Just Starting...

[bite]

Hi,

New PGY1 here. I am hoping to start saving for retirement and I feel I have already made a mistake.

My hospital states that they only offer a 403b (no Roth accounts). So, they suggested I start a Roth IRA with the third-party company (TIAA) that they use. Once I set this Roth account up, there are several "equities" and "fixed income" funds to choose from. However, all of these funds have a "gross expense ratio" of 0.3-1.0%, with no options that I have read about (like the Vanguard total stock market fund). Being that I auto-deposited $500 into the account, I was forced to choose some bogus retirement fund with a high-than-desired expense ratio. I bit the bullet, and have paused all further contributions to this plan.

Now, I am hoping to set up a Roth IRA without making the same mistake twice. Do I set up a Roth IRA directly through Vanguard? How can I go about this?

Apologies in advance if this is a very fundamental question.

[ShredtheGnar]

Don’t know specifically about Vanguard but other major brokerage firms will let you set up a Roth IRA online. Very easy to do. Would guess that Van is similar to other firms like Schwab or Fido

[dataentryspecialist]

I like etrade a lot for this. Great interface and app, and access to all the vanguard ETFs you want with no transaction fees. I do recommend using ETFs over mutual funds, in general. Once you start making attending money, just switch over to doing back door roth.

[JBME]

this isn't a major mistake on your part because you are new. Easily correctable. You can apply for a Roth IRA online at Vanguard. Go open one up with a SSN. Once established, you can roll over the Roth IRA you have through work to your Vanguard Roth IRA. BTW, an expense ratio of .3 isn't terrible. 1% is but .3% isn't.

The only thing is by doing this your roth ira contributions won't come out of your paycheck. You'll need to get paid and then send the money to vanguard yourself. no biggie in my view. Try to get $6k in there by the end of the year or tax day 2023 (to count for 2022) at the latest

[bite]

I like etrade a lot for this. Great interface and app, and access to all the vanguard ETFs you want with no transaction fees. I do recommend using ETFs over mutual funds, in general. Once you start making attending money, just switch over to doing back door roth.

Why ETF's (VTI) over mutual funds (VTSAX)? From a newbies POV, they both seem tax efficient and have similar rates of return. The only difference I see by toying with the Vanguard interface is I would have to put in buy orders for the ETF's

[bite]

this isn't a major mistake on your part because you are new. Easily correctable. You can apply for a Roth IRA online at Vanguard. Go open one up with a SSN. Once established, you can roll over the Roth IRA you have through work to your Vanguard Roth IRA. BTW, an expense ratio of .3 isn't terrible. 1% is but .3% isn't.

The only thing is by doing this your roth ira contributions won't come out of your paycheck. You'll need to get paid and then send the money to vanguard yourself. no biggie in my view. Try to get $6k in there by the end of the year or tax day 2023 (to count for 2022) at the latest

Thank you for this advice. I just opened a Vanguard account and plan to begin contributions once my bank account is linked.

I have also heard from others' posts about having "poor stock options" via their employer's retirement accounts. If this is the case, why don't they also simply create an account at a third-party firm like Vanguard, etc.?

[G]

this isn't a major mistake on your part because you are new. Easily correctable. You can apply for a Roth IRA online at Vanguard. Go open one up with a SSN. Once established, you can roll over the Roth IRA you have through work to your Vanguard Roth IRA. BTW, an expense ratio of .3 isn't terrible. 1% is but .3% isn't.

The only thing is by doing this your roth ira contributions won't come out of your paycheck. You'll need to get paid and then send the money to vanguard yourself. no biggie in my view. Try to get $6k in there by the end of the year or tax day 2023 (to count for 2022) at the latest

This.

Don't sweat it, it wasn't a mistake. Hopefully it is the most irritating thing that happens intern year, but I doubt it.

[JBME]

Thank you for this advice. I just opened a Vanguard account and plan to begin contributions once my bank account is linked.

I have also heard from others' posts about having "poor stock options" via their employer's retirement accounts. If this is the case, why don't they also simply create an account at a third-party firm like Vanguard, etc.?

by "you are new" I mean I suspect you're young and new to your investing career so this "mistake" probably cost you less than $20. I assume you're just starting your Roth IRA this year. Don't forget to roll the existing Roth IRA over to Vanguard. Also be aware that you can only contribute $6k to your Roth IRA this year...you can't do $6k in the VG account and $6k in your employer-controlled account. You didn't seem to be confused on this but I want to be clear for anyone reading.

"Poor stock options" likely means high-expense ratio mutual funds within your employer account. That is why when someone here complains about poor options, we don't reply back asking for mutual fund performance over time but rather what the expense ratios are, like you did. Again though, an ER of .3 in our small little world here could be better, but when most people are paying 1%+, .3 is actually quite good.

https://www.whitecoatinvestor.com/expense-ratios/

At some point the expense ratios go low enough that going from one number down to another just isn't worth the effort. Like there's a big difference between $1000 and $100 but there's a much lower difference between $100 and $10 or $10 to $1. Be okay with an ER of .3. Yes it could be better but you're not getting swindled

[Tim]

Actually, the way the market is going, you might have actually avoided some losses with your pause.
You and actual transfer the funds and make up for any planned contributions that are in your bank account now.

The whole point I am making is the "process" is more important than the result. The difference is skill vs luck. Easily fixable, stay with your process.

[kmelton]

Hey guys, just joined the WCI site and found this thread. I have a very similar question:

From what I am reading, the typical max roth contribution per year is $6k, but I can contribute $20,500 to my employer sponsored TIAA 403b, and it seems that I can divide this up roth vs. standard. Does this mean the 403b allows me to contribute $20,500 of post tax money (roth)? If so, is it still better to set up a separate Vanguard 401k instead?

[Hank]

$22,500 for a 401(k) or 403(b) in 2023 (if you won’t be age 50 or older by the end of the year. $6,500 for a traditional or Roth IRA and $6,500 for an IRA for your spouse (whether the spouse works for remuneration or not).

[99mkw]

Hey guys, just joined the WCI site and found this thread. I have a very similar question:

From what I am reading, the typical max roth contribution per year is $6k, but I can contribute $20,500 to my employer sponsored TIAA 403b, and it seems that I can divide this up roth vs. standard. Does this mean the 403b allows me to contribute $20,500 of post tax money (roth)? If so, is it still better to set up a separate Vanguard 401k instead?

Unless you have a side gig/second job as a 1099 employee you won't be setting up an individual 401k with Vanguard, you will want to set up a Roth IRA as mentioned above. Also note that $6k for Roth and 20.5k for 403b are the 2022 limits. In 2023 it will be 6.5 and 22.5k. Also make sure you understand whether or not your income level requires you to contribute to the Roth via backdoor approach.

[kmelton]

99mkw I am doing some moonlighting so I can set up an individual 401k, I will not need the backdoor Roth right now. I am still unsure about the following:

Does my employee sponsored 403b (resident, no match) allow me to contribute an extra 16k of Roth money? Or is only 6.5k/22k eligible to be Roth? If the former, it seems reasonable to keep this 403b. If the latter, am I better off just opening up my own 401k?