sam1000
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Anyone have any experience with ETrade IRAs? I want to rollover my 401k with my old employer and I'm thinking about opening an account with them, any other choices?
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Mon Sep 10, 2007 11:37 pm |
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efflandt
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Joined: 25 Apr 2005
Location: Elgin, IL USA
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Whatever you do, do a direct trustee to trustee transfer to the IRA. Then there is no withholding and it is not subject to annual number of rollover limits. That is usually arranged by setting up an account at the destination trustee and having them initiate the transfer (although, you may need to contact your former employer to approve it). It no longer matters much if you call it a Rollover IRA or Traditional IRA except in some cases if you may want to roll it over into a later employer's 401k (but even that may not matter).
If you have a check made out to you there is manditory 20% withholding and any part of it you do not roll over to a qualified account within 60 days (including making up the missing 20% withheld) would be subject to tax (and 10% penalty if under age 59.5).
There are other tax considerations if you want to convert any of the IRA to a Roth IRA (and possible penalty if tax is withheld by default from conversions). I adjusted my W-4 withholding to cover gradual $10k/yr IRA to Roth conversions and specifically tell my trustee not to withhold tax from conversions. The gradual conversion (and 401k contributions) keeps me from bumping into a higher tax bracket.
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Tue Sep 11, 2007 3:55 am |
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sam1000
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Cash: $ 21.05
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Joined: 28 Jul 2005
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thanks for the responses.
I will be maintaining the same investments I had in the 401k which is pretty much all mutual funds.
I see Scottrade is also offering a no fee IRA, my question is how do they make their money maintaining my account? When does the $7 trading commission apply? I thought this fee is only to buy or sell stocks and does not apply to mutual funds.
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Tue Sep 11, 2007 4:03 am |
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efflandt
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Cash: $ 80.45
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Joined: 25 Apr 2005
Location: Elgin, IL USA
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Do some research to figure out whose mutual funds you would most likely want and look into those brokers.
Note that there is always a tradeoff somewhere. Brokers that charge low stock trade fees usually do not pay much for core cash waiting to be invested. But that is not easy to find without actually opening an account. All the brokers make some money from mutual fund expense ratios.
For example Scottrade has low stock trade fees, but pays very little interest for idle cash. Vanguard has some funds people like, and they pay about 5% for idle cash in IRA's, but their stock trade fees are higher than others. Fidelity also pays about 5% for IRA cash, over 1000 no transaction fee funds (but would charge a fee for Vanguard funds), and their normal $19.95 stock trade fee drops to $10.95 if you have at least $50k in assets.
Even if a broker does not pay much interest for core cash, you could stash some in a money market fund or conservative ETF until you figure out what to do with it. There would just be a slight lag selling that before investing it.
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Tue Sep 11, 2007 4:48 am |
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pf101
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Location: Portland, OR
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If you plan on sticking with funds, then I'd go with a fund broker. Vanguard is my personal preference but there are other good no-load, low-fee companies like Fidelity and T. Rowe Price.
If you buy funds through a brokerage like Scottrade or Etrade, you have to stick to their list of no-load funds which can be somewhat limited and, from what I've seen, can have high ERs. Alternatively you could invest in funds not on their 'no load' list, but then you have to pay a transaction fee. I believe Scottrade charges you $15 to invest in a Vanguard fund. Why pay that when you can get it for free directly?
Another problem I have with Scottrade (not sure about etrade) is that they charge for Dividend Reinvestment. This can get very pricey so be careful. If you plan on holding dividend paying stocks then I'd look into Firstrade since they don't charge to DRIP.
Personal Finance 101
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Wed Sep 12, 2007 8:43 pm |
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Nic
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Location: Chesterfield, VA
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I use ETrade. No real complaints other than the transaction fees seem to be rather high. As said before, it's a trade-off. Brokers are going to make their money somewhere. For someone with a buy and hold attitude, a place like ETrade isn't a bad place to put your money IMO.
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Wed Oct 03, 2007 2:55 pm |
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