virtually untouchable.

But, generally speaking EVERYONE should be contributing to both.  Contribute to your employer sponsored 401k/403b until you have gotten the full employer match, then fill your personal IRA (decide whether traditional or Roth is better for you), then finish filling your 401k/403b.  If there is anything left to invest after that then you can look into brokerage accounts, backdoor roths, or let me know and I'll send you my bank account and routing number! 🤣

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young one's   - -  listen up!!

how to retire  multimillionare

 

1) start an ROTH IRA as soon as you can - think early 20's here - before you get used to the big salary just contriubute the max amount to it each year (most important for the first 10-15 years

2) if you have a 401(k) or 403(b) then you neeed to contriubute enough to get the match

3) do not carry CC debt

with this alone you will retire with multimillions in the bank.....

 

 

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What if you “earn too much” for a Roth? My financial advisor got me into an IUL as it’s virtually tax free (you pay into it with money that’s already been taxed) but I’m starting to doubt its value to aid in retirement. Any advice?


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47 minutes ago, NYCPAC said:

What if you “earn too much” for a Roth? My financial advisor got me into an IUL as it’s virtually tax free (you pay into it with money that’s already been taxed) but I’m starting to doubt its value to aid in retirement. Any advice?


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Look into "Backdoor" Roths.  Essentially you create a a traditional IRA then immediately switch it over to a Roth.  There are some hoops to jump through and multiple ways to screw yourself if you're not careful so I'd advise speaking with a financial planner/tax person...Not me.

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2 hours ago, NYCPAC said:

What if you “earn too much” for a Roth? My financial advisor got me into an IUL as it’s virtually tax free (you pay into it with money that’s already been taxed) but I’m starting to doubt its value to aid in retirement. Any advice?


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Of course your financial advisor recommended an IUL. He made a huge commission by selling it to you. An IUL is a whole life insurance policy and has no place in your retirement portfolio. I recommend that you  1) Dump your advisor -STAT.  He’s more concerned with making money off you than what’s best for you. 2) find a fee only advisor that charges you by the hour. NEVER EVER UNDER ANY CIRCUMSTANCES USE AN ADVISOR THAT IS A BROKER OR IN ANYWAY SELLS ANY FINANCIAL PRODUCTS !!!  3) Don’t put another dime into the IUL.You will no doubt loose money in the short term but in the long term you’ll be better off.  4) if you are not eligible for a Roth then start a Traditional. IRA.  5) maximize your contributions to an employer 403 (b) or 401 (k) if you have that option available to you.

Disclaimer; I speak from experience. Many years ago a a broker posing as a financial advisors cost me about $10K.  I was lucky enough to have a family member who was the CEO of an insurance company that sold whole life policies.  HIs advice was to never consider insurance as an investment. No load mutual funds (Vanguard orFidelity) for retirement and level term life insurance if you need life insurance
BTW your advisor will try to talk you out of getting out of the IUL because HE will lose a ton of money

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Of course your financial advisor recommended an IUL. He made a huge commission by selling it to you. An IUL is a whole life insurance policy and has no place in your retirement portfolio. I recommend that you  1) Dump your advisor -STAT.  He’s more concerned with making money off you than what’s best for you. 2) find a fee only advisor that charges you by the hour. NEVER EVER UNDER ANY CIRCUMSTANCES USE AN ADVISOR THAT IS A BROKER OR IN ANYWAY SELLS ANY FINANCIAL PRODUCTS !!!  3) Don’t put another dime into the IUL.You will no doubt loose money in the short term but in the long term you’ll be better off.  4) if you are not eligible for a Roth then start a Traditional. IRA.  5) maximize your contributions to an employer 403 (b) or 401 (k) if you have that option available to you.
Disclaimer; I speak from experience. Many years ago a a broker posing as a financial advisors cost me about $10K.  I was lucky enough to have a family member who was the CEO of an insurance company that sold whole life policies.  HIs advice was to never consider insurance as an investment. No load mutual funds (Vanguard orFidelity) for retirement and level term life insurance if you need life insurance
BTW your advisor will try to talk you out of getting out of the IUL because HE will lose a ton of money

