Vanguard or Schwab for Roth IRA?

[Amyolin]

Polling you smarter folks about where to invest my back door Roth.

401k is with Schwab.  Just opened a taxable account with Vanguard.  Also have an old Roth IRA with USAA. Prob doesn't matter much where I go as long as I invest, but curious to hear where and in what investments people have their back door Roths.

Thanks.

[Craigy]

I don't know if I'm smarter, but I like Vanguard.

I just rolled over my old Roth from USAA to Vanguard.  I want to say USAA charged a fee that was about $50 to do the rollover.  I also just opened/converted an IRA to a Roth for my wife with Vanguard.

I'm not sure of the Schwab benefits but Vanguard offers no commission trades on their own ETFs which was nice when my balance was low.  I think the first 20 or 30 trades outside of their products are also commission free but I haven't used any.

[dshelley86]

just curious, do you mind sharing why you left USAA for Vanguard?  I'm a graduating resident and I am opening pretty much everything with USAA because I think they're a great company.  But wondering what other info you may have.  Thanks!

[DMFA]

dshelley86 wrote:

just curious, do you mind sharing why you left USAA for Vanguard?  I’m a graduating resident and I am opening pretty much everything with USAA because I think they’re a great company.  But wondering what other info you may have.  Thanks!

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USAA's funds don't perform as well and have higher costs than Vanguard.  Also, their backdoor Roth is very cumbersome, requiring me to *gasp* actually use paper forms that I have to fax them.  I switched to Fido because my wife's 403b was with them.  I haven't moved the 529 over yet, but I plan to do so because USAA's fees are pretty high for their 529.

USAA was not terrible, and you can hold Vanguard's funds with any custodian (though you'd pay trade fees), but all things considered I needed more from them than they were set up to do without actual pieces of paper and administrative delays.

[DMFA]

Vanguard's backdoor Roth process is super easy.  So is Fidelity's.  Both let you keep the $0 Traditional IRA account open year-round just to use as a dumping ground for the few days between contribution and conversion.  IDK about Schwab because I haven't used them, but it must be similarly easy.  I'd pick whichever custodian has the easiest processes and most funds you'd want to own to be able to trade for free.  If you'll ever need an indie 401(k), though, be advised that Vanguard doesn't accept incoming 401(k) rollovers (for now).

[Hank]

I like USAA for banking and auto / homeowners insurance.  Back in 2012 we got a great rate but frustrating customer service on a mortgage through USAA.  (Seriously, it was a night and day difference in customer service.  Like dealing with a company that was every bit as bad as the insurance and banking side of USAA is good.)

USAA investment products are overpriced and under-performing compared to Schwab and Vanguard.  Schwab's fees now are competitive with Vanguard.  My wife has been a Schwab customer since she was 16.  That said, I like how Vanguard is owned by its investors and I like what they've done for the industry.  We have accounts at both Vanguard and Schwab (and still have a 529 and Coverdell at USAA).  We ought to consolidate and simplify, but we haven't gotten around to it yet.

[Craigy]

dshelley86 wrote:

just curious, do you mind sharing why you left USAA for Vanguard?  I’m a graduating resident and I am opening pretty much everything with USAA because I think they’re a great company.  But wondering what other info you may have.  Thanks!

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I still bank with USAA but wanted to put all of my investment accounts under one roof at Vanguard.  I setup the USAA Roth a long time ago as a teenager.  For me it was a tiny account since I had cashed most of it out to give some liquidity for a first-time home purchase, so the rollover wasn't really a big deal.

But in general if I was going to open an investment account, it would be with Vanguard over USAA.  Like DFMA said, Vanguard is easier to deal with, and offers free transactions for their own funds and ETFs.  And I have always been impressed with Vanguard when dealing with them for clients.

USAA is a great company for banking and for insurance if you're eligible.  On the investor side they're OK.  You'll be fine with either one, or Fidelity etc. but that's just my vote.

[Zaphod]

Why would you have a taxable at Vanguard? Has their interface or trading costs changed dramatically? They are cumbersome and expensive. You can always just buy their funds from whatever custodian you have.

Merrill is free is you have like 100k through all accounts. You can choose Vanguard stuff or Schwab, etc...

[Craigy]

https://investor.vanguard.com/investing/benefits/voyager

All I know about Merrill is how back in the day they were happy to slam me with a $50 commission when I'd trade literally three shares of stock.  Bleh.

[dshelley86]

Do you guys feel like financial advising, which is free with USAA, is worth the higher fees over vanguard? I'm a graduating resident and I'm still heavily in the education phase of things. Although the WCI site is helping immensely.

[AZdoc68]

Amyolin wrote:

Polling you smarter folks about where to invest my back door Roth.

401k is with Schwab.  Just opened a taxable account with Vanguard.  Also have an old Roth IRA with USAA. Prob doesn’t matter much where I go as long as I invest, but curious to hear where and in what investments people have their back door Roths.

Thanks.

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I use Schwab for IRAs and Taxable and invest mostly in Schwab's index ETFs.  They have a full menu of them for US stocks, foreign stocks, US REITs, and US bonds (none yet cover foreign bonds or foreign REITs which I buy Vanguard ETFs for at $4.95 per trade).  They have ZERO transaction costs which make rebalancing free and have very very low fees, as in under 10 bps per year.  Backdoor Roth is a breeze.

SCHB - US Total Stock mkt

SCHA - US Small cap stock

SCHD - US dividend stock

SCHH - US REIT

SCHF - Foreign developed market large cap stock

SCHC - Foreign developed market small cap stock

SCHE - Foreign emerging market stock

SCHZ - US aggregrate bonds

SCHO - US govt short term treasuries

SCHP - US TIPS bonds

There are others too.

[Craigy]

dshelley86 wrote:

Do you guys feel like financial advising, which is free with USAA, is worth the higher fees over vanguard? I’m a graduating resident and I’m still heavily in the education phase of things. Although the WCI site is helping immensely.

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If it makes you feel comfortable, sure.

But it is of no value to me.

[Amyolin]

Took advice of WCI on the Vanguard life strategy moderate growth fund.  Wanted a place to put extra cash each month instead of my high interest savings account.  There are no fees with this fund and I have an automatic transfer set up each month to go direct from checking into the account to get invested into the fund.

 

As for USAA's free financial advising, I have not been overly impressed and I assume they are biased.  I'm going to get my investments out of USAA and into Vanguard since the fees are so much higher.

 

Dshelley, if I were you, I'd stick with WCI/bogleheads/PoF...you are way ahead of the game.  I wish I had known about these resources at the end of residency.  I'm correcting all sorts of small mistakes from the past 8 years.  Never knew about investing my HSA or back door Roth, just to name a few.

[Craigy]

Amyolin wrote:

Took advice of WCI on the Vanguard life strategy moderate growth fund.  Wanted a place to put extra cash each month instead of my high interest savings account.  There are no fees with this fund and I have an automatic transfer set up each month to go direct from checking into the account to get invested into the fund.

 

As for USAA’s free financial advising, I have not been overly impressed and I assume they are biased.  I’m going to get my investments out of USAA and into Vanguard since the fees are so much higher.

 

Dshelley, if I were you, I’d stick with WCI/bogleheads/PoF…you are way ahead of the game.  I wish I had known about these resources at the end of residency.  I’m correcting all sorts of small mistakes from the past 8 years.  Never knew about investing my HSA or back door Roth, just to name a few.

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If you have been putting money away during those 8 years, you haven't been making any mistakes.  Might not have always done everything you could have, but you're doing well.