(Continued from Should I roll over my 401k? Part 1 – Stay put with old 401k?)
I just had a couple of very nice conversations with the customer service reps at Fidelity and Vanguard about rolling over my 401k into an IRA. I’ve always liked dealing with both these solid companies, they have short phone hold times even on their main lines (unlike E-Trade, which sucks), courteous people (again, unlike E-Trade), and they even speak intelligible English (unlike Dell)!
I cleared up some things with Fidelity first. I couple of commenters on my last post suggested simply rolling over my Fidelity 401k directly to a Fidelity IRA, so I explored that a bit. Here are my findings:
– The 0.10% expense ratios have been “permanently” changed to .10% for the Spartan funds. This was not reflected accurately on their retirement website. However, they can still be raised in the future, just as with any other fund.
– I confirmed that if I kept my funds in the 401k, there would be no maintenance fees of any time.
– If I do move over to a Fidelity IRA, my Spartan Extended Market Index Fund (FSEMX) and Spartan International Index Fund (FSIIX) would roll over directly and I would be able to avoid the usual $10,000 minimum initial investment. However, each of those funds has a low balance fee of $10 for balances under $10,000.
– The rest of my funds would be converted to cash and I would have to reinvest them. Thus, I would not be able to invest in their Spartan 500 Index Fund (FSMKX), unless I ponied up $10k.
– I could combine try to combine my S&P 500 funds and my Extended Market funds and get $10k so I could buy their Total Market fund (FSTMX).
To avoid fees, I also disovered this fund: Fidelity Four-in-One Index Fund (FFNOX). The holdings are as follows:
Equity Funds
Spartan 500 Index Fund 54.63%
Spartan Extended Market Index Fund 15.56%
Spartan International Index Fund 14.59%
Fixed-Income Funds
Fidelity U.S. Bond Index Fund 15.18%
So, about 85% stocks, 15% bonds. All index funds. That’s about what I’m looking for. The expense ratio is 0.21%, temporarily capped. Not bad either! $10k minimum… This fund is very tempting. I’ll have to think about this one.
Oh, yes, Vanguard. I just asked if there would be any fees for a rollover (answer: No) and if I could merge my Rollover IRA with my existing Traditional IRA (answer: Yes if I wanted to.) Now to explore my Vanguard options. This is kind of fun!
(Read the next part, Should I roll over my 401k? Part 3 – Vanguard Options)
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I just rolled over my 401(k), which had been with Fidelity, into a Rollover IRA at TD Ameritrade. I thought I’d share my experience with Fidelity here.
First of all, I chose TD Ameritrade since I already have a rollover IRA with them. I just invest my retirement funds in a handful of index ETFs, and I don’t really need investment “advice,” so I stick with Ameritrade to keep my commissions low. I’ve been an Ameritrade client for about 10 years now.
When I called Fidelity to ask for a check to be made out to Ameritrade FBO me, I expected to get a sell job from Fidelity to encourage me to put the money in one of their IRAs, and I did get one. The guy was nice, but I just explained that I’d rather have consolidate my investments with my existing broker, I want to keep my costs low, etc.
They clearly had a script on hand specifically for people moving their money from Fidelity to Ameritrade. He asked me things about my interest in personalized advice, whether I plan on daytrading with my retirement funds (I’m paraphrasing), and so on. Finally I made it clear that I’m not a daytrader, and I just want to keep my costs as low as possible.
The really interesting part is that he then asked, “What if we can beat their costs?” It had never even occurred to me that I could negotiate their prices. I had a good chunk of change invested with them (after four years of maximum contributions and generous company matches), and I expected they would really want to keep me, but I never thought to just ask for lower prices. In retrospect, I’m thinking, “Duh!”
I finally relented and said, “Okay, sure, I’ll listen to what you have to offer.” But then they blew it… He said, “Well, I can’t offer you anything specific. I need to transfer you to such-and-such department, and they can tell you about what special offers we can make you.”
They really missed their chance there. I was ready to listen to what they had and to consider keeping my money with Fidelity, but I didn’t want it enough that I was willing to spend another 15 minutes on the phone explaining my situation to a new agent.
So, I politely declined and he went ahead and got the process started on issuing the rollover check. I expect to receive it some time this week.
The main lesson for me was the reminder that everything is negotiable. I doubt the average Joe with just a few thousand in his account will have much leverage, but many brokerages and mutual fund companies will indeed negotiate their rates. Anyone with a good chunk of assets shouldn’t be shy about asking, “What can you do for me?”