Resident Learning...

[thepodfather]

First post here so bare with me....I just finished WCI today and looking to keep the momentum rolling on more of the suggested books I've seen in the book/forum

I'm a very frugal first year resident that has been lucky enough to make some good real estate investments (with the help of good luck) in the past between undergrad and going back to professional school.  With that said, I'm now looking to step up my game to become an intelligent investor and relying less on luck.  We have accumulated about $35k in savings/online brokerage counts, and we then have 3 pre-tax retirement accounts from previous jobs.  I currently have a 403(b) and 457(b) with my program matching 2%.  We are trying to educate ourselves more about retirement accounts and investing now in order to consolidate these accounts into a single retirement account, if at all possible.  My questions are:

1.  Is it possible to combine several retirement accounts into one new account?  If so, could we also convert the older IRA's as well as my current 403/457 accounts to a Roth (since we are now in the lowest tax bracket that we will ever be at in our lives)?

2.  Would it be insane to use a CFP in the short-term to set this up, and then move on to managing our investments myself for the long run?  Or is it a fairly safe option for a novice to open up a Vanguard account and just go for it?

For what it's worth, this forum and the WCI book is an incredible resource and I appreciate everyone's involvement!

[DMFA]

1. Yes. Pretax to pretax is called a rollover. You need an account which accepts incoming rollovers. People often use traditional IRAs for rolling over prior employers' 401(k)/403(b) accounts. We high-income (or soon-to-be high) folks tend to eschew the traditional IRA in favor of rolling into a current employer account or an individual 401(k) so as not to have funds in pretax IRAs in order to enable "backdoor Roth IRA" contributions/conversions without pro-rata taxation. However, this may not be an issue right now since you might be able to make direct Roth contributions, and if that's the case, you could roll them into a traditional IRA, then roll that into an individual 401(k) once you can moonlight and obtain self-employment income. You're right in that your being in a low bracket now would also be a good time to convert those pretax accounts to Roth IRA if you could afford the tax bill.

2. This is probably simple enough for a n00b to fly solo. However I don't think getting some education or planning advice is a bad idea. Vanguard is easy to use and has great fund choices and fees, but their individual 401(k) doesn't accept incoming rollovers, if that's a path you choose to take.

[nachos31]

Welcome. You'll find good folks here with good advice.

1) You have a couple of options, but note that you cannot convert your current employer accts to Roth until you separate from your current employer and that you'd have to pay taxes on any converted amount
- you can (probably) roll all your old employer accts into your current 403b and then convert to Roth when you separate (you'd have more money as attng to cover taxes on conversion).
- you can convert your old accts to Roth as a resident in one fell swoop but you'll owe the taxes that year.
- you can convert your old accts piecemeal, maybe one acct each year in order to not bump yourself into higher tax bracket and so you can spread the cost of paying taxes on those conversions. You'd have to look at your current income and the thresholds for the various tax brackets to better plan this. This would probably be the way I'd go.

2) You could use someone else but it's also straightforward to do yourself with a little of reading and asking around here. You'd also potentially get guidance from the institutions where those old accts reside and/or your new Roth acct (e.g. at vanguard)

Good luck!

[nachos31]

Classic DMFA, getting his post in just before mine while I type slowly on my phone...

Also, he makes a great point about the solo 401k option to answer your first question.

[nachos31]

Classic DMFA, getting his post in just before mine while I type slowly on my phone...

Also, he makes a great point about the solo 401k option to answer your first question.

[thepodfather]

Update:

I've opened a Vanguard account and have set up all the basics so everything is going good so far on that front, but one issue that I've run into is that my Raymond James IRA account is requiring a "signature guarantee or Medallion Stamp" to transfer over to Vanguard.  This has been a bit of an issue with my availability.  Is there any way to avoid this or would paying for a Vanguard adviser help with setting up my accounts?  I wasn't able to find much helpful information on the Vanguard website....

[Dreamgiver]

I went through this same exact things a few years back. My super small bank does not offer the medallion stamp so, if I remember correctly, Vanguard helped me with that. There were some extra documents involved that I had to sign. Ask your bank first. They might offer it as a service to their customers and that would be the easiest way to go about it.