Hey guys,

I'm 28, married with a 1 month old. Finally got out of debt and my wife and I want to start a Roth IRA account.

The investing consultant at BB&T wants to setup an American Funds Roth IRA account for us both (as well as a college savings 529 for our daughter).


I know there is a $10 setup fee for each account, and a $10/yr maintenance fee.

What is the purpose of the "BB&T Advisor," is he the one that will make the decisions on what to invest in? Anyone know how he gets paid? I plan on asking all of these questions when I meet with him on Friday, but I thought I would ask so I have an understanding of what to expect...


What are some of the things I need to be aware of?

Thanks for your help, I'm very ignorant when it comes to investing... Any recommended reading material would be great as well..

I don't know anything about BB&T but I would recommend calling and talking to someone at Vanguard also.  They are pretty much the best place for all retirement investing

I keep reading that..

It scares me that people warn against American Funds because of their Load funds.. Basically, near 6% load up front and still 0.68% expense ratio.. That seems rediculous to me when I can buy Vanguard for 0.18% expense ratio and no load...

Is this guy just trying to screw me into purchasing American Funds so he can get a kickback from the load fee?

I've got a nauseous feeling about this...

Then RUN AWAY!!!!

Vanguard is excellent to deal with. I can't say that I have experience with any of the others but I know that my first eye-opening experience with investing was with Edward Jones. I didn't invest with them (luckily) because of advice I found here and on other forums. I went with Vanguard (for almost 10 years now).

Think about it this way, that person that you go sit down with and talk to is making money for the advice they give, and the work they do to buy funds for you. Even if you just buy funds and they don't do any active investing on your behalf, they are still making money. That cuts into your gains. Sometimes, with less-than-honest companies, the hidden fees, costs, etc, kill pretty much all of your earnings. If they are doing active investing they are charging you even more in fees & time. The difference between them and Vanguard is that a few guys at Vanguard are making double or triple what your guy is making because they know their shit, but Vanguard still has lower costs because those guys are managing funds that are hundreds, if not thousands, of times larger than your guy's managed funds. That means each share pays a MUCH smaller fraction to help pay for the managers and the overhead. The story is the same on the non-managed funds at Vanguard; there are LOTS more shares to help spread the burden of the admin costs of the fund, and your bottom line ultimately shows the proof.

FWIW, vanguard isn't the only game in town, but they ARE the cheapest gain. And even small differences in cost-ratio can make significant differences in fund value over the long-haul, where compounding plays a role. IE, over the life a retirement account, the differences in fees can mean ten's of thousands of dollars saved...

IMHO, I would run away from ANY local investor whether they are honest or not, based solely upon the fact that they cannot possibly compete with the online places on costs/fees, and that difference will ultimately mean more money for you by avoiding them.

FWIW, although some states will allow you to invest in a 529 plan through an investment firm it's stupid. Most states have direct-investment options where you can go straight to the source. Your firm is going to charge you a fee on top of the fees from the actual source of the 529, cutting further into the gains. Go STRAIGHT to the administrator of your state's 529 plan and invest there...

The load is where he makes the majority of his money.  Think of it has his sales commission.  You "invest" $100, $94 goes in the account, $6 goes in his pocket, then you get socked with a 0.68% expense ratio every year.  On top of all of that, he's going to charge you $10 just for the pleasure of meeting him and giving him business AND pay him another $10/ yr just so that you can have the privilege of continuing to give him 6% of everything you are trying to save.

In turn, you go to Vanguard and buy Vanguard funds you invest $100, $100 goes in the account, you pay 0.18% expense ratio annually.  No extra fees involved as long as you do electronic statements.

Which sounds like a better deal?

The only catch to Vanguard is most of the funds have a $3,000 minimum, but there are a few with $1,000 minimum if you need a lower starting point.

That's kind of what I was reading...

Sounds like a horrible deal.. It's a pity financial advisors are not expected to live up to the "what's best for my client" standard that doctors have to live up to...

I understand, you have to make a living.. But I have a 1 month old daughter and you're trying to screw me out of money to fill your own pocket.. Souless I tell you...


I'm looking at the Vanguard 2050 Mutual Fund for our IRA's (Mine and my wifes). It's 0.18% ER with only a $1k minimum (we plan on contributing the full $5500/ea per year, roughly $920 total a month for both of us..

Sounds like a solid plan to me.. Just wanted to make sure I wasn't missing something significant.. I wish my parents would have taught me this stuff growing up..

They did teach me how to be independent, work, and hunt.. So I guess I still came out better than most people!

Bogleheads

The wikis on that site will be very, very helpful to you.  It is a gold mine of information.  Many people there also advocate Vanguard.

excellent approach!!!

ps
there is probably some good info in these threads for you...

and
http://www.ar15.com/forums/t_1_5/1672620_Vanguard__Fidelity__TD_Ameritrade_or_another__For_IRAs__small_time_investing_and_speculating_for_fun.html
and
http://www.ar15.com/forums/t_1_5/1628800__ARCHIVED_THREAD____I_need_to_start_saving_for_retirement___Where_do_I_start_.html
and read from this post on down:
http://www.ar15.com/forums/t_1_5/1669572_If_you_had_1k_to_invest.html&page=3#i49571557

ar-jedi

Holy crap, you're very smart! Haha..

Are you an investment advisor or something