Opening new ROTH IRA; what should I invest in?

[jmlrn]

I've gotten good advice here before. Hubby handled ALL the financial stuff. So now our IRA's in bank CD's are coming to maturity & I have decided to open a ROTH IRA at Vanguard. I've been reading & researching & all it's given me is a headache & nauseas stomach. I don't want to pay a financial advisor. I actually don't have that much money to invest so it wouldn't be cost effective. My plan is just to put the initial amount around $15,000 into either a 2015 Target date fund. We've been very conservative in the past so not even sure if this is too much stock for my liking. I think I could also do bonds but the choice is dizzying. Once I open this ROTH can I change the Target date fund to all bonds? Can I change just a percentage? Once the next IRA CD comes due can I just roll this additional money, another $15,000 into this Vanguard IRA or do I have to open a whole new one? I'm really clueless. The two relatives I trust for advice do not have any IRA's; one has all stocks & the other has an annuity. Hubby always said never get an annuity. All this is keeping me up at night

I guess what I'm asking too is what are good funds to invest in that don't have alot of risk. I'm about 5 years from retirement.

[schildi]

If it was me, I would invest the money in something like VTI. That would have a higher risk though than what you are targeting, judging by your post.

You can change the investment(s) at any time, even partially.

I don't like target date funds much, but everybody is different.

[Regis]

So how do you feel about the amount of money you currently have saved for retirement from a scale of 1 to 10, with 10 being "I have no worries at all about retirement"?

[jmlrn]

Feb 5, 2021 16:33:53 GMT -5 Regis said:

So how do you feel about the amount of money you currently have saved for retirement from a scale of 1 to 10, with 10 being "I have no worries at all about retirement"?

I saw a fiduciary last year for a one time fee & she said I would un out of money at age 78 with spending around $33,000 a year of my own money I think but maybe this included my social security. Anyway it didn't sound like alot of leeway but by the same token it sounds like I don't have alot to risk losing either.

[jmlrn]

So I would say about a 5-6 on 1-10 scale

[justme]

So you don't have to open another IRA to roll the second group of CDs into unless you want to.

You can change allocations within the IRA whenever you want.

Yes the Target 2015 is going to have some risk in it. Hard to say yay/nay for sure without knowing about all your other investments. But if you don't risk anything you don't get much. The interest your $15k in the CDs was probably only a few hundred dollars. Depending on when you invested in it it could have been up several thousand if you put it in the Target Fund or something else. 

The money I put in Target funds is actually for the group after when I'm hoping to retire. Don't like how it gets so conservative - honestly will likely move a big chunk of it out of Targets once I get close, but they work pretty well. 20+ years out. 

[Tiny]

Are the bank CDs in a Traditional IRA (sometimes abbreviated as tIRA) or a Roth IRA (sometimes abbreviated rIRA)?

Moving money from a pretax account (tIRA) to a posttax account(rIRA) may change some of the advice you get.

[jmlrn]

Feb 5, 2021 17:04:31 GMT -5 Tiny said:

Are the bank CDs in a Traditional IRA (sometimes abbreviated as tIRA) or a Roth IRA (sometimes abbreviated rIRA)?

Moving money from a pretax account (tIRA) to a posttax account(rIRA) may change some of the advice you get.

We have several CD's in both traditional & ROTH

[Tiny]

Once I open this ROTH can I change the Target date fund to all bonds?

Odds are once the money is transferred to the Roth IRA it will be in a "core account" - which get next to no interest. You don't want to leave your money there. You can then decide which fund(s) you'd like to buy. you could do 5K to a bond fund and 10K to a Target Date fund for example. I'm wondering if you meant a Target Date Fund for 2025 (and not 2015)? 

If you put 15K in the Target Date Fund and at some point in the future you don't like it - you can "trade" money from it to somewhere else - you will "sell" the Target Date Fund shares and "buy" shares in the new fund. You can buy and sell (or trade) between funds at your convenience. (OK, there might be funds where you have a 30 day wait or some other cutoff - but the fund literature will clearly indicate that there is some sort of considerations for doing trades into or out of that fund. )

Can I change just a percentage?

You should be able to accomplish this - you'd need to look at the ways Vanguard lets you allocate your $ when doing trades. 

Once the next IRA CD comes due can I just roll this additional money, another $15,000 into this Vanguard IRA or do I have to open a whole new one?

