Announcement

Collapse
No announcement yet.

Capital Group/American Funds Roth IRA

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Capital Group/American Funds Roth IRA

    Hello and thank you in advance for your recommendations.

    I am new to investments, however during residency was told that if I could contribute to a Roth IRA I was doing well for the time being. I of course found a financial advisor who recommended American Funds for a Roth IRA. Now that I am doing more research, I am seeing that the expense rations of the funds that I have are approximately 0.59-0.84% as well as have front end load fees of ~ 5.75% and selling fees of ~ 1%. Of course this was never disclosed to me and I was just told that these funds have performed well over the years.

    I am currently in fellowship and have ~ $25,000 in the Roth IRA.

    My funds through Captial Group/American Funds are:

    AEPGX (ER 0.84%)
    ANCFX (ER 0.61%)
    ANEFX (ER 0.76%)
    ANWPX (ER 0.76%)
    AWSHX (ER 0.59%)

    From what I am reading, it is generally recommended to go with Vanguard Index Funds for Roth IRA due to low expense ratios and fees.

    Would you all recommend moving these to Vanguard, and if so which fees and what is the best way of transferring the funds? Currently I am still eligible to contribute to a Roth IRA given my fellowship income, however starting in July 2021 I will no longer be eligible. Therefore this is likely the last year that I would contribute to the Roth IRA. I have put in $3000 this year, and will put in $3000 prior to the deadline for 2020 tax year.

    I really appreciate your time and help as well as your tolerance of my ignorance . Please let me know if further information is needed.

  • #2
    American Funds are fantastic funds...for the advisor to sell. Any of the large brokerages (Vanguard, Fidelity, etc.) will have extremely low fee options. You should be able to contact the brokerages and they can help arrange the transfers. The funds are in a Roth so no tax consequences on selling and buying more appropriate funds. Also, just because your income won't allow you to contribute directly to an IRA doesn't mean you still can't get money into a Roth. Look up the backdoor Roth, that is what you'll be doing once your income is high enough. Best wishes and do me a favor...email your financial advisor a middle finger and poop emoji from me, they'll know what it means.

    Comment


    • #3
      Don’t put the $3k in this account.
      Do you have employment lined up? If you what brokers are available in their plans?
      If Fidelity or another large one, consider that. It doesn’t have to be Vanguard.

      Comment


      • #4
        Definitely top 5 mistake you could have made.

        Comment


        • #5
          Thank you all very much for your helpful information. I'm still working on joining a private practice and developing a contract so I'm not quite sure what retirement options there will be. I will likely go forward with contacting Vanguard to transfer to their Roth IRAs. Do they have different funds to choose from (or do you all have any recommendations which ones to choose)?

          Also, I'm not sure what "definitely top 5 mistake you could have made" means...helpful commentary? Anyways, thank you again.

          Comment


          • #6
            Originally posted by weoutchere View Post
            Thank you all very much for your helpful information. I'm still working on joining a private practice and developing a contract so I'm not quite sure what retirement options there will be. I will likely go forward with contacting Vanguard to transfer to their Roth IRAs. Do they have different funds to choose from (or do you all have any recommendations which ones to choose)?

            Also, I'm not sure what "definitely top 5 mistake you could have made" means...helpful commentary? Anyways, thank you again.
            so ill preface this by: welcome.

            here we go:
            - you were tricked by a salesman. you were supposed to read the prospectus. stop talking to your salesman, and never again.
            - this also brings up if you bought whole life insurance you need to unwind that too...also a top 5 mistake.
            - you need to move your Roth IRA to any large firm (vanguard, fidelity, schwab, tda, etc). you create accounts there and have them pull your Roth IRA to them. this is the portfolio you build around in the long run (https://www.bogleheads.org/wiki/Three-fund_portfolio).
            - Thats the end of your conversation with the salesman. you will lose the load fee, sales fee, etc. its gone.
            - You bought something that needs to achieve >6% return just to break even. realize some of us project our portfolios out to retirement with a 6% gain total.....
            - theres a bunch of reading to do. Bogleheads books, their wiki, the WCI blog, the WCI books, Zweig, Ferri, Clements, Piper, it goes on.
            - But heres an easy one to start: https://about.vanguard.com/what-sets...020_Online.pdf. (tldr: cost is the only determinant of success)

            OK, Roth eligibility:
            - the month of the year doesnt matter. its your MAGI for the tax year in question. therefore, for 2021, what will be your MAGI? figure that out and then decide if you can contribute directly or need to do a backdoor rIRA (read this whole thing first: https://forum.whitecoatinvestor.com/...-ira-home-base).

