Feel smart by answering my very dumb financial questions
March 2, 2023 9:10 PM Subscribe
I have been a very ignorant passive Roth IRA contributor and now I have a problem and some corresponding very low level questions. Mostly on whether I will be taxed on things or pay fees on things. Please please please be nice.
Let me start with: I am really avoidant about looking at my retirement money because I am not convinced it will ... work. Right now I have a 403b through work and I try to also make a Roth IRA contribution once a year. I'm generally a pessimist about society and investing anything more than a savings account or CD just feels like gambling to me so I always feel like the Roth contribution money just gets removed from the credit union savings account it came from and I will never see it again unless I am very very lucky. So all that is to say, I don't like to check my retirement accounts at all. I am aware that this is not good.
Well... I recently checked more in-depth and discovered that I have been a giant idiot for the past 5+ years and learned that a bunch of the recent yearly contributions I had been making to my Fidelity Roth IRA weren't automatically invested in the target date fund I thought they were automatically going into. They were basically just in the Roth account but not actually invested and it seems like they were in the equivalent of a big pool marked "CASH". :')
I had a moment of panic and suffering upon finding this out (well, a lot of them) and realized that some assistance would be nice so I spent a lot of time trying to find a fee-only financial planner in my area that seemed like they could help someone at my piddly financial level. But it turns out everyone near me on NAPFA is named like "Gentleman's Excellence Wealth Management" or "Golden Ratio Power Portfolio Performance" and only wants accounts over a certain amount. I just went back through a third cycle of "Well maybe I should look again they can't all have been that bad" and yeah there is no way I am going to find anyone around here I can just pay $200 to for an hour of answering my dumb questions, so I'm asking you Metafilter, thank you and I'm sorry.
My questions are:
1. After the above, I said "f it" and figured it was as good a time as any to transfer my accounts from Fidelity to Vanguard which I had been casually thinking about doing anyway. This may have been a bad choice made out of panic? In Fidelity I have the Roth and also a rollover IRA from a job I had a long time ago. I initiated a transfer of the rollover IRA to a new Vanguard account and that one is now all cleared and moved to Vanguard. It is now in the "Vanguard Federal Money Market Fund (Settlement Fund)" and was formerly in "Fidelity Government Money Market". Vanguard said it was an in-kind transfer, it was labeled a rollover IRA at Fidelity and is still labeled a rollover IRA now, and I am PRETTY sure the answer to this is no, but I am still low-key panicking that I'm going to be on the hook for some kind of taxes on transferring it over, especially since the Fidelity transfer out says "TRANSFER OF ASSETS ACAT DELIVER (Cash)" which makes me nervous. Will I be taxed on the amount that was transferred in the rollover IRA?
1b. My Roth that I have been passively been contributing to is partially in "Fidelity Government Cash Reserves" and partially in the super basic target date fund I originally intended to put it all into. If I do the same type of in-kind transfer from Fidelity Roth to Vanguard Roth on this one would that be taxable?
2. I seriously don't remember ever having to do any "purchase" or "invest" type actions with my initial couple of contributions to the Roth, I could have sworn it just auto-went into the super basic target date fund I picked when I set the account up. It is currently partly that fund and partly "Fidelity Government Cash Reserves" so my understanding is that that did not happen, and my Roth is now basically just part "investment I originally wanted" and part "cash lol". The asterisk next to "Fidelity Government Cash Reserves" says "Amount of uninvested cash which can be used for processing transactions" so I am guessing that is just equivalent to having a bunch of dollar bills under my mattress. This is another "I think it will be ok if I do this" but I want to be sure - on Fidelity, and I'm assuming on Vanguard too if I transfer it, I think I have to officially invest it by placing an "order" or "transaction" of the large amount of $ that is currently in cash mode. Is that a taxable thing? Would it be a pay-a-fee thing? Should I strategize about transaction fees if I have a big blob of money in Roth Cash-mode and I want the big blob of money to go into Roth Fund-I-want?
