I have a 401 in Turner / AOL / Time Warner / ATT / WB 401 at Fidelity from a few jobs ago.

A guy from Fidelity is pestering me to roll this over into an IRA with their management services. He admits that it, at .81% costs, is a little more expensive than the 2030 target plan I have 70% of that money in now. He's trying to convince me that their management will get me better returns and open options for advice going forward.

I have a basic understanding of what's going on, but I also know there's a lot of detail and context I'm oblivious to. What I can say is that over the past 12 months what I have has gotten me a 9.3% return.

Does it look like this guy is offering a useful option or just looking to get credit for an account opening?

You likely *should* roll the money into something... and not leave it in the old 401k.  Your target date fund in the old 401k likely has a stupid high expense ratio... but you should verify this.
Additionally, many 401k's charge a management fee every month or quarter for ex-employees, and that is just throwing money in the garbage.

I'd roll it over into a personal IRA or I'd roll it into your current employer's 401k.  There are pro/con to both.

Do you contribute to a Roth IRA every year?  
Will your household income approach $77k (single) or $123k (Married filing jointly)?

As to Fidelity WMS beating the Target Date Fund.... no - they wont and carry identical risk profiles.  They cannot guarantee this.  What they likely would do is a blend of funds that are much less weighted on International like is in your TDF.  You'd be better suited in creating your own Lazy Portfolio that matches your age/planned retirement/risk profile.

If you've got at least 10 years until you want to get the money out I'd roll it over into a fidelity rollover IRA and avoid their management services.  
Put the money into low/zero fee index funds and if you leave it for at least a decade the risk is extremely low.

0.8% is also an awfully high management fee.


That's not very good for 2023, but you said it was a 2030 target date fund so it should be significantly biased towards conservation rather than growth.  

Do some of what he suggested OP.

1. roll it into an IRA
2. Do not pick their management or any active portfolio management
3. Put it into a near zero or zero fee fund. When do you need the money? That will dictate what you put it into

9.3% is a horrible return for 2023.  The S&P 500 gained 24%.  If you had just kept your money in a S&P 500 ETF, you would have made 24%.  The holdings in my Roth gained 35% for 2023.

FYI, financial advisors almost never beat the S&P 500, plus you have to pay their management fees.  It's a huge scam.  Even Warren Buffet has told people to avoid financial advisors and simply put their 401k money in the S&P 500 every 2 weeks to capitalize on dollar cost averaging.

I hope you realize that someone with a planned retirement date of 2030 (6 years away) should NOT be blindly invested fully in an S&P500 index fund.  Asset allocation is a thing.

As I recall, 2030 was the closest option available. Theoretical retirement is likely to be in 6-10 years.
I take employer match and put 10% into the current company's 401.
I don't have any Roth IRA accounts.
I'm going to assume finding low/zero fee index funds should be fairly easy on the website?

Summaries -
WB 401 in Fidelity mostly in 2030 fund
A rollover IRA in Fidelity (small balance, currently idle in money market)
An active 401 in ABA from current employer, all in 2035 fund
Retirement is possible in 6-10 years. More likely 11 or 12.

If retirement is more than likely 11-12 years away, you should have an asset allocation closer to 80/20 equities to fixed income assets, IMO.  That would have returned closer to 18% this past year, to give you an idea of what you are missing out on using overloy conservative and overly international target date funds.

Read the Lazy Portfolios site I posted earlier, to set your own asset allocation and reduce expense ratio fees.
If current 401k has an S&P500 fund, that will be much lower fees than your TDF.  If not, then at least use a TDF Date that is farther in the future.

Fidelity has all sorts of ways to search their funds.  
They have a line of “zero” funds with no fees that have index funds and total market funds.  
Their standbys like FNCMX, FXAIX, etc have very low expense ratios around the 0.02 - 0.03 range.  

Yes. There is even a filter to screen by zero cost funds…

If it applies to you, I'm pretty sure doing that will remove your ability to do the back door Roth -- at least without converting and paying taxes on the IRA first.

Considering I have no idea what that is, and the fact I'm an Arf-Poor, it might not be a big deal for me.

... but, Mama didn't never raise nobody dumb as I look, so I'll check into what a backdoor Roth is before blindly acting.

Essentially - you already said you do not contribute to a Roth IRA and do not have a Roth IRA.

If you DID wish to contribute to a personal Roth IRA, AND you earned more than $77k (single) or $123k (married filing joint) then you would become ineligible to directly contribute to a Roth IRA.  However, there is something called a BackDoor Roth, which is where people over the income threshold can contribute post tax dollars (a non-deductible contribution) to a traditional IRA, then convert that contribution to a Roth IRA.  This works well, UNLESS you already HAVE any IRA's with pre-tax funds in them, due to something called the pro-rata rule.  

So having any IRA's with pre-tax funds would significantly impact the benefit of the Backdoor Roth, and make a large percentage of the conversion a taxable event.  

The above is only an issue if you choose to do a Backdoor Roth IRA contribution.  If you do not plan to do this, there is no consequence, but it is good to be aware of.

I did it last year and am happy so far.  The rate of return is in line with the market, but that’s on an up year.  My expectation is the managed account has a measurably better return on down years. We shall see.

