Roth Rollovers, taxes, expenses

Use partial rollovers to avoid getting into a higher tax bracket. And, don't pay the taxes out of your 401k.

If your 401K has good choices, stick with it. It's safer after you leave the country to move the 401K assets to an IRA or Roth.

-- Ron

Can you share the funds and their expense ratios that your 401(k) offers?

There's a bit of math and a bit of assumption to be made. For most people, the Roth conversion is much ado about nothing, as most people won't save enough to find themselves in a higher bracket at retirement. For those who have a great pension, IRA withdrawals at retirement may very well push them into a higher bracket. So the math starts with looking at your current marginal rate and understanding what your retirement rate will be. 15% now but 25% at retirement? Converting now to 'top off' the bracket may make sense. But, look at the extra cost and decide if the 10% savings is worth that annual cost.

Large US Equity

0.01 Small US Equity 0.02

International Equity

0.06 Emerging Market 0.21

Hopefully the above formats OK when I send after cutting, pasting and editing from a spreadsheet.

Danielle

Sorry, a .01% (one hundredth of 1%) cost on Large Equity? If that's correct, it's amazing. Until now I've been bragging I pay .05%. I'll stop.

Joe

Assuming those are all percentages (ranging from 0.01%, 0.21% above), I have never seen such low ones. (I assume there are no loads on these funds; if there are loads, please correct me.)

I understand your point. The low expense ratios (and no loads) are indeed an argument not to rush to a Roth. Still, there may be good tax reasons to rollover slowly. Numbers need to be run for your situation. In addition to considering the advice here, there are online calculators and much discussion of this topic, if you had not seen it already.

I was mostly curious. It is good to read about such great expense ratios in a 401(k). Just ten years ago highway robbery was routine when it came to 401(k) expense ratios on funds.

I found this planner at

I found it interesting to see the result. It's not clear to me how up to date this is or how well it's supported. I did not find another one showing this level of detail for suggested withdrawal and timing of transfers to a Roth IRA.

Danielle

Some 401(k)'s charge account maintenance fees over and above the fund fees.

I suspect that these are the _additional_ fees charged by the 401k administrator over and above the fund's expense ratio. 0.05% is good to brag about, and even if the administrator is charging 0.01% extra, that is still worth bragging about. My experience with 401k plans is that the funds made available for investment are rarely the best choice or lowest cost choice even in that fund family. For example, a 401k allowed investment in some Fidelity funds but not in the Spartan series run by Fidelity which had lower expense ratios. If you are paying a

1% expense ratio to the fund, the extra 0.01$ tacked on by the plan administrator is much smaller potatoes.

Dilip Sarwate

For sake of disclosure - my own 401(k) fees are $80/yr. This is another .10% on 80K, for example. Of course, the percent will seem far higher the first few years. Hopefully the new disclosure rules will make the fees clear to everyone.