He already has tried. He loves the throw the idea of taxes later at me but I realized today that the cost of insurance is 18% right now on a $500/Mo premium. I want to dump this is find someone trustworthy about retirement solutions but feel overwhelmed


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It can be overwhelming.  I’ve been reading up on this stuff for over 40:years and have learned from my mistakes.  Best advice I can give you is to get yourself a fee only advisor you can trust and go with no load mutual funds. For a novice like you Vanguard would be a good choice  there funds are just about all no load index funds  Another caveat is to never buy our invest in anything that you don’t completely understand. I was fortunate enough to find a CPA who is also a Certifiend Financial Planner  I’m happy to chat with you if you’d like  just email me 

 

 

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To the young PAs out there, open roth IRA, max it out and enjoy compound interest. Vanguard is great, has very low fees and you get select a target date retirement fund that changes allocation from stocks to bonds as you get closer to retirement. 

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On 9/1/2020 at 2:32 PM, MSPAC2 said:

New employer offers a 401K but what are the benefits of rolling the money to an IRA?

YOU get to control it.  Sometimes employers have plans that have much higher fees/charges, and have worse performance, than what one can easily find on your own.  Some employers offer wide spectrum of investments at low cost, others not so much.  Rolling it into your OWN IRA allows YOU to have better control of it.

 

On 9/1/2020 at 2:32 PM, MSPAC2 said:

Is an IRA from one place e.g. Fidelity better than others?

Better is a subjective term, but they differ in how MUCH they cost, how those costs are FUNDED, and of course performance.

First, let's talk about how the costs (ie: how companies like Vanguard, Fidelity, or Dodge & Cox make money) are funded.  Sometimes you pay a set price for every purchase, sometimes you pay a percentage of every transaction, but most of the time with retirement accounts the company just skims a little off the top every year.  

That amount that they skim off the top varies GREATLY.  For example, my Vanguard's S&P 500 mutual fund (VFIAX) costs me 0.04% of what I have in there every year.  But what I have in my Fidelity S&P 500 mutual fund (FXAIX) costs me 0.015% every year.  Years ago I had an account with Dodge & Cox that was costing me 0.45% every year.  

But then you can compare how good these funds do!  Back when I had the Dodge & Cox account I was paying much more in fees, but their performance was tracking 1-2% better a year than most every mutual fund.

You can get really in the weeds comparing different companies and different funds within the companies.  Most people don't, and I would argue most people don't need to.  A simple strategy is look for low cost mutual funds (0.015% - 0.05% is good for domestic funds like a S&P500 fund), and then diversify a bit by having most of it in a good S&P 500 fund, but some of it in small cap funds (a mutual fund that owns small businesses), and then some in international (often called "emerging markets").
 

On 9/1/2020 at 2:32 PM, MSPAC2 said:

What questions should I asking or what things should I be considering? 

The MOST important thing about investing is to absolutely understand WHAT you are investing in.  If you invest in a S&P500 fund, just understand WHAT that means.  It's not that complicated.   If you don't know what it means to short sale, or what a derivative is, or what a futures contract is...then DON'T invest in them.  In my opinion, the only people who get rich on these kinds of things are people with insider knowledge (Like Hillary Clinton investing $1000 in a cattle futures contract that turned into $100,000 in ten months).

As a corollary to that - KEEP IT SIMPLE.  Simple enough for you to understand it, and with as few steps as possible.  I haven't done short sales, or bought derivatives or futures contracts, but I've done some complicated real estate deals.  I usually wind up not liking these deals (although I had one turn out very good).

Read one investment/money book a year.  I would start with Dave Ramsey's "Total Money Makeover" unless you are completely and totally out of debt.  

WARNING:  As UGoLong and others said, make SURE your money goes from one company directly to the other, without ANY of it going to you.  If 403(b) company sends YOU a check, then they will report it to the IRS and you will have to pay taxes and penalties on it even if you then send that to new company (you can get the tax money back when you file, but becomes big headache).  This has to be initiated by YOU and the company where you have your money AT (ie: your 403B money).