The financial advisors will tell you that they get a better return on down years, but in reality they don't if you factor in the very low performing funds during the up years that really drag down the overall performance.

I have seen many people's managed account and they just don't perform any better than the S&P 500 in the long term.  Subtracting in the management fees makes the return even worse.  The problem is that people can't admit their managed account isn't very good since they paid good money for it and they believe the advisors BS about how beneficial their services is.

Absolutely correct.  

That doesn't mean CFP/FA doesn't provide a valid service - they absolutely do.  But beating the market in a down year and attaining market performance in an up year just isn't something they can do, and should not be the measure of their value as an advisor.

The management fees are a big deal to me.  If the management fee is 1%, and the return on my stake is 5%, then his 1% fee is actually a 20% hit on my return and growth.  That's a big damned hit.  Worse, that's accumulates over time. So next year, rather than say $100,000 being $105,000 as the principal working for my return, it's now $104,000.  And the year after that, and the year after that...  It's worth it if he's a wizard and constantly beats the market and makes that 5% actually be 8% - but they never actually are; in comparison to S&P 500 or even low-load XXX corp retirement 2040 plan.  If he were that good, he's not going to be working for my chump-change ass.

One thing I have learned, is my super clever ass CAN beat S&P 500  (a little, here and there, time to time), BUT - in order to actually do that well, I need to buy-low / sell-high.  Which means I get zinged taxes on the Sell-High, which again, just like the financial advisors load, eats away a large chunk of my net take.  If I just had dumped it all into S&P 500 or other mutual fund, THEY do the tweaking of what's in the plan, and as such, I get to hide from the SELL taxes as they shift the portfolio by their fund management.  (or at least, I think that's how that works).  Lesson I learned there, sure, if you want to take a few grand and play the stock market for fun, go for it - but unless you're a full time day-trader and willing to take the hits on the sell (because no gem you found undervalued company does 20% growth forever, you have to dump it after it's ridden up to full value); then screw it.

This and IF you are happy with the strategy of a 2030 target date fund then just get VTHRX Vanguard Target Retirement 2030 Fund within that IRA.  Only 0.08% expense ratio.

You'll have something similar to what you have now with very low costs.

VTHRX simply does not perform well.

Look at it compared to the S&P 500.  Even though the S&P500 dipped lower during the 2008 crash and in 2020, it recovered quickly like it always has.  This is why financial advisors won't compare their portfolios against the S&P500.  They always underperform.  Diversification?  The S&P 500 has corporations from many sectors of industry and is very well diversified.

Are you seriously comparing the asset allocation of a portfolio for someone planning to retire in 2030, to "just invest in the S&P500 index"?

The goal of financial advisors is not to beat the S&P500.  That's why they don't compare their portfolios against the index.  That's not what they do.

As to VTHRX, it is also not designed to "beat the S&P500".  If you used the 4% drawdown rule for retirement, and you invested in the S&P500, there is a MUCH higher chance you will outlive your money due to sequence of returns risk amplified by your choosing 100% domestic large caps.  VTHRX is composed of 4 index funds:


63% stocks, 37% bonds.  As it nears 2030, it will achieve somewhere between a 50/50 to 60/40 mix (whatever the fund managers target) with 63% being domestic stocks and bonds, while 33% being international.  You can debate if that's too conservative, or too much international, but the performance being achieved by this fund is exactly what the fund managers expect based on its composition mix.

Dude my funds have an average of 0.05% fee... about 10x lower than yours.

And I did way better than 9.3% last year.

You could easily roll that money out and plunk it into an IRA at Schwab or elsewhere, then pick out your own target date fund, without paying a big fee like that.

You could also just look at target date funds, and emulate what they are doing, investing the same amount in the same funds.  Or just figure out what percentages you want for your own age and retirement timeframe, plunk the stock portion into the S&P 500 and the fixed income into whatever bonds or whatever you want.  (I have no bonds, can’t help there).

What I personally would not do though, is pay that much for an advisor to just drop it into a target date fund….it is a lot of fees for very little work, and those fees add up when it all compounds year after year….

Not a huge fan of target date funds anyhow, so if I did want to do it, I would likely go the route of emulating one, without the advisor and fees.  I kind of got jammed up by the state because they forced some of my money into a target date fund based on my age, despite the fact that I was in a job and classification where I could (and did) retire 15 years earlier than that date.  (Which was actually OK, I wanted it more aggressive anyhow, but it was still dumb).  Plus I think target date funds  work best when they going to be the main source of your retirement income, but that was also not what my situation was at all.

Basically- they are a bit too generic for me.  And paying an advisor to just put you into a generic plan seems like it is just throwing money away- what value are they actually adding?  (Zero).  Now if they were handling individual stocks for you, doing some serious planning for taxes, etc, and you hated working on any of that yourself?  Well then yes, it might make sense to pay someone to help you out then…

For good or bad, my old 401 balance is now 100% in a rollover IRA.

Now to decide on what to put it in other than "cash"...

Fidelity is great as they provide a lot of useful tools especially for research, but find their people are useless other than to try and sell additional services.
Usually if they recommend something, it is rarely something you need but something that will generate revenue for them.

If you ever attend one of their onLine classes or talk directly to the person and ask direct questions you never get direct answers.
All their answers will point you to their tool or one of their pay for services.