Please be nice, I know I screwed up, and I know I should have been more aware of what was happening, and I have now learned my lesson. I was much more confident about this stuff a long time ago but it's been so long that it got away from me and now I'm nervous about making more errors. Thank you in advance <3
Let me start with: I am really avoidant about looking at my retirement money because I am not convinced it will ... work. Right now I have a 403b through work and I try to also make a Roth IRA contribution once a year. I'm generally a pessimist about society and investing anything more than a savings account or CD just feels like gambling to me so I always feel like the Roth contribution money just gets removed from the credit union savings account it came from and I will never see it again unless I am very very lucky. So all that is to say, I don't like to check my retirement accounts at all. I am aware that this is not good.
Well... I recently checked more in-depth and discovered that I have been a giant idiot for the past 5+ years and learned that a bunch of the recent yearly contributions I had been making to my Fidelity Roth IRA weren't automatically invested in the target date fund I thought they were automatically going into. They were basically just in the Roth account but not actually invested and it seems like they were in the equivalent of a big pool marked "CASH". :')
I had a moment of panic and suffering upon finding this out (well, a lot of them) and realized that some assistance would be nice so I spent a lot of time trying to find a fee-only financial planner in my area that seemed like they could help someone at my piddly financial level. But it turns out everyone near me on NAPFA is named like "Gentleman's Excellence Wealth Management" or "Golden Ratio Power Portfolio Performance" and only wants accounts over a certain amount. I just went back through a third cycle of "Well maybe I should look again they can't all have been that bad" and yeah there is no way I am going to find anyone around here I can just pay $200 to for an hour of answering my dumb questions, so I'm asking you Metafilter, thank you and I'm sorry.
My questions are:
1. After the above, I said "f it" and figured it was as good a time as any to transfer my accounts from Fidelity to Vanguard which I had been casually thinking about doing anyway. This may have been a bad choice made out of panic? In Fidelity I have the Roth and also a rollover IRA from a job I had a long time ago. I initiated a transfer of the rollover IRA to a new Vanguard account and that one is now all cleared and moved to Vanguard. It is now in the "Vanguard Federal Money Market Fund (Settlement Fund)" and was formerly in "Fidelity Government Money Market". Vanguard said it was an in-kind transfer, it was labeled a rollover IRA at Fidelity and is still labeled a rollover IRA now, and I am PRETTY sure the answer to this is no, but I am still low-key panicking that I'm going to be on the hook for some kind of taxes on transferring it over, especially since the Fidelity transfer out says "TRANSFER OF ASSETS ACAT DELIVER (Cash)" which makes me nervous. Will I be taxed on the amount that was transferred in the rollover IRA?
1b. My Roth that I have been passively been contributing to is partially in "Fidelity Government Cash Reserves" and partially in the super basic target date fund I originally intended to put it all into. If I do the same type of in-kind transfer from Fidelity Roth to Vanguard Roth on this one would that be taxable?
2. I seriously don't remember ever having to do any "purchase" or "invest" type actions with my initial couple of contributions to the Roth, I could have sworn it just auto-went into the super basic target date fund I picked when I set the account up. It is currently partly that fund and partly "Fidelity Government Cash Reserves" so my understanding is that that did not happen, and my Roth is now basically just part "investment I originally wanted" and part "cash lol". The asterisk next to "Fidelity Government Cash Reserves" says "Amount of uninvested cash which can be used for processing transactions" so I am guessing that is just equivalent to having a bunch of dollar bills under my mattress. This is another "I think it will be ok if I do this" but I want to be sure - on Fidelity, and I'm assuming on Vanguard too if I transfer it, I think I have to officially invest it by placing an "order" or "transaction" of the large amount of $ that is currently in cash mode. Is that a taxable thing? Would it be a pay-a-fee thing? Should I strategize about transaction fees if I have a big blob of money in Roth Cash-mode and I want the big blob of money to go into Roth Fund-I-want?
Please be nice, I know I screwed up, and I know I should have been more aware of what was happening, and I have now learned my lesson. I was much more confident about this stuff a long time ago but it's been so long that it got away from me and now I'm nervous about making more errors. Thank you in advance <3
1. If you did the "rollover" form, they should not be taxable. It's called a direct rollover and is very simple and easy. If you messed up and did a withdrawal and re-deposited it into the new Roth they would actually not be taxable either if you did it only once in a 12 month period but you'd need a little more annoyance on your tax filings. In the latter case, it would be "60 day rollover.'
