| Roll my 401K into 403b or IRA Roth |
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rwl123456
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| Roll my 401K into 403b or IRA Roth |
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Hi All,
I am 25 year old making 60k a year and will soon be changing jobs. My current job offers a 401k that currently has ~$33k . My new company offers a 403b plan.
I met with a financial advisor at Merrill Lynch (this was just an introduction meeting to review he is not my offical advisor) wants me to roll my 401k into a traditional IRA and then into the IRA Roth instead of putting it into the 403b.
My advisor also wants me to open my 403b as a roth with the new company. This would give me a 403b roth and an ira roth. Which seems odd to me.
Is this the best way for me to go about this? If i sign with the advisor he will take a 1.5% fee on total assets under management which would be specifically the IRA Roth that he wants me to open instead of rolling it into the 403b.
Any ideas if his advice is in my best interest or his?
Thanks for the help.
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Thu Jul 28, 2011 4:49 pm |
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oldguy
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The first thing to be aware of - the ML person is not a financial adviser, s/he is a salesperson, account executive, yada. Their goal is (1) the current 1.5% fee, and (2) to keep you in-house (to keep the 1.5% cash flow). So the conflict of interest is huge.
I would move the $33,000 into a Rollover IRA at a no-load company such as Vanguard or Fidelity (no need to pay ML $500 for that, the no-load company will do it for you. That fund will probably be where you roll your accounts on future job changes, as well as where you put your funds when you retire. No, I don't see any hurry to convert it to a Roth and pay the taxes, you don't need to pay any of that tax until you are age 70 1/2 and then just on 4% at a time.
The Roth/Traditional IRA decision is made based on your tax bracket. If you are in a low bracket, it is good to pay the tax now and get the money tax free later (Roth IRA). And if you are in a higher bracket, you should take the tax break now, and pay the taxes a little bit at a time after you retire (Traditional IRA).
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Thu Jul 28, 2011 5:48 pm |
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jfurnish
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I would roll it now pay the tax on the 33k then let that grow for the 20-30 years and then take out your millions tax free.
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Thu Jul 28, 2011 11:26 pm |
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kate032
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by rwl123456
I met with a financial advisor at Merrill Lynch (this was just an introduction meeting to review he is not my offical advisor) wants me to roll my 401k into a traditional IRA and then into the IRA Roth instead of putting it into the 403b.
He wouldn't be a very good adviser for his company if he didn't. Always consider the financial benefits that your decision has on the person giving the advice.
Putting your 401(k) into a no-load fund with a low expense ratio will keep a lot more of your money for yourself. I see no advantage to paying ML the privilege of taking 1.5% of your money.
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Fri Jul 29, 2011 2:53 am |
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coaster
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by kate032
He wouldn't be a very good adviser for his company if he didn't. Always consider the financial benefits that your decision has on the person giving the advice..
Or in other words: "who is this person really working for?"
You want a financial advisor who's working for YOU.
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Fri Jul 29, 2011 5:51 am |
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jfurnish
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by coaster
quote:
Originally posted by kate032
He wouldn't be a very good adviser for his company if he didn't. Always consider the financial benefits that your decision has on the person giving the advice..
Or in other words: "who is this person really working for?"
You want a financial advisor who's working for YOU.
That doesn't exist. You have to just take their advice and realize where they are coming from and make your own educated decisions.
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Fri Jul 29, 2011 4:48 pm |
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coaster
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by jfurnish
That doesn't exist.
Yes it does. They're called fee-based planners. You pay them a fee; they're working for you. A straight exchange of money paid for services rendered. In fact, they even have a legal obligation to render those services in your best interest. (ref: "fiduciary responsibility")
I don't know of any other, or better, definition of "working for".
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Fri Jul 29, 2011 5:44 pm |
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jfurnish
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by coaster
quote:
Originally posted by jfurnish
That doesn't exist.
Yes it does. They're called fee-based planners. You pay them a fee; they're working for you. A straight exchange of money paid for services rendered. In fact, they even have a legal obligation to render those services in your best interest. (ref: "fiduciary responsibility")
I don't know of any other, or better, definition of "working for".
Yes some charge a fee as a percent of assets under management. This type would have a personal incentive to keep your money under their management.
However if you went to a fee based that simply charged an hourly fee for some advice you might find a better chance there but I would still say they are influenced by wholesalers trying to push products.
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Sat Jul 30, 2011 12:23 am |
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kate032
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by jfurnish
Yes some charge a fee as a percent of assets under management. This type would have a personal incentive to keep your money under their management.
No, there are advisors who sell nothing but their independent financial advice.
