Roth Rollovers, taxes, expenses


D

DanielleOM

I find myself wondering how to best evaluate rollovers to a roth IRA.
Although there may be tax advantages, I don't see any funds or ETFs that
can beat my company 401K choices when it comes to fees / expenses.


Danielle
 
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R

Ron Peterson

I find myself wondering how to best evaluate rollovers to a roth IRA.
Although there may be tax advantages, I don't see any funds or ETFs that
can beat my company 401K choices when it comes to fees / expenses.
Use partial rollovers to avoid getting into a higher tax bracket. And,
don't pay the taxes out of your 401k.

If your 401K has good choices, stick with it. It's safer after you
leave the country to move the 401K assets to an IRA or Roth.
 
E

Elle

I find myself wondering how to best evaluate rollovers to a roth IRA.
Although there may be tax advantages, I don't see any funds or ETFs that
can beat my company 401K choices when it comes to fees / expenses.

Can you share the funds and their expense ratios that your 401(k)
offers?
 
J

JoeTaxpayer

I find myself wondering how to best evaluate rollovers to a roth IRA.
Although there may be tax advantages, I don't see any funds or ETFs that
can beat my company 401K choices when it comes to fees / expenses.
There's a bit of math and a bit of assumption to be made. For most
people, the Roth conversion is much ado about nothing, as most people
won't save enough to find themselves in a higher bracket at retirement.
For those who have a great pension, IRA withdrawals at retirement may
very well push them into a higher bracket. So the math starts with
looking at your current marginal rate and understanding what your
retirement rate will be. 15% now but 25% at retirement? Converting now
to 'top off' the bracket may make sense. But, look at the extra cost and
decide if the 10% savings is worth that annual cost.
 
D

DanielleOM

Can you share the funds and their expense ratios that your 401(k)
offers?













Large US Equity




0.01
Small US Equity


0.02



















International Equity




0.06
Emerging Market


0.21




Hopefully the above formats OK when I send after cutting, pasting and
editing from a spreadsheet.

Danielle
 
J

JoeTaxpayer

Large US Equity 0.01
Small US Equity 0.02
International Equity 0.06
Emerging Market 0.21
Sorry, a .01% (one hundredth of 1%) cost on Large Equity?
If that's correct, it's amazing.
Until now I've been bragging I pay .05%. I'll stop.

Joe
 
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E

Elle

Large US Equity

        0.01
Small US Equity

                0.02

International Equity

        0.06
Emerging Market

                0.21

Hopefully the above formats OK when I send after cutting, pasting and
editing from a spreadsheet.

Assuming those are all percentages (ranging from 0.01%, 0.21% above),
I have never seen such low ones. (I assume there are no loads on
these funds; if there are loads, please correct me.)

I understand your point. The low expense ratios (and no loads) are
indeed an argument not to rush to a Roth. Still, there may be good tax
reasons to rollover slowly. Numbers need to be run for your situation.
In addition to considering the advice here, there are online
calculators and much discussion of this topic, if you had not seen it
already.

I was mostly curious. It is good to read about such great expense
ratios in a 401(k). Just ten years ago highway robbery was routine
when it came to 401(k) expense ratios on funds.
 
D

DanielleOM

Assuming those are all percentages (ranging from 0.01%, 0.21% above),
I have never seen such low ones. (I assume there are no loads on
these funds; if there are loads, please correct me.)

I understand your point. The low expense ratios (and no loads) are
indeed an argument not to rush to a Roth. Still, there may be good tax
reasons to rollover slowly. Numbers need to be run for your situation.
In addition to considering the advice here, there are online
calculators and much discussion of this topic, if you had not seen it
already.

I was mostly curious. It is good to read about such great expense
ratios in a 401(k). Just ten years ago highway robbery was routine
when it came to 401(k) expense ratios on funds.


I found this planner at http://www.i-orp.com/. I found it interesting
to see the result. It's not clear to me how up to date this is or how
well it's supported. I did not find another one showing this level of
detail for suggested withdrawal and timing of transfers to a Roth IRA.


Danielle
 
A

anoop

Assuming those are all percentages (ranging from 0.01%, 0.21% above),
I have never seen such low ones. (I assume there are no  loads on
these funds; if there are loads, please correct me.)
Some 401(k)'s charge account maintenance fees over and above
the fund fees.
 
D

dvsarwate

Sorry, a .01% (one hundredth of 1%) cost on Large Equity?
If that's correct, it's amazing.
Until now I've been bragging I pay .05%. I'll stop.

I suspect that these are the _additional_ fees charged by
the 401k administrator over and above the fund's expense
ratio. 0.05% is good to brag about, and even if the administrator
is charging 0.01% extra, that is still worth bragging about.
My experience with 401k plans is that the funds made available
for investment are rarely the best choice or lowest cost choice
even in that fund family. For example, a 401k allowed investment
in some Fidelity funds but not in the Spartan series run by
Fidelity which had lower expense ratios. If you are paying a
1% expense ratio to the fund, the extra 0.01$ tacked on
by the plan administrator is much smaller potatoes.

Dilip Sarwate
 
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J

JoeTaxpayer

I suspect that these are the _additional_ fees charged by
the 401k administrator over and above the fund's expense
ratio. 0.05% is good to brag about, and even if the administrator
is charging 0.01% extra, that is still worth bragging about.
My experience with 401k plans is that the funds made available
for investment are rarely the best choice or lowest cost choice
even in that fund family. For example, a 401k allowed investment
in some Fidelity funds but not in the Spartan series run by
Fidelity which had lower expense ratios. If you are paying a
1% expense ratio to the fund, the extra 0.01$ tacked on
by the plan administrator is much smaller potatoes.

Dilip Sarwate
For sake of disclosure - my own 401(k) fees are $80/yr. This is another
.10% on 80K, for example. Of course, the percent will seem far higher
the first few years. Hopefully the new disclosure rules will make the
fees clear to everyone.
 
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