2. Buying and selling stocks, bonds, funds, etc in your Roth IRA is a non-taxable thing so don't worry about that. Basically, with a Roth you've already paid your taxes on the money in it and you'll never pay taxes on anything related to it and its earnings unless you withdraw it before retirement age (there are some other obscure exceptions but they shouldn't apply to you). Vanguard doesn't charge fees for buying and selling.
From a bigger perspective, it sounds like you have a lot of anxiety about your IRA. That's very understandable: investing for retirement can be scary but it's also something that can become much less scary with a bit of exposure. The trick is that doing something vaguely sensible will get you most of the way there and that so long as you avoid a few unforced errors, the rest of your decisions don't really matter. The few important things to keep in mind (it sounds like you already know this) are:
1. Contribute to your retirement fund when you can.
2. Make sure all your retirement funds are working for you. That means everything should be invested in something. Make sure that dividend reinvesting is turned on and that you invest your new contributions.
3. Buy low-fee diversified funds. A target date fund is totally fine. Don't stress too hard about exactly which fund and don't go overboard trying to mix it up.
4. Don't panic sell if markets go down. Markets go up and down and up and down and if you panic sell, your funds won't be working for you (see #2). If you want less risk, you need to choose it beforehand, with a choice of more conservative funds (per #3), not after the risk has already been realized. Remember that retirement is investing for the long term though and it's OK to take some risk for better average returns.
And after that, if you do the basic things, you're doing all you can. No need to worry or have anxiety. Obviously, nothing is a guarantee of outcome but the mental part of the investing game is to focus on just what you can control (#1-4) and not worry about the rest that's out of your hands.
posted by bsdfish at 5:07 AM on March 3, 2023 [2 favorites]
2. Buying and selling stocks, bonds, funds, etc in your Roth IRA is a non-taxable thing so don't worry about that. Basically, with a Roth you've already paid your taxes on the money in it and you'll never pay taxes on anything related to it and its earnings unless you withdraw it before retirement age (there are some other obscure exceptions but they shouldn't apply to you). Vanguard doesn't charge fees for buying and selling.
From a bigger perspective, it sounds like you have a lot of anxiety about your IRA. That's very understandable: investing for retirement can be scary but it's also something that can become much less scary with a bit of exposure. The trick is that doing something vaguely sensible will get you most of the way there and that so long as you avoid a few unforced errors, the rest of your decisions don't really matter. The few important things to keep in mind (it sounds like you already know this) are:
1. Contribute to your retirement fund when you can.
2. Make sure all your retirement funds are working for you. That means everything should be invested in something. Make sure that dividend reinvesting is turned on and that you invest your new contributions.
3. Buy low-fee diversified funds. A target date fund is totally fine. Don't stress too hard about exactly which fund and don't go overboard trying to mix it up.
4. Don't panic sell if markets go down. Markets go up and down and up and down and if you panic sell, your funds won't be working for you (see #2). If you want less risk, you need to choose it beforehand, with a choice of more conservative funds (per #3), not after the risk has already been realized. Remember that retirement is investing for the long term though and it's OK to take some risk for better average returns.
And after that, if you do the basic things, you're doing all you can. No need to worry or have anxiety. Obviously, nothing is a guarantee of outcome but the mental part of the investing game is to focus on just what you can control (#1-4) and not worry about the rest that's out of your hands.
posted by bsdfish at 5:07 AM on March 3, 2023 [2 favorites]
1a. There is no tax due when you roll over funds directly between retirement accounts of the same type. In this case you moved a Fidelity rollover IRA to a Vanguard rollover IRA so there's no problem.
It's completely fine if you want to consolidate all of your retirement accounts from Fidelity onto Vanguard. Transfers between major institutions like that happen all the time and they will be able to help you through the process.
1b. Again, you are moving funds to the same account type so no tax is triggered by the transfer of assets. Reallocating funds within a retirement account (for example by buying and selling stocks within your Roth IRA) is also not taxable.
2. Yes, you basically have been keeping your money under the mattress for a couple of years. That's not the end of the world, you have still taken advantage of favorable tax treatment for your annual contributions and maybe you avoided losing money in the recent market downturn.
Yes, you need to make an official trade order to move the money out of cash and into some investment vehicles. That transaction will be within your retirement account so it is not taxable.