You will move the money to the existing IRA you just set up. I'm assuming you want all the money from the Bank IRA to go to a single IRA (at Vanguard).  (I would go tIRA at bank to tIRA at Vangaurd, rIRA at bank to rIRA at Vanguard.  Mixing the two may incur unexpected/unwanted taxes when you do your income tax return.  

How much interest will you be losing if you just move all the money (in the CDs) to Vanguard in one fell swoop? Interest rates have been really really low on CDs for quite some time. If the amount is small - it might be worth "sacrificing" some of the interest to get your money into a vehicle that may give you a better return.

Hubby always said never get an annuity.

This is generally good advice. There are some situations where an annuity makes sense. The trick is to figure out if your situation would benefit from one. I don't know how to accomplish finding that out.

[Tiny]

Feb 5, 2021 17:30:42 GMT -5 jmlrn said:

Feb 5, 2021 17:04:31 GMT -5 Tiny said:

Are the bank CDs in a Traditional IRA (sometimes abbreviated as tIRA) or a Roth IRA (sometimes abbreviated rIRA)?

Moving money from a pretax account (tIRA) to a posttax account(rIRA) may change some of the advice you get.

We have several CD's in both traditional & ROTH

You may want to move the bank Roth IRA CDs to the vanguard Roth IRA. And then move the Bank traditional IRA CDs to a Vangaurd Traditional IRA.

I'm not sure - but I strongly suspect if you move tIRA funds to a Roth IRA it may effect your income taxes (possibly in an unfortunate way). You may want to see if Vanguard has some literature on this OR if you use a tax preparer perhaps they can offer some insight into doing this.

[jmlrn]

Tiny, I did mean 2015 Target date fund as it has less stock. None of our investments have had any stock for years. We have been very conservative. The Cd's are getting 3% interest.

[Tiny]

Feb 5, 2021 18:55:40 GMT -5 jmlrn said:

Tiny, I did mean 2015 Target date fund as it has less stock. None of our investments have had any stock for years. We have been very conservative. The Cd's are getting 3% interest.

Got it!  Wasn't sure if it was a typo.    The CDs aren't that bad.  Waiting for them to "mature" sounds reasonable.  (I was thinking you might have less than 1% on them). 

[buystoys]

I'm also not a fan of Target date funds.  They cost more and you really can do it yourself.  If the 2015 fund is 25% stocks and 75% bonds, you can just mirror that with the total stock market fund and the total bond fund. 

Have you run your retirement numbers through FIRECalc?  Or have you tried i-ORP?  Either one will give you some insight as to how much you will need when you retire. 

ETA:  I know you said you don't like risk, but you have to take some risk if you want to beat the rate of inflation with your invested dollars.  You likely won't need 100% of your money all at one time.  You can think of it as buckets if you like.  The first bucket is what you need for the next 2-3 years.  The second bucket is what you'll need in 4-8 years, and the third bucket is for all else.  As you finish a year, you pull money down from the next bucket up to refill what you've used.

[teen persuasion]

Feb 5, 2021 16:20:42 GMT -5 jmlrn said:

I've gotten good advice here before. Hubby handled ALL the financial stuff. So now our IRA's in bank CD's are coming to maturity & I have decided to open a ROTH IRA at Vanguard. I've been reading & researching & all it's given me is a headache & nauseas stomach. I don't want to pay a financial advisor. I actually don't have that much money to invest so it wouldn't be cost effective. My plan is just to put the initial amount around $15,000 into either a 2015 Target date fund. We've been very conservative in the past so not even sure if this is too much stock for my liking. I think I could also do bonds but the choice is dizzying. Once I open this ROTH can I change the Target date fund to all bonds? Can I change just a percentage? Once the next IRA CD comes due can I just roll this additional money, another $15,000 into this Vanguard IRA or do I have to open a whole new one? I'm really clueless. The two relatives I trust for advice do not have any IRA's; one has all stocks & the other has an annuity. Hubby always said never get an annuity. All this is keeping me up at night

I guess what I'm asking too is what are good funds to invest in that don't have alot of risk. I'm about 5 years from retirement.

I know Tiny explained part of this, but just wanted to reiterate - you probably don't want to open a Roth IRA and move the bank tIRA money into that.  That would either be a Roth conversion (and the entire amount would get added to your AGI, for extra tax) or it would be a withdrawal from tIRA and new contribution to Roth IRA (which would be the worst of both worlds - entire amount added to AGI plus extra tax, and new Roth IRA contribution is only $6k or $7k if age 50+) depending on how you do it.

You want to rollover each account to a new account of the same type - Roth to Roth, or traditional to traditional - at a better provider, like Vanguard.