 

On 9/2/2020 at 9:21 AM, MSPAC2 said:

He also mentioned that the IRA is more vulnerable to claims like lawsuits.  How do you protect yourselves from that? 

This is state specific.  I had a better website at one time, but here is this:  https://www.nolo.com/legal-encyclopedia/bankruptcy-exemptions-state#:~:text=Bankruptcy exemptions play a large role in both,the 50 states. Alabama. Alaska. Arizona. Arkansas. California.

And just to clarify, it's not vulnerable to claims like lawsuits, it's whether or not it 's protected from bankruptcy.  If you are successfully sued for 10 million, and our malpractice is for $1M, then you owe the litigant $9M.  That's when you file bankruptcy.  States have variable laws regarding protection of property from bankruptcy.  Please note that many states protect your primary residence from bankruptcy, which can make it a good idea to have a paid-off home.
 

On 9/2/2020 at 1:44 PM, mgriffiths said:

But, generally speaking EVERYONE should be contributing to both.  Contribute to your employer sponsored 401k/403b until you have gotten the full employer match, then fill your personal IRA (decide whether traditional or Roth is better for you), then finish filling your 401k/403b. 

This will depend on what kind of IRA you have.  For example, you cannot invest in a SEP-IRA if you have access to investing to a 401K.  Additionally, investing in a company 401K AND in a personal IRA could put you over the annual pre-tax investment limits and get you in trouble (same with investing in multiple 401Ks at different jobs).  

 

7 hours ago, NYCPAC said:

My financial advisor got me into an IUL as it’s virtually tax free (you pay into it with money that’s already been taxed) but I’m starting to doubt its value to aid in retirement. Any advice?

An IUL is an Indexed Universal Life policy.  As with ALL universal life/whole life policies, this makes the car payments for the guy who sold it to you.  My advice is to call your financial advisor tomorrow and cancel every single account you have with him because he is ripping you off.

If you need life insurance, get a TERM life insurance.  Much cheaper and more coverage.

If you want to invest, then invest in the stock market/real estate/whatever.

But insurance agents have combined those two things to make an overpriced, underperforming product that makes THEM rich.

 

4 hours ago, NYCPAC said:

I want to dump this is find someone trustworthy about retirement solutions but feel overwhelmed emoji30.png

You PRACTICE MEDICINE.  You can easily learn basic insurance and retirement solutions, and then YOU will be that trustworthy person!








 

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53 minutes ago, Boatswain2PA said:

YOU get to control it.  Sometimes employers have plans that have much higher fees/charges, and have worse performance, than what one can easily find on your own.  Some employers offer wide spectrum of investments at low cost, others not so much.  Rolling it into your OWN IRA allows YOU to have better control of it.

 

Better is a subjective term, but they differ in how MUCH they cost, how those costs are FUNDED, and of course performance.

First, let's talk about how the costs (ie: how companies like Vanguard, Fidelity, or Dodge & Cox make money) are funded.  Sometimes you pay a set price for every purchase, sometimes you pay a percentage of every transaction, but most of the time with retirement accounts the company just skims a little off the top every year.  

That amount that they skim off the top varies GREATLY.  For example, my Vanguard's S&P 500 mutual fund (VFIAX) costs me 0.04% of what I have in there every year.  But what I have in my Fidelity S&P 500 mutual fund (FXAIX) costs me 0.015% every year.  Years ago I had an account with Dodge & Cox that was costing me 0.45% every year.  

But then you can compare how good these funds do!  Back when I had the Dodge & Cox account I was paying much more in fees, but their performance was tracking 1-2% better a year than most every mutual fund.

You can get really in the weeds comparing different companies and different funds within the companies.  Most people don't, and I would argue most people don't need to.  A simple strategy is look for low cost mutual funds (0.015% - 0.05% is good for domestic funds like a S&P500 fund), and then diversify a bit by having most of it in a good S&P 500 fund, but some of it in small cap funds (a mutual fund that owns small businesses), and then some in international (often called "emerging markets").
 