If you are buying into Fidelity or Vanguard's "house brand" retirement target funds or index funds they may not charge any transaction fees at all so nothing to worry about. For some other funds they might charge a nominal flat rate transaction fee (like $10-$20 per trade) or have a minimum investment amount. That's all expected and okay. In general you don't need to strategize about transaction fees unless you make frequent trades (not advisable for your situation) or the fees are much higher.
posted by 4rtemis at 5:53 AM on March 3, 2023 [2 favorites]
It's completely fine if you want to consolidate all of your retirement accounts from Fidelity onto Vanguard. Transfers between major institutions like that happen all the time and they will be able to help you through the process.
1b. Again, you are moving funds to the same account type so no tax is triggered by the transfer of assets. Reallocating funds within a retirement account (for example by buying and selling stocks within your Roth IRA) is also not taxable.
2. Yes, you basically have been keeping your money under the mattress for a couple of years. That's not the end of the world, you have still taken advantage of favorable tax treatment for your annual contributions and maybe you avoided losing money in the recent market downturn.
Yes, you need to make an official trade order to move the money out of cash and into some investment vehicles. That transaction will be within your retirement account so it is not taxable.
If you are buying into Fidelity or Vanguard's "house brand" retirement target funds or index funds they may not charge any transaction fees at all so nothing to worry about. For some other funds they might charge a nominal flat rate transaction fee (like $10-$20 per trade) or have a minimum investment amount. That's all expected and okay. In general you don't need to strategize about transaction fees unless you make frequent trades (not advisable for your situation) or the fees are much higher.
posted by 4rtemis at 5:53 AM on March 3, 2023 [2 favorites]
It sounds like you did everything right, and none of it will be taxable! The only thing left to do is invest it now that it's at Vanguard, and the target date retirement fund sounds like it will be a good fit for you. A heads up for next year: you will get 1099s from Fidelity - do not panic! They just have to show to the IRS that they no longer hold the funds, now that they're at Vanguard. The gross distribution amount will be for your total account value, BUT! the taxable portion in the box right below that will be 0, and that's the important bit :)
You made this internet stranger laugh at the names of advisors, so if I may offer one last tidbit of advice: I feel like everyone's done a good job of being nice to you, and we don't even know you! So maybe....extend some niceness to yourself as well? It's been a tough few years to be a human, hang in there!
posted by csox at 5:54 AM on March 3, 2023 [6 favorites]
You made this internet stranger laugh at the names of advisors, so if I may offer one last tidbit of advice: I feel like everyone's done a good job of being nice to you, and we don't even know you! So maybe....extend some niceness to yourself as well? It's been a tough few years to be a human, hang in there!
posted by csox at 5:54 AM on March 3, 2023 [6 favorites]
You could consider signing up for one of the Vanguard advisory options. Here's the page with a comparison chart.
Which service you can sign up for depends on how much total dollars you have there, but even the most basic should do exactly what you need of helping get the money invested into appropriate funds. I don't think that this is strictly speaking necessary for you since it's not a horribly complicated process to do so yourself and it sounds like picking a target date fund would hit your needs very well, but honestly I am guessing that having a service do this for you would reduce a huge amount of your stress. And then you can decide if you want to continue with the service or handle things on your own going forward.
We have been trying out one of their services for basically the same reason -- it is a relatively low cost way to hand off something I dislike and find stressful. But it's a luxury, not a complete essential, and I'm not certain we'll stay with it long term, or maybe instead sign up every few years to get things adjusted and then go back to autopilot.
posted by Dip Flash at 6:09 AM on March 3, 2023
Which service you can sign up for depends on how much total dollars you have there, but even the most basic should do exactly what you need of helping get the money invested into appropriate funds. I don't think that this is strictly speaking necessary for you since it's not a horribly complicated process to do so yourself and it sounds like picking a target date fund would hit your needs very well, but honestly I am guessing that having a service do this for you would reduce a huge amount of your stress. And then you can decide if you want to continue with the service or handle things on your own going forward.
