Investing 102

[GregWeld]

Originally Posted by captainofiron

1), the guy is an private investment guy that handles the companies 401k, he is a part of Baird Financial

2) To be completely honest I am really intimidated by all of this, never having done it, nor knowing anyone who has done it. Hence why I havent touched my old 401k, which is with Fidelity in one of their target date funds. About a month after being hired on, my new company had their 401k review and the investment guy talked to me afterward about possible strategies.

3) thats alot of reading

haha thanks

1) Baird Financial is a HUGE firm with BILLIONS under management. Don't be afraid of them.

2) Read this thread from start to finish - take your time - and you'll be a lot less intimidated

3) It's YOUR future we're talking about... given the amount of time you have to live in retirement... the 400+ pages of this thread is childs play.

4) You have an obligation to yourself and your family to get a grip on your finances. It's EASY... and more importantly - IT'S THE MOST IMPORTANT THING YOU CAN EVER DO.

Like anything else - we all do things that we start out knowing nothing about. We all manage to educate ourselves about clutches - motors - tires - paint etc. Except that NONE of those are very important. Yet me manage to dive in and get involved.

[captainofiron]

Originally Posted by GregWeld

1) Baird Financial is a HUGE firm with BILLIONS under management. Don't be afraid of them.

2) Read this thread from start to finish - take your time - and you'll be a lot less intimidated

3) It's YOUR future we're talking about... given the amount of time you have to live in retirement... the 400+ pages of this thread is childs play.

4) You have an obligation to yourself and your family to get a grip on your finances. It's EASY... and more importantly - IT'S THE MOST IMPORTANT THING YOU CAN EVER DO.

Like anything else - we all do things that we start out knowing nothing about. We all manage to educate ourselves about clutches - motors - tires - paint etc. Except that NONE of those are very important. Yet me manage to dive in and get involved.

Thanks thats good to know on #1
The guy was a real fast talker, reminded me of Wolf on Wall Street and I was really unnerved

I just started reading through the PDF. but its going to take me a while, haha

and just because its appropriate

haha

SO with that said, rolling over my old 401k to them in the form of a traditional IRA is a good move?
OR should I roll it into my new companies 401k?

I am leaning more toward the new 401, as they pay the fees and stuff, BUT the more choices and the ability to withdraw from the IRA (even though its penalized) is a very attractive "Pro"

[JKnight]

I would talk to someone about the IRA before you go too far in thinking that there are "fees" issues associated with it. Most discount brokers will set you up an IRA for free and there are no account maintenance charges. You'll pay some amount in commissions whenever you trade, but there are no annual fees for your average rollover IRA (I'm sure there are exceptions to this where someone is charging account fees, but there are plenty that don't).

In fact, your company's current 401k with its' target date funds will actually cost you more than holding stocks in an IRA. For example, look at the OER (Operating Expense Ratio) on the target date funds you're holding in your 401k. Most likely, the OER is somewhere in the range of 0.60%-1.50%. That means that the returns for each fund are being reduced by the OER (fee the fund company charges to pay the portfolio managers, keep the lights on, etc.) with whatever's leftover being reflected as an increase in the fund's price (aka your return for the year).

That OER is being taken every year, so ~1.00% per year. That's a fee! There is no such thing happening in an IRA, well, unless you buy mutual funds in it. So, yeah, you'll pay some amount in commissions to buy your stocks (or whatever you choose) in the IRA, but you shouldn't have to pay anything additional on an annual basis. You can even buy ETFs in the IRA and sometimes that can be done commission free.

[captainofiron]

Originally Posted by JKnight

I would talk to someone about the IRA before you go too far in thinking that there are "fees" issues associated with it. Most discount brokers will set you up an IRA for free and there are no account maintenance charges. You'll pay some amount in commissions whenever you trade, but there are no annual fees for your average rollover IRA (I'm sure there are exceptions to this where someone is charging account fees, but there are plenty that don't).

In fact, your company's current 401k with its' target date funds will actually cost you more than holding stocks in an IRA. For example, look at the OER (Operating Expense Ratio) on the target date funds you're holding in your 401k. Most likely, the OER is somewhere in the range of 0.60%-1.50%. That means that the returns for each fund are being reduced by the OER (fee the fund company charges to pay the portfolio managers, keep the lights on, etc.) with whatever's leftover being reflected as an increase in the fund's price (aka your return for the year).