An IRA is just a bucket to hold a variety of investments.  Within that bucket you can buy and sell investments without tax implications.  Initially we were 100% total stock market VTSAX.  When we passed age 50 and were thinking early retirement soon, I decided it was time to add bonds (as crappy as they look now). I wanted 30% of our total in bonds, so I added all our accounts together, got a $ value for 30%, but I wanted bonds only in tIRA, not in Roth accounts. So I sold the $ value of VTSAX in DH rollover tIRA, and bought the same $ value in total bond market to replace it.

I want the Roth accounts to grow the most, so all stocks in there. Bonds should limit growth, so are better in tIRA where we will eventually need to pay tax on any withdrawals, RMDs, even Roth conversions.

But you sound like you are much more conservative than we are. VTSAX is all stock, it's as volatile as the market it is indexing. You want something less volatile. But you need some stocks to keep up with inflation over decades in retirement.

[jmlrn]

Feb 6, 2021 11:50:30 GMT -5 teen persuasion said:

Feb 5, 2021 16:20:42 GMT -5 jmlrn said:

I've gotten good advice here before. Hubby handled ALL the financial stuff. So now our IRA's in bank CD's are coming to maturity & I have decided to open a ROTH IRA at Vanguard. I've been reading & researching & all it's given me is a headache & nauseas stomach. I don't want to pay a financial advisor. I actually don't have that much money to invest so it wouldn't be cost effective. My plan is just to put the initial amount around $15,000 into either a 2015 Target date fund. We've been very conservative in the past so not even sure if this is too much stock for my liking. I think I could also do bonds but the choice is dizzying. Once I open this ROTH can I change the Target date fund to all bonds? Can I change just a percentage? Once the next IRA CD comes due can I just roll this additional money, another $15,000 into this Vanguard IRA or do I have to open a whole new one? I'm really clueless. The two relatives I trust for advice do not have any IRA's; one has all stocks & the other has an annuity. Hubby always said never get an annuity. All this is keeping me up at night

I guess what I'm asking too is what are good funds to invest in that don't have alot of risk. I'm about 5 years from retirement.

I know Tiny explained part of this, but just wanted to reiterate - you probably don't want to open a Roth IRA and move the bank tIRA money into that.  That would either be a Roth conversion (and the entire amount would get added to your AGI, for extra tax) or it would be a withdrawal from tIRA and new contribution to Roth IRA (which would be the worst of both worlds - entire amount added to AGI plus extra tax, and new Roth IRA contribution is only $6k or $7k if age 50+) depending on how you do it.

You want to rollover each account to a new account of the same type - Roth to Roth, or traditional to traditional - at a better provider, like Vanguard.

An IRA is just a bucket to hold a variety of investments.  Within that bucket you can buy and sell investments without tax implications.  Initially we were 100% total stock market VTSAX.  When we passed age 50 and were thinking early retirement soon, I decided it was time to add bonds (as crappy as they look now). I wanted 30% of our total in bonds, so I added all our accounts together, got a $ value for 30%, but I wanted bonds only in tIRA, not in Roth accounts. So I sold the $ value of VTSAX in DH rollover tIRA, and bought the same $ value in total bond market to replace it.

I want the Roth accounts to grow the most, so all stocks in there. Bonds should limit growth, so are better in tIRA where we will eventually need to pay tax on any withdrawals, RMDs, even Roth conversions.

But you sound like you are much more conservative than we are. VTSAX is all stock, it's as volatile as the market it is indexing. You want something less volatile. But you need some stocks to keep up with inflation over decades in retirement.



So I am realizing I need some stocks. Basically I just want to pick SOMETHING to put my money in when I convert my ROTH & leave it there. I won't be watching it or trading anything. As another ROTH CD comes due I'll put that amount in the same place or places.( Initially I will probably only be starting with $10,000). I'll set up tIRA & ROTH separately & put the corresponding cd's in as they mature. Honestly 30% stock is the highest I'm comfortable with. Is my best bet a Target Date Fund since I just want to put the money in & forget about it? Or should I really be paying an advisor at Vanguard? I'm almost 61 now. My full retirement is at 67. Not sure I can physically work that long but I'm gonna try. 65 is probably more realistic. Total cash & retirement accounts right now are about $650,000. I've done alot of internet searches this weekend & still at a total loss as to particular investments. The only thing I'm sure about is Vanguard.