We have been trying out one of their services for basically the same reason -- it is a relatively low cost way to hand off something I dislike and find stressful. But it's a luxury, not a complete essential, and I'm not certain we'll stay with it long term, or maybe instead sign up every few years to get things adjusted and then go back to autopilot.
posted by Dip Flash at 6:09 AM on March 3, 2023
Great answers up thread, y'all. I like to think I'm on top of these things, but my spouse has a ton of anxiety about it, so we worked with a fee only planner that was really targeting beginners without a butt ton of cash. Michelle is fantastic and I think you'd like her. https://www.youngandscrappy.com/
If you don't want to do all that, you have this internet stranger's permission to pile it all into a target date fund and never think about it, and the one at Vanguard is really good about keeping fees low. You can also set it up so Vanguard will automatically withdraw money from your bank monthly and invest in the target date fund.
posted by advicepig at 6:53 AM on March 3, 2023 [5 favorites]
If you don't want to do all that, you have this internet stranger's permission to pile it all into a target date fund and never think about it, and the one at Vanguard is really good about keeping fees low. You can also set it up so Vanguard will automatically withdraw money from your bank monthly and invest in the target date fund.
posted by advicepig at 6:53 AM on March 3, 2023 [5 favorites]
Response by poster: Thank you so much everyone for putting my fears to rest and being very nice to me in the process, I feel so much better about the whole thing. I’m super relieved to have this stuff answered and really appreciate the (financial and self-kindness) advice.
posted by crime online at 7:00 AM on March 3, 2023 [2 favorites]
posted by crime online at 7:00 AM on March 3, 2023 [2 favorites]
Lemme take a shot at:
0. You're doing great. You're saving for retirement, which is the basic and most important thing, and the polar opposite of "I screwed up". "Set it and forget it" (ie your "don't check at all") is a legit, advisable approach for target-date investing, so don't berate yourself for it. You know taxability is an issue, and you did the right things to address that. In sum, you do not have my permission to call yourself ignorant.
1. A note on Fidelity vs Vanguard: they are really not so different. Kind of like Home Depot vs Lowe's. Both are perfectly legit places to hold your accounts. Both are much, much better than Edward Jones (which only comes with high-expense funds). You're doing fine.
2. A note on funds: Fidelity or Vanguard won't invest them for you, you would be rightfully mad if they did that, so yeah, you have to tell them where to put it once it's in the account.
Transaction fees are a thing you'd have to worry about at Edward Jones, but not at Fidelity/VG. The thing you want to watch for is expense ratio (ER), which is the cost of your fund. Most target-date funds have ER < 0.3, which is fine/average. Super-low cost is 0.05. Just make sure you haven't chosen a target-date fund with ER of 1.0, which do exist.
posted by Dashy at 7:48 AM on March 3, 2023 [1 favorite]
0. You're doing great. You're saving for retirement, which is the basic and most important thing, and the polar opposite of "I screwed up". "Set it and forget it" (ie your "don't check at all") is a legit, advisable approach for target-date investing, so don't berate yourself for it. You know taxability is an issue, and you did the right things to address that. In sum, you do not have my permission to call yourself ignorant.
1. A note on Fidelity vs Vanguard: they are really not so different. Kind of like Home Depot vs Lowe's. Both are perfectly legit places to hold your accounts. Both are much, much better than Edward Jones (which only comes with high-expense funds). You're doing fine.
2. A note on funds: Fidelity or Vanguard won't invest them for you, you would be rightfully mad if they did that, so yeah, you have to tell them where to put it once it's in the account.
Transaction fees are a thing you'd have to worry about at Edward Jones, but not at Fidelity/VG. The thing you want to watch for is expense ratio (ER), which is the cost of your fund. Most target-date funds have ER < 0.3, which is fine/average. Super-low cost is 0.05. Just make sure you haven't chosen a target-date fund with ER of 1.0, which do exist.
posted by Dashy at 7:48 AM on March 3, 2023 [1 favorite]
About the "investment in a target date-vs-cash" issue:
I also have a Vanguard target date account, and I noticed something similar looked like it was starting to happen with mine. I also don't want to make conscious decisions about where to invest things, I want to have THEM decide where the contributions go because I'm an idiot.
I mention that as backstory for the fact that literally all I had to do was call Vanguard and ask them, "So, yo....how do I make my account do this?" And the agent said "oh, I can walk you through that," and it was like one setting that had to be checked off. He stayed on the phone while I did it because I was paranoid I was going to screw up, and he was patient with my questions, and it fixed everything.
A bit of a redirect from the above though:
A note on funds: Fidelity or Vanguard won't invest them for you, you would be rightfully mad if they did that, so yeah, you have to tell them where to put it once it's in the account.
