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2nd year of backdoor Roth -- quick question

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  • 2nd year of backdoor Roth -- quick question

    I'm in my early 30s, first year of practice after training. When I graduated, I read up on WCI and started a Vanguard backdoor roth IRA. For 2017, I didn't have enough funds to use an admiral account so I figured I would just put $5500 in a target fund and re-address the issue next year.

    Well, the time is here now

    Currently I have $5500 for my 2018 contribution sitting in the money market fund, and my original 2017 funds in the target fund. Which of these options would be preferable?

    1) sell off my target fund shares and put everything into the admiral VTSAX. Then after a couple years when I have $10k+ extra in contributions, I'll put half into admiral VTIAX

    2) Get my money out of the target fund and split my current funds 50/50 between VGTSX and VTSMX?

    3) Something else?

    I also have a 401k through work where I am using a typical three fund system. Thanks!

  • #2
    Congrats on being where you are so early in your career.

    There are no bad choices here, any of the options you listed would be fine.

    That said, I had a target date fund in his/her Roths that I sold once I had enough to split to VTSAX and VTIAX to lower the expense ratios. I didn't bother to sell before there was enough to get the admiral shares due to hassle factor. YMMV

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    • #3
      I wouldn't worry about the tiny difference in expense ratios at your stage in the game.

      With vanguard, your funds will automatically be moved to the admiral shares version of the fund once you accumulate the required minimum balance (10k).

      At least that's how mine worked in my account once I passed the 10k threshold. I got an email notifying me that my funds were automatically being converted to admiral shares.

      Just keep contributing according to your desired asset allocation and let it ride.

      Nice job!

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      • #4
        The difference is minuscule, but if you feel better about it, you could just go 100% VTSAX (total stock, admiral).  Keep in mind that the difference in fees on $10,000 between VTSAX (0.04%) and VFIFX (target date 2050, 0.16%) is literally $12/year.

        Also, if you were considering splitting between VTSMX (total stock investor, 0.15%) and VGTSX (total int'l stock investor, 0.16%), there's hardly any point in leaving VFIFX which is already 56% VTSMX and 34% VGTSX (remaining 10% bonds; 7% US VTBIX and 3% int'l VTIBX), unless you *really* wanted a higher int'l allocation or really wanted to get that $1,100 out of bonds.  Small potatoes.

        I'd prob just stick with simplicity, tbh, unless you want more int'l exposure.

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        • #5
          I am in the second year of Backdoor Roth too. Just moved the 5500 from my savings to my TIRA. Do I necessarily need to invest it before converting to my Roth? Thank you.

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          • #6




            I am in the second year of Backdoor Roth too. Just moved the 5500 from my savings to my TIRA. Do I necessarily need to invest it before converting to my Roth? Thank you.
            Click to expand...


            No and best if you don’t. That way you’ll have a clean $5,500 to convert.
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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