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Sat Jul 30, 2011 5:48 pm |
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jfurnish
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by kate032
quote:
Originally posted by jfurnish
Yes some charge a fee as a percent of assets under management. This type would have a personal incentive to keep your money under their management.
No, there are advisors who sell nothing but their independent financial advice.
How do you think they come up with their independent advice?
Let me put it like this. Would you pay someone to take care of your wife/husband? How long do you think that would last until they have gone of with the person you paid to take care of them? Same thing with money. You can pay for advice but you should watch and manage your money yourself if you want it to be there when you need it.
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Sun Jul 31, 2011 12:35 am |
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coaster
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by jfurnish
You can pay for advice but you should watch and manage your money yourself if you want it to be there when you need it.
Using that logic, I'm assuming that you also have a field of cotton, a herd of sheep, a spinning wheel and a loom so you can keep yourself clothed; you have a herd of mild cows, a herd of beef cattle, a pen full of pigs, a chicken house full of chickens, a vegetable garden, and an orchard so your food will be there when you're hungry; you have an oil well in the back yard and a refinery in the basement.......ad nauseum.
You pay those who know how to provide what you have neither the knowledge, resources, experience, time, or inclination to do yourself. So it is with assets. If you can manage them yourself, as I do, more power to you. But don't assume that everyone can or wants to, and especially don't assume that it's a prerequisite to produce wealth. Plenty of people have managed their own portfolios into very large holes in the ground. The financial services industry exists because (1) there is a need for it, and (2) many have found that what they get from it is worth what they pay for it.
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Sun Jul 31, 2011 3:06 am |
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kate032
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by jfurnish
How do you think they come up with their independent advice?
Education and experience, same as most professionals. Some advisors do work for companies in which they are paid a fee directly or indirectly. However, some advisors work independently.
Coaster's analogy of resources was spot on. Most of us would not choose to represent ourselves in court or choose to rely solely on our laymen's knowledge of medicine. Even though we consults with doctors and lawyers, we don't have to take their advice and can hire different people if we want. We're still ultimately in control.
edit: www.cfp.net has an excellent guide called "Consumer's Guide to Financial Self-Defense." I'm just reading it now. A couple of the points:
Ask your advisor to provide services with the “duty of care of a fiduciary.” This obligates them to base their recommendations on the client’s
best interests, fully disclosing any conflicts of interest (actual, potential,
or perceived). If the advisor avoids the question or doesn’t understand
the term, go elsewhere.
Ask your prospective advisor to identify the organizations that license
or supervise him. Brokers are regulated by FINRA; investment advisors
by either the SEC or a state securities regulator; insurance agents by the
state insurance commission in states in which they do business; CFP®
professionals by CFP Board. Use these organizations’ Web sites to check
the advisor’s background and disciplinary history, if any.
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Sun Jul 31, 2011 3:24 am |
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jfurnish
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I think its time I remind you two what I said:
"You have to just take their advice and realize where they are coming from and make your own educated decisions."
this is the same as Kate said here
" Even though we consults with doctors and lawyers, we don't have to take their advice and can hire different people if we want. We're still ultimately in control."
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Sun Jul 31, 2011 2:18 pm |
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jfurnish
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by coaster
quote:
Originally posted by jfurnish
You can pay for advice but you should watch and manage your money yourself if you want it to be there when you need it.
But don't assume that everyone can or wants to, and especially don't assume that it's a prerequisite to produce wealth. Plenty of people have managed their own portfolios into very large holes in the ground. The financial services industry exists because (1) there is a need for it, and (2) many have found that what they get from it is worth what they pay for it.
I did not assume everyone or wants too I suggested they pay attention and educate themselves.
There are pleanty of cases of so called pro's who have much larger holes in the ground.
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Sun Jul 31, 2011 2:27 pm |
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jfurnish
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| Re: Roll my 401K into 403b or IRA Roth |
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quote:
Originally posted by coaster
quote:
Originally posted by jfurnish
You can pay for advice but you should watch and manage your money yourself if you want it to be there when you need it.
Using that logic, I'm assuming that you also have a field of cotton, a herd of sheep, a spinning wheel and a loom so you can keep yourself clothed; you have a herd of mild cows, a herd of beef cattle, a pen full of pigs, a chicken house full of chickens, a vegetable garden, and an orchard so your food will be there when you're hungry; you have an oil well in the back yard and a refinery in the basement.......ad nauseum.
By using your logic then you must have built a bank in your back yard to manage your money. your logic is mind numbing.
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Sun Jul 31, 2011 2:37 pm |
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