I think that with a Vanguard target account, all this means is, you have to either confirm that you want the "usual" mix of stocks vs. bonds or tell them if you want something different; it's not like you need to be calling them to say "I want to invest 20% in IBM and 10% in Pepto-Bismol and another 20% in...." or whatever. I think this was that one setting that the Vanguard guy walked me through setting. But they can definitely help you sort through this.
posted by EmpressCallipygos at 8:02 AM on March 3, 2023
I also have a Vanguard target date account, and I noticed something similar looked like it was starting to happen with mine. I also don't want to make conscious decisions about where to invest things, I want to have THEM decide where the contributions go because I'm an idiot.
I mention that as backstory for the fact that literally all I had to do was call Vanguard and ask them, "So, yo....how do I make my account do this?" And the agent said "oh, I can walk you through that," and it was like one setting that had to be checked off. He stayed on the phone while I did it because I was paranoid I was going to screw up, and he was patient with my questions, and it fixed everything.
A bit of a redirect from the above though:
A note on funds: Fidelity or Vanguard won't invest them for you, you would be rightfully mad if they did that, so yeah, you have to tell them where to put it once it's in the account.
I think that with a Vanguard target account, all this means is, you have to either confirm that you want the "usual" mix of stocks vs. bonds or tell them if you want something different; it's not like you need to be calling them to say "I want to invest 20% in IBM and 10% in Pepto-Bismol and another 20% in...." or whatever. I think this was that one setting that the Vanguard guy walked me through setting. But they can definitely help you sort through this.
posted by EmpressCallipygos at 8:02 AM on March 3, 2023
I think that with a Vanguard target account
I don't want to argue between comments, but this is a misconception that the OP has as well. There is no such thing as a "Vanguard target account".
You have an account at Vanguard. It can be one of several types of accounts -- IRA, Roth IRA, brokerage, 401k, 403b, etc. Accounts just hold money.
Within accounts, you buy and hold and sell holdings. Those can be individual stocks, bonds, and can also be funds, like mutual funds and target date funds.
So "target account" is ... not a thing, and expecting it to be a thing that invests automatically is incorrect, and is the mistake that the OP made.
As I said above, VG will not buy a fund within your account for you. That would be bad behavior on anyone's part. You must make a transaction within your account to buy a holding (a fund, a stock, a bond) that you specify. You can set this up to happen automatically yourself, but Vanguard won't do it for you (and they shouldn't).
I can confirm that VG phone reps are usually very nice, and very competent.
posted by Dashy at 8:33 AM on March 3, 2023
I don't want to argue between comments, but this is a misconception that the OP has as well. There is no such thing as a "Vanguard target account".
You have an account at Vanguard. It can be one of several types of accounts -- IRA, Roth IRA, brokerage, 401k, 403b, etc. Accounts just hold money.
Within accounts, you buy and hold and sell holdings. Those can be individual stocks, bonds, and can also be funds, like mutual funds and target date funds.
So "target account" is ... not a thing, and expecting it to be a thing that invests automatically is incorrect, and is the mistake that the OP made.
As I said above, VG will not buy a fund within your account for you. That would be bad behavior on anyone's part. You must make a transaction within your account to buy a holding (a fund, a stock, a bond) that you specify. You can set this up to happen automatically yourself, but Vanguard won't do it for you (and they shouldn't).
I can confirm that VG phone reps are usually very nice, and very competent.
posted by Dashy at 8:33 AM on March 3, 2023
It can get confusing when you start with an employer sponsored plan and then move to a self directed plan (not sure of the exact terms). My retirement contributions do get automatically invested in funds that I chose when I opened the account and even if I had not chosen any, they have defaults set up. But your accounts don't have these defaults set up, but that is not a ridiculous assumption to think they did, because many other accounts are set up that way. You learned now and that is the most important thing.
posted by soelo at 9:12 AM on March 3, 2023
posted by soelo at 9:12 AM on March 3, 2023
So "target account" is ... not a thing, and expecting it to be a thing that invests automatically is incorrect, and is the mistake that the OP made.
