No. of Recommendations: 2
As for his second job, will he have access to a 401k there and will it have any company matching contributions? ...
If the new employer does offer a 401k, it will probably have a set of target retirement funds, each managed to plan for a future retirement year. DS should pick the one closest to when he will turn 65. For his Traditional IRA (rollover) and Roth IRA (new cash) investments, he could go with an S&P 500 Index ETF or Mutual Fund (I prefer ETFs because they tend to be lower expense and can be traded on the open market) or a Total Stock Market index fund or ETF.


I've had this same conversation with my kids and new employees at my company:
1. Get all the matching money the company will give you, even if the funds in the 401k aren't what you consider ideal (e.g., 0.07% fee index fund) and even if you want a Roth but they only offer a traditional 401k (not a Roth 401k).
2. If you've got 35 years to work still, you could go with a 100% stock allocation. If there's a market drop soon, you'll be down like a couple thousand dollars. You have decades of salary coming that's not tied to market ups & downs. Each market retraction, you'll be buying stocks "on sale." Low prices are good if you're a net buyer. If that's still too scary, pick an asset allocation (say, 80/20 stocks and bonds) and have your contributions put into two funds in those proportions. Once a year, see if the balance is still at that allocation and rejigger it if not.
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No. of Recommendations: 14
Have your son go to Vanguard -- the largest low-fee mutual fund company.

They also help him move the $10,000 from the former employer.

https://investor.vanguard.com/home/?WT.srch=1&cmpgn=PS:R...

intercst
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No. of Recommendations: 5
My son has left his job. The former employer had a retirement fund for him and it has $10,000 in it. It charges fees, and it appears to me that the fees are fairly high. I would like to know if he can move it to a place where it will still earn interest and not have to pay this company for managing untouched money. How does he do that?

What type of 'retirement fund' is it? If it's a 401(k), Simple IRA or SEP-IRA, he can roll it over into an IRA. If it's some other type of 'retirement fund', it may or may not be able to be rolled over.

Did he get some information on the 'retirement fund' from his former employer? Generally, that information will include information on how to initiate a rollover starting from the former employer's side, if it's possible to do so. It's also possible to have a broker initiate a rollover. In order to do that, he would need to contact a broker, open a rollover IRA account, and provide them with the information for the account at his former employer.

Second, his next job will be at a starting salary, so I understand that the thing to do is begin a Roth IRA and fund it with a no-load S & P 500 account.

Actually, he has to 'fund' the Roth IRA using cash. Once the cash is in the Roth IRA, he can use it to buy an S&P 500 ETF or mutual fund, if that's what he wants to invest in.

However, first he would need to confirm that he's actually eligible to contribute to a Roth IRA. That's dependent on his MAGI (Modified Adjusted Gross Income). I know you said he's going to have a 'starting salary' but, depending on his field, starting salaries can be high enough that he would be ineligible for a Roth, which starts to phase out at $120k in 2018. It would probably be helpful for him to read and understand IRS Pub 590-A https://www.irs.gov/pub/irs-pdf/p590a.pdf

He has NO interest in becoming an investor, so a set it and forget it deal is what he needs. What does he do? Go to his bank and ask if they can set the Roth up for him? Do you have to use a broker?

Then he would probably be better off investing in something like a Target Date retirement fund, with target date that's in or after the year he expects to reach his full retirement age. He can get these with reasonable costs at Vanguard or Fidelity.

I would not suggest going to his bank, as they typically offer fewer options and higher costs.

That said - having "NO interest in becoming an investor" leaves him very open to losing his money when investing, which is what he would be doing by opening any of these accounts, and buying investments. If he doesn't want to lose his money, he should at least educate himself in the basics of investing, even if he doesn't want to become an 'investor'.