            Comment


            • #7
              Originally posted by weoutchere View Post
              I will likely go forward with contacting Vanguard to transfer to their Roth IRAs. Do they have different funds to choose from (or do you all have any recommendations which ones to choose)?
              You can choose from any of their funds. VTSAX is the popular total US market fund and VTIAX is the popular total international market fund or you could choose their ETF counterpart depending on your preference.

              Comment


              • #8
                Originally posted by Peds View Post
                OK, Roth eligibility:
                - the month of the year doesnt matter. its your MAGI for the tax year in question. therefore, for 2021, what will be your MAGI? figure that out and then decide if you can contribute directly or need to do a backdoor rIRA (read this whole thing first: https://forum.whitecoatinvestor.com/...-ira-home-base).
                No harm in doing a back door Roth contribution whether your modified adjusted gross income is too high for a direct Roth contribution this year or not. Just one extra step.

                Comment


                • #9
                  weoutchere
                  You just received more actionable financial advice than you would receive in a lifetime with your current FA. Actually, if you read and follow it, it corrected mistakes and put you on much better path for FREE. You definitely got your money's worth on your first post. Welcome to the forum.

                  Comment


                  • #10
                    It’s a rookie mistake, but at least you made the mistake in the pre-season. When regular season starts (when you are an attending), you will be in a position to do much better.

                    Comment


                    • #11
                      Originally posted by VagabondMD View Post
                      It’s a rookie mistake, but at least you made the mistake in the pre-season. When regular season starts (when you are an attending), you will be in a position to do much better.
                      Exactly. OP, investing using American Funds was a mistake, but a small one in the bigger view of things. Just move your Roth IRA to Vanguard, Fidelity, or Schwab, and read up on how to do the Backdoor Roth, and in the long run you'll do just fine! (I didn't save anything during residency, so you are ahead of where I was at your age.)

                      And welcome to the board! I hope you stick around. You'll learn a lot.

                      Comment


                      • #12
                        Originally posted by Peds View Post

                        so ill preface this by: welcome.

                        here we go:
                        - you were tricked by a salesman. you were supposed to read the prospectus. stop talking to your salesman, and never again.
                        - this also brings up if you bought whole life insurance you need to unwind that too...also a top 5 mistake.
                        - you need to move your Roth IRA to any large firm (vanguard, fidelity, schwab, tda, etc). you create accounts there and have them pull your Roth IRA to them. this is the portfolio you build around in the long run (https://www.bogleheads.org/wiki/Three-fund_portfolio).
                        - Thats the end of your conversation with the salesman. you will lose the load fee, sales fee, etc. its gone.
                        - You bought something that needs to achieve >6% return just to break even. realize some of us project our portfolios out to retirement with a 6% gain total.....
                        - theres a bunch of reading to do. Bogleheads books, their wiki, the WCI blog, the WCI books, Zweig, Ferri, Clements, Piper, it goes on.
                        - But heres an easy one to start: https://about.vanguard.com/what-sets...020_Online.pdf. (tldr: cost is the only determinant of success)

                        OK, Roth eligibility:
                        - the month of the year doesnt matter. its your MAGI for the tax year in question. therefore, for 2021, what will be your MAGI? figure that out and then decide if you can contribute directly or need to do a backdoor rIRA (read this whole thing first: https://forum.whitecoatinvestor.com/...-ira-home-base).
                        I really appreciate your teaching and advice - this was extremely helpful. I look forward to continuing to learn and hopefully being able to contribute in the future.

                        Comment


                        • #13
                          Thank you all for your positive input, tolerance and advice!

                          Comment


                          • #14
                            Originally posted by VagabondMD View Post
                            It’s a rookie mistake, but at least you made the mistake in the pre-season. When regular season starts (when you are an attending), you will be in a position to do much better.
                            Great point. Randomly, this reminds me of the old Allen Iverson interview https://www.youtube.com/watch?v=L29cuziRazU

                            Comment

                            Working...
                            X