My own word choice may be confusing matters - this is a "target date account", meaning that those who sign up for the account are effectively telling Vanguard that "I want to retire by X date, I am giving you the right to ascertain how much of my portfolio should be switched from stocks to bonds between now and then and at what point". Those definitely are a thing that exists, and I know because I have one and I expressly had it recommended to me when I told a financial planner that "I don't want to always be telling my IRA what to do".
posted by EmpressCallipygos at 10:22 AM on March 3, 2023
My own word choice may be confusing matters - this is a "target date account", meaning that those who sign up for the account are effectively telling Vanguard that "I want to retire by X date, I am giving you the right to ascertain how much of my portfolio should be switched from stocks to bonds between now and then and at what point". Those definitely are a thing that exists, and I know because I have one and I expressly had it recommended to me when I told a financial planner that "I don't want to always be telling my IRA what to do".
posted by EmpressCallipygos at 10:22 AM on March 3, 2023
EC, you are still confusing accounts with funds. I will hopefully clarify for other readers as well:
You cannot invest / get a target date fund by signing up for any type of account at all.
You can invest in, or buy shares of, a target date fund within (almost) any account. You can hold a target date fund within a 401k account. You can hold it in your Roth IRA account and/or your regular IRA. You can even buy target date funds in your brokerage account (not advisable for tax efficiency, but).
But just opening an IRA account or a brokerage account will not get you into a target date fund. Again, there is no such thing as a target date account. You must make each investment choice yourself, even if that takes the form of a Vanguard rep interpreting your words as "please buy target 2050", within an account. That account is still a distinct entity from a target date fund, even if you only use it for target date investing.
Target date funds exist, in many varieties (and some of them are more expensive, higher ER, than others). And as soelo said, many employer-sponsored plans nudge you pretty hard to opt for a specific type of investment, such as target date funds, since they'll need to know what to do every pay period. You could even hire "a guy" or a service that does it for you, acting on a direction they solicit from you. But it is fundamentally a choice you must make yourself.
posted by Dashy at 10:37 AM on March 3, 2023 [1 favorite]
You cannot invest / get a target date fund by signing up for any type of account at all.
You can invest in, or buy shares of, a target date fund within (almost) any account. You can hold a target date fund within a 401k account. You can hold it in your Roth IRA account and/or your regular IRA. You can even buy target date funds in your brokerage account (not advisable for tax efficiency, but).
But just opening an IRA account or a brokerage account will not get you into a target date fund. Again, there is no such thing as a target date account. You must make each investment choice yourself, even if that takes the form of a Vanguard rep interpreting your words as "please buy target 2050", within an account. That account is still a distinct entity from a target date fund, even if you only use it for target date investing.
Target date funds exist, in many varieties (and some of them are more expensive, higher ER, than others). And as soelo said, many employer-sponsored plans nudge you pretty hard to opt for a specific type of investment, such as target date funds, since they'll need to know what to do every pay period. You could even hire "a guy" or a service that does it for you, acting on a direction they solicit from you. But it is fundamentally a choice you must make yourself.
posted by Dashy at 10:37 AM on March 3, 2023 [1 favorite]
Lots of good advice here already, but I wanted to share that I did this same thing for years, for the same reasons of not trusting retirement and not wanting to look at it. I put money in a Roth IRA but didn't realize I had to direct it to be invested in a fund and it sat there as cash for a long time. I am certain you wouldn't be mean to me or think I'm a bad person because of this, so please don't beat yourself up either. It will be okay and there are ways to move forward.
posted by lizard music at 11:46 AM on March 3, 2023 [1 favorite]
posted by lizard music at 11:46 AM on March 3, 2023 [1 favorite]
This thread is closed to new comments.
1b) A transfer within your Roth account isn't taxable. That's the joy of a Roth IRA! You pay taxes once and then don't have to think about it (unless you withdraw early, but you didn't, you rolled it over).
2) Buying a fidelity target date fund with your money in fidelity should not incur any taxes or fees. Same for buying a vanguard fund with your money in vanguard. Don't try to do something fancy/crazy like buying vanguard shares with your fidelity account before you do a rollover.
And please stop beating yourself up. The past 12 months have been a great time to ignore the market! If the Fidelity cash fund is like the Vanguard settlement fund, you get a tiny bit of interest, so you were an awesome investor! But seriously, retirement is a long game and not getting maximum gains for a couple of years is not an unrecoverable offense.
posted by Narrow Harbor at 9:26 PM on March 2, 2023 [8 favorites]