The MOST important thing about investing is to absolutely understand WHAT you are investing in.  If you invest in a S&P500 fund, just understand WHAT that means.  It's not that complicated.   If you don't know what it means to short sale, or what a derivative is, or what a futures contract is...then DON'T invest in them.  In my opinion, the only people who get rich on these kinds of things are people with insider knowledge (Like Hillary Clinton investing $1000 in a cattle futures contract that turned into $100,000 in ten months).

As a corollary to that - KEEP IT SIMPLE.  Simple enough for you to understand it, and with as few steps as possible.  I haven't done short sales, or bought derivatives or futures contracts, but I've done some complicated real estate deals.  I usually wind up not liking these deals (although I had one turn out very good).

Read one investment/money book a year.  I would start with Dave Ramsey's "Total Money Makeover" unless you are completely and totally out of debt.  

WARNING:  As UGoLong and others said, make SURE your money goes from one company directly to the other, without ANY of it going to you.  If 403(b) company sends YOU a check, then they will report it to the IRS and you will have to pay taxes and penalties on it even if you then send that to new company (you can get the tax money back when you file, but becomes big headache).  This has to be initiated by YOU and the company where you have your money AT (ie: your 403B money).

 

This is state specific.  I had a better website at one time, but here is this:  https://www.nolo.com/legal-encyclopedia/bankruptcy-exemptions-state#:~:text=Bankruptcy exemptions play a large role in both,the 50 states. Alabama. Alaska. Arizona. Arkansas. California.

And just to clarify, it's not vulnerable to claims like lawsuits, it's whether or not it 's protected from bankruptcy.  If you are successfully sued for 10 million, and our malpractice is for $1M, then you owe the litigant $9M.  That's when you file bankruptcy.  States have variable laws regarding protection of property from bankruptcy.  Please note that many states protect your primary residence from bankruptcy, which can make it a good idea to have a paid-off home.
 

This will depend on what kind of IRA you have.  For example, you cannot invest in a SEP-IRA if you have access to investing to a 401K.  Additionally, investing in a company 401K AND in a personal IRA could put you over the annual pre-tax investment limits and get you in trouble (same with investing in multiple 401Ks at different jobs).  

 

An IUL is an Indexed Universal Life policy.  As with ALL universal life/whole life policies, this makes the car payments for the guy who sold it to you.  My advice is to call your financial advisor tomorrow and cancel every single account you have with him because he is ripping you off.

If you need life insurance, get a TERM life insurance.  Much cheaper and more coverage.

If you want to invest, then invest in the stock market/real estate/whatever.

But insurance agents have combined those two things to make an overpriced, underperforming product that makes THEM rich.

 

You PRACTICE MEDICINE.  You can easily learn basic insurance and retirement solutions, and then YOU will be that trustworthy person!








 

Excellent advice!

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2 hours ago, MediMike said:

Dangit @Boatswain2PA...I almost liked one of your posts, until you had to throw the Clintons into it.

Am I wrong? Come on over to the RIGHT side, you dont have to agree with everything! lol

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One thing to think about is contribution limits:

  • IRA: $6,000/yr for 2020, $7,000 if you're 50 or older
  • 401K: $19,500/yr for 2020, $26,000 if you're 50 or older - this is for the employee contribution.

Net: it often makes sense to contribute extra to your 401K, even beyond what's needed to maximize the employer match.   It's a better way to put aside more money pre-tax for retirement.

Also, if you can max out your HSA account, do so.  Contributions are pre-tax.  Withdrawals for medical purposes aren't taxed.  After age 65, you can treat it like it like another IRA with withdrawals taxable like IRA withdrawals.

Edited by ohiovolffemtp

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8 hours ago, ohiovolffemtp said:

Also, if you can max out your HSA account, do so. 

As long as it is an investment HSA.  I see many HSAs are just money market/savings accounts.

And with HSAs you do not have to pay/reimburse the year of the expenditures.  In other words you can save up your receipts for years/decades (while your investment HSA grows) before you reimburse yourself with tax free money.

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