That OER is being taken every year, so ~1.00% per year. That's a fee! There is no such thing happening in an IRA, well, unless you buy mutual funds in it. So, yeah, you'll pay some amount in commissions to buy your stocks (or whatever you choose) in the IRA, but you shouldn't have to pay anything additional on an annual basis. You can even buy ETFs in the IRA and sometimes that can be done commission free.

Well Im reading this whole thread, and Gregs post are really getting me excited, haha

the OER on mine is .78%

The investment guy I have been talking to here at my new job says that I should go with Mutual Funds since I am young (31)

and suggested some from Blackrock

specifically these
1) http://www.blackrock.com/investing/p...nal-class-fund

2) http://www.blackrock.com/investing/p...nst-class-fund

3) http://www.blackrock.com/investing/p...nal-class-fund

[JKnight]

Originally Posted by captainofiron

the OER on mine is .78%

The investment guy I have been talking to here at my new job says that I should go with Mutual Funds since I am young (31)

and suggested some from Blackrock

specifically these

If that's what you're comfortable with, then go for it. It's good that you're talking to a professional and listening to their advice. However, I would have encouraged you to ask a follow-up question of him, "why are mutual funds better suited for a "young" person of my age?". Then you can hopefully learn from his answer, helping you to become more informed about why you're doing what you're doing, or you can find out if he's feeding you a line of bull.

You and I are the same age, so I get where you're coming from. As a young person, you can afford to have stocks rise and fall quite a few times before you need the money. So the logic of using highly-diversified mutual funds for a young person seems a bit odd. For me, I also utilize commission-free ETFs in a rollover IRA because I know that over the course of 40 years of compounding, not losing out on ~1.0% a year in returns due to expenses can make a real difference in the ending balance.

In Greg terms, I would use the commission-free ETFs to "park" cash if you don't have a stock or other investment you're interested in.

As a reminder: we're not telling you what to do, just telling you what we do or how we think about things so you can learn.

[captainofiron]

Originally Posted by JKnight

If that's what you're comfortable with, then go for it. It's good that you're talking to a professional and listening to their advice. However, I would have encouraged you to ask a follow-up question of him, "why are mutual funds better suited for a "young" person of my age?". Then you can hopefully learn from his answer, helping you to become more informed about why you're doing what you're doing, or you can find out if he's feeding you a line of bull.

You and I are the same age, so I get where you're coming from. As a young person, you can afford to have stocks rise and fall quite a few times before you need the money. So the logic of using highly-diversified mutual funds for a young person seems a bit odd. For me, I also utilize commission-free ETFs in a rollover IRA because I know that over the course of 40 years of compounding, not losing out on ~1.0% a year in returns due to expenses can make a real difference in the ending balance.

In Greg terms, I would use the commission-free ETFs to "park" cash if you don't have a stock or other investment you're interested in.

As a reminder: we're not telling you what to do, just telling you what we do or how we think about things so you can learn.

Man, I wish I would have found this thread before I talked to him. I didnt start googling until after I spoke with him, and then I stumbled upon this gem of a thread.

Im curious if he suggested that because I told him I am a more conservative person. That was like the second question he asked me.

I guess the more important thing right now is to get the old 401k rolled over into an IRA, then later on start looking at the commission free ETF that you and Greg are talking about

[GregWeld]

I would suggest you do absolutely NOTHING until you're done reading....


You're only 31 --- and couple more weeks isn't going to kill you right now. Read thru the thread -- go back and re-read parts you don't quite get... it will start to all come together for you. THEN you can come back here with better questions.

Ditch the fast talking bozo --- if you decide to go with them - call them and ask to work with a different representative. NEVER EVER NEVER EVER work with a fast talker. It's way too important for you!!

Don't get caught up in thinking you need to do this or that. Wait until you understand ALL your options! There are income tax implications if you do it WRONG.... and there are many other considerations that will all greatly affect your decisions now and into the future.

When you get a little more comfortable with all these "terms" --- ask what it would look like to roll your 401K over into a ROTH IRA. This may take an accountant to factor in the taxes... but if I was your age (without knowing another single detail about you or your income level) I'd want my money in a ROTH IRA.