[buystoys]

I don't know if you can hire an advisor at Vanguard or not.  Here are a couple of links, though, to help you understand setting an asset allocation you are comfortable with and how you can do it with only a couple of funds. 

All of our investments are at Vanguard.  I do an annual rebalance to keep the AA we want.  It's really not difficult and takes me about 15 minutes to do it.  Our IRAs are basically Couch Potato investments.  Here's a link for that:  link

You can do the Couch Potato type investing with less that 50/50.  You could do 30/70 using the same concept of investing in two index funds and just setting it.  We do 65/30/5 with the 5% being our cash holdings.

Bogleheads has a good Wiki with fairly simple explanations.  Here's the link for that:  link

Hope these help get you started!

[justme]

Fidelity has an option to go with advisers. They're pretty much the same as vanguard. My money is most at fidelity because my work 401k and espp is with them so it was easier at a place I already had money.

[teen persuasion]

Vanguard does have an advisor service, PAS, which costs .3% of your assets in the service. That's better than the costs at some other firms like Edward Jones who charge at least 1% AUM (assets under management) and put you in expensive funds, and churn your account to boot. But you don't need an advisor. You should mostly be buy and hold, not shifting from this fund to that fund every time the wind blows.

If you want to be more hands off, a target date fund is good enough. It will rebalance for you. It will glide more conservative over time. A vanguard target date fund will be low expense ratio.

[gs11rmb]

You can get advisors at Vanguard:  investor.vanguard.com/advice/financial-advisor/
 
They started asking if I was interested in this service when the account went over $200K.

[teen persuasion]

One other thing - terminology matters. "Convert" means change a tIRA to Roth IRA, and pay tax on the converted amount. "Rollover" means to move an account to the same type (traditional vs Roth) at a different provider.

You should not be converting here. Using that word with a provider might cause errors.

[Lizard Queen]

I don't know about the advisors at Vanguard, but the one at fidelity had my Dad's money in way more funds than necessary, and they were funds with higher fees/expenses. If you know you want 30% stocks, and the rest bonds, just DIY with the low expense total market funds for each. There's really no need to mess around with anything else.

[Tiny]

Feb 8, 2021 9:36:04 GMT -5 Lizard Queen said:

I don't know about the advisors at Vanguard, but the one at fidelity had my Dad's money in way more funds than necessary, and they were funds with higher fees/expenses. If you know you want 30% stocks, and the rest bonds, just DIY with the low expense total market funds for each. There's really no need to mess around with anything else.

This was my experience at Fidelity too. I didn't know what I wanted so I just went with it. It wasn't bad - but it could have been better. If I were to do it over again, I would have more opinions about my "needs" and would have been a bit more prepared to say what types of funds I wanted in what percentages.

If you do work with an advisor at Vanguard you don't have to "do" what they advise. And you can tell them what type of funds/percentages you want. You may wind up with a compromise - but it will most likely be closer to what you want.

If I knew I wanted 30% (or25% stock) and 70% (or 75%) bonds I'd look for and pick out a Total Market stock and a Total Market bond fund and then when the money gets to the roll over IRAs (it will most likely go in a "core account") I would divvy it up and "trade" or "buy" the two funds you've chosen in the amount you want.

The boglehead wiki might be helpful www.bogleheads.org/ - they have a 3 fund "portfolio" that makes sense for a many investors. Look for the Wiki Home link on the page. (I think that's what you want).

[jmlrn]

Really starting to think I may do the Personal Advisor service at Vanguard. This causing me also of anxiety & consuming all my free time worrying about it. I suppose after a year or two if I'm feeling better about all of these decisions I could drop the personal advisor services.

[Lizard Queen]

Feb 16, 2021 21:14:21 GMT -5 jmlrn said:

Really starting to think I may do the Personal Advisor service at Vanguard. This causing me also of anxiety & consuming all my free time worrying about it. I suppose after a year or two if I'm feeling better about all of these decisions I could drop the personal advisor services.

That's probably a good idea, to make sure things are set up and rolled over correctly, and to ease your anxiety.

[minnesotapaintlady]

Personally, I think if you just call Vanguard, they'll talk you through all your options without actually hiring an advisor. 

Basically what I'm hearing is you just have some bank IRA money you want to rollover to Vanguard. They can easily move it and just stick it in a money market or something else super safe for now while you decide what you want to do with it.

If it wasn't in a Roth before you'll have to pay taxes on the entire amount converted though, so maybe you just want to roll it to a traditional IRA and avoid that?  I don't know what kind of money we're talking here though and how much of a tax hit you can absorb.