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Roth IRA conversions

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  • Roth IRA conversions

    Hello WCI,

    My first post!

    SO...I've been working for about 3 years now, and started investing into my company 401. Rather erratically at first as you will see, but I've maxed out this year and plan to for the years to come.

    Had no idea what I was doing at the beginning, but I've become a little wiser (thanks to WCI and Bogleheads). There are two "mistakes" I made early on, and I wanted some advice as to what I should do. Nothing life-altering, but I figure the dialogue would be educational and I could avoid making any bad moves with my already invested monies.


    The 401/403k has about 35k. It's a mix of 401a and 403b because my company was at first using the 401 for their contributions but appears they have switched entirely to 403 for my contributions and theirs.) Excuse the following: When I started contributing 3 years ago, I put 10k into Roth 403, which is now worth about 11.5k. I'll be 100% vested in their contributions in 2 years.

    Also, I opened Vanguard IRA (traditional and Roth) this year and plan to start using the backdoor soon. Excuse the silliness of the following. I put 50 dollars (yes, 50) into the traditional to try it out. I made $0.07 on the Fed MM Fund over the course of a month since I didn't convert it right away. I've transferred it to the Roth IRA just now.

    Question 1. Do I need to worry about the IRA? As to what I've read so far, I would incur a penalty on 7 cents when I do my taxes when I file, yes? I will be contributing the full amount starting next year and transferring the next day per instructions to avoid taxation. Once I've done that I can actually open an index fund of course. Also, should I worry about any "residuals" than pop into the traditional over the next 60 days?

    Q2. So the portion of my 403 that's Roth. Should I just leave this as is? It's held with Fidelity. Can I or should I roll it into my new Vanguard Roth IRA?

    Q3. Rebalancing. To give some insight first. I currently have about a 60/40 domest/interntl mix in the 401/403. All vanguard products. Less than 10% overall and even less cash. Once I get the Roth IRA going, how should I rebalance? Should I keep the mix the same in both accounts or use one for international and the other for domestic? or what? Are there any benefits to putting all the bonds or all the international equities in one account over the other?

    Q4. Future investments. As I continue to save, I am looking at opening taxable accounts after maxing out the 401/IRA. How would one rebalance then?

    Of course, I'm aware that I'm kind of small on bonds at the moment. I wanted to keep it this way for now and incorporate more into my portfolio as I grow.

    Any advice/questions welcome.



  • #2
    Corretion: Q3. Less than 10% 'bonds'


    • #3

      Question 1. Do I need to worry about the IRA?
      Click to expand...

      well, you need to put the remaining 5450 contribution in and convert it. doing it all 1 year is so much easier. when you convert make sure to select 100% or all shares or whatever nomenclature exists.

      yes you owe tax on any gains. so on $0.07 at the 24% bracket is $0.02. the IRS $0.

      Q2. So the portion of my 403 that’s Roth. Should I just leave this as is?
      Click to expand...


      you likely cannot roll it over until you leave your employer.

      Q3. Rebalancing.
      Click to expand...

      as your 403 grows faster than the rIRA, you basically willl be adjusting the positions with new cash flow. you can even do it quarterly the first year. most programs have online software where its just a few clicks of a button. some even let you set a % and will do it automatically yearly, etc.

      all the fixed income should be in the 403.

      you dont list the options but likely you have 1 US fund, and 1 INTL fund. that can be offset with whatever you like the rIRA (US, INTL, REIT, etc).

      then once you add taxable, its more the same. increase the fixed income to compensate, decrease the US/INTL portion for whatever you add to taxable.

      Q4. Future investments.
      Click to expand...

      see above.

      you are looking at it too granular. say you have 100K between 403/IRA/taxable. and you want 10% bonds, 54% US, and 36% INTL. you need 10K in bonds, so that goes in your 403. then whatevers left goes into your next best fund, usually s&p500, and if you need more then you subtract the taxable portion, etc.

      its just puzzle pieces.

      Of course, I’m aware that I’m kind of small on bonds at the moment.
      Click to expand...

      i think 10% is a good place to start.


      • #4
        Question 1: negligible, don't worry about it

        Question 2: you won't be able to roll your Roth 403b out from a plan of your current employer unless you are at least age 59.5 or your plan allows for in-service distributions.

        I'll pass on the rebalancing questions.

        Welcome to the forum!
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


        • #5
          Thanks for all that.


          My 403 is a combination: all vanguard funds through Fidelity. They had the lowest cost ratios and the best results. I opted for the 2060 (or was it 2065?) retirement fund which is mixed (and new!), and two additional higher risk index funds with the overall b/d/i mix being as I stated.

          The smaller 401 is mixed similarly from three funds. For some reason they allow me to allocate to 401 and 403 as though they were separate accounts, but the statements include everything together. It was a little confusing at first actually.