Rolling over a 401k into and IRA, guy wants 5% each time I deposit?

Question

Does this seem high? What are my options?

I left the job and work freelance now. Also, what is better an IRA or a Roth IRA?

Thanks

Answer 1

What "guy"?  Where are you thinking of opening an IRA?  You should consider an IRA direct with Vanguard or T. Rowe Price.

Answer 2

That is his commission for the front loaded mutual funds, annuities, or whatever he is putting your money into.  Just hope there are not significant fees if you want to cash those out and/or transfer your IRA elsewhere.

If you are willing to learn how to invest yourself, you could open an account at a discount broker (Fidelity, Vanguard, etc.) with no annual fee and a bunch of (over 1000) mutual funds with no load and no transaction fee (they just make money from the expense ratio used to manage the fund).  However, you would need to do your own research (or can often get free online general suggestions from the broker) to see what to invest in and how to diversify.  The trick is finding the 10-20% of the funds that outperform their related sector.

Typically a Roth IRA is suggested when your income (and tax) is minimal, since contributions are not tax deductable, but gain is never taxed (unless withdrawn too early).  And in a pinch, any former contributions can be withdrawn without tax or penalty.  When your income tax is higher, make deductable contributions if possible to a traditional IRA.

If you want to convert any from 401(k) or IRA to Roth IRA, there would be tax due on the converted amount.  That is best done gradually to avoid a big tax hit, and you should cover that tax with other income, not withholding from the conversion.

Any transfers between retirement accounts is best done with direct trustee to trustee transfer to avoid tax withholding.

Answer 3

5% is highway robbery.  Go elsewhere.

Answer 4

Your broker wants front loaded money meaning he gets a certain percentage of monies when you put into the fund...like a "handling fee"  Shop around, I look for a back loaded fund.

IRA is the traditional style of retirement.  You can put up to $5000 in retirement into your IRA.  The best thing about traditional IRA is that you can write this off on your taxes because it's a after tax deposit.  However the sad part about this is that you can't touch the monies invested for instance like paying for a down payment on a high price item, like a house, boat, car without incurring a penalty.   You must keep the money in there until you at least 59.5 years old and start withdrawing at that age, also you will be taxed every time you withdrawal it.

The Roth IRA is like the traditional IRA but only this time you can't write it off your taxes, because you are not being taxed on your gains at all.  You can put up to $5000 in here and still won't get taxed on this.  The best part is that if you are planning to purchase a house or a car...any high price item you can take a one time penalty free withdrawal to cover for that expenses.  Like the traditional IRA you must withdrawal it at 59.5 years of age.

If you have both IRA's and wanted to put money in both you can only put up to $5000.  So you can put $1000 in the IRA and the $4000 in the Roth in one year.

Go with the Roth IRA, its better.  You don't get taxed on your gains, which can be alot on retirement.

Back to your 401k, when your rollover you money to a traditional IRA than you can just pay the 5% and not deposit anything else for the rest of your life.  Because you'll be using the Roth IRA.   You can't move your 401k to a Roth IRA, it's not allowed because your 401k is pre-taxed money and traditional IRA is pre-tax money, because you can write it off.

go with the Roth...

Answer 5

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