AJ
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No. of Recommendations: 3
Hey Mama. Assuming the former employer had a 401k, then DS should be able to open a Traditional IRA and have that money rolled over. Almost any discount broker would be happy to assist him. You can see a limited list of brokers here:

http://www.fool.com/how-to-invest/broker/index.aspx

There's also a page on how to size up a broker here:

http://www.fool.com/investing/brokerage/10-ways-to-size-up-a...

And there's a discussion board where you can talk with other Fools about the brokers in which you are interested:

http://boards.fool.com/discount-brokers-100146.aspx

As for his second job, will he have access to a 401k there and will it have any company matching contributions? Setting aside enough of his paychech to earn any free money available would be my first priority. After that, yes, a Roth IRA for a young wage earner is a great idea. He can contribute $5500 per year, and I might break that down into $458.33/mo to spread it out. He should probably talk to the same discount broker about settign up both accounts.

Whether he wants to or not, even just buying a position in an S&P 500 ETF or Mutual Fund makes him an investor. The question is whether he is an active or passive investor and it sounds like he'd rather be the latter. So the important thing is to set up diverse investents he can buy and hold for the long term. Back to discount brokers for a second, Vanguard is well suited for this type of strategy.

If the new employer does offer a 401k, it will probably have a set of target retirement funds, each managed to plan for a future retirement year. DS should pick the one closest to when he will turn 65. For his Traditional IRA (rollover) and Roth IRA (new cash) investments, he could go with an S&P 500 Index ETF or Mutual Fund (I prefer ETFs because they tend to be lower expense and can be traded on the open market) or a Total Stock Market index fund or ETF.

My recommendation, however, would be to buld a little more diversity into his portfolio via asset allocation. I might look for small cap, large cap, mid cap and international funds or ETFs and establish positions based on an age-appropriate asset allocation. For example, a young man may choose to have 40% in large caps, 20% in mid cap, 20% in small cap and 20% in international equities.

DS may fight it, but at the very least he should take a few minutes and read this Foolish Retirement Guide:

https://www.fool.com/retirement/index.aspx

The last thing I'll say is that he may not want to be an active investor, it is important that he be a consistent one, and by that I mean taking advantage of the opportunity to set aside cash every pay period for investment.

Fuskie
Who notes if any of his assumptions are incorrect (and even if they are), you should feel free to ignore his musings...

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Thanks, I had heard that Vanguard was the way to go. I did not know if we could just do it ourselves with them or if a broker had to set it up for us. Thanks!
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I think you'll find Vanguard pretty easy to deal with and willing to help you out if you have questions.

Fuskie
Who notes DS will actually have to do the account management with Vanguard; there are just some things a son has to do for himself...

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Disclaimer: This post is non-professional and should not be construed as direct, individual or accurate advice
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Fool Code of Conduct: http://tinyurl.com/FoolCode
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We have moved our funds and those for two others (whose portfolios we manage) to Vanguard. They are as good as it gets unless you do not follow their directions. Vanguard is a huge organization with low costs and hence the lowest fees for investors. As an example, if they say you need a signature guarantee - they mean it and there will be no exceptions. You can download forms yourself and fill them out.
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Who notes DS will actually have to do the account management with Vanguard; there are just some things a son has to do for himself...

Not necessarily. My DS, who has accounts at E-Trade and Vanguard, has opted to give me POA so that I can manage all of his accounts.

There are options.
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You can download forms yourself and fill them out.

And if you need help, they will walk you through it. DD is just moving over an old 401k, and they helped her with the forms this morning.
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While I am sure that Vanguard is wonderful, I think that you will find that pretty much everything here said about Vanguard is also true of Fidelity and Schwab. Depending on where you live, the latter may be interesting because there may be a local office where they can walk you through the transition.
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While I am sure that Vanguard is wonderful, I think that you will find that pretty much everything here said about Vanguard is also true of Fidelity and Schwab. Depending on where you live, the latter may be interesting because there may be a local office where they can walk you through the transition.

Fidelity also has local offices.

AJ
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hat tams says about local offices is correct. That said, generally speaking if you do not have your account at Vanguard, you will have difficulty investing in Vanguard funds, if you can at all. Most funds pay a fee to the brokerage firm who holds the account. For example of Fidelity or Schwab sells you the XYZ fund, the XYZ folks pay some money to Fidelity or Schwab. Vanguard refuses to do that and when we were are Schwab, we could not buy Vanguard funds. Thing may have changed, but the time to know this is before you open an account.
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GWPotter,

You wrote, hat tams says about local offices is correct. That said, generally speaking if you do not have your account at Vanguard, you will have difficulty investing in Vanguard funds, if you can at all. Most funds pay a fee to the brokerage firm who holds the account. For example of Fidelity or Schwab sells you the XYZ fund, the XYZ folks pay some money to Fidelity or Schwab. Vanguard refuses to do that and when we were are Schwab, we could not buy Vanguard funds. Thing may have changed, but the time to know this is before you open an account.

Fidelity and Schwab also have a good selection of mutual funds and ETFs as well as local offices in most US cities. Many of these funds have low expense ratios that are competitive with Vanguard - especially for core indexes.

- Joel
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From a couple of years ago, the research I did then was that Schwab had way and above the largest number of funds and ETFs in their zero commission program, like 3 to 1 over Fidelity. Now, if you have your heart set on a particular fund, it may or may not be in the program, but if choice is the preference, it is pretty compelling.
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I pick my mutual funds based on analysis/reading Morningstar. Vanguard is not always the best.


But they have a disproportionate representation is the Gold and Silver rated funds - Those ratings are expectations of future performance. The Star system is past performance - and as anybody whose a prospectus knows, past performance may not be found in the future.
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If you are convinced you can only buy certain mutual funds from specific sponsors, you are missing out on a lot. Vanguard no longer has a lock on the lowest cost mutual funds. Others mentioned here have very competitive funds. Also, do not overlook ETFs that are comparable to the mutual funds. ETFs can be bought from any fund sponsor regardless of whether you can buy the sponsor's mutual funds.

Here's an example. I want to invest in the Vanguard Dividend Appreciation fund (VDADX). Because my account is at Schwab, I'm out of luck because they do not offer Vanguard funds. But, wait! There is also a Vanguard Dividend Appreciation ETF (VIG) that is the exact same product and exact same expense ratio. I pay <$5 to buy the ETF and a bit more than $5 to sell it. And, Schwab let's me DRIP the ETF, so that's all the cost I have. Hold this for a few years and the $10 will not matter. (Oddly enough according to Yahoo, VIG pays higher dividends than the mutual fund!)
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As for his second job, will he have access to a 401k there and will it have any company matching contributions? ...
If the new employer does offer a 401k, it will probably have a set of target retirement funds, each managed to plan for a future retirement year. DS should pick the one closest to when he will turn 65. For his Traditional IRA (rollover) and Roth IRA (new cash) investments, he could go with an S&P 500 Index ETF or Mutual Fund (I prefer ETFs because they tend to be lower expense and can be traded on the open market) or a Total Stock Market index fund or ETF.


I've had this same conversation with my kids and new employees at my company:
1. Get all the matching money the company will give you, even if the funds in the 401k aren't what you consider ideal (e.g., 0.07% fee index fund) and even if you want a Roth but they only offer a traditional 401k (not a Roth 401k).
2. If you've got 35 years to work still, you could go with a 100% stock allocation. If there's a market drop soon, you'll be down like a couple thousand dollars. You have decades of salary coming that's not tied to market ups & downs. Each market retraction, you'll be buying stocks "on sale." Low prices are good if you're a net buyer. If that's still too scary, pick an asset allocation (say, 80/20 stocks and bonds) and have your contributions put into two funds in those proportions. Once a year, see if the balance is still at that allocation and rejigger it if not.
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No. of Recommendations: 0
Once again, Thank you to ALL of you! I am amazed at the knowledge generous sharing of same! I have read the entire thread several times. You are a wonderful community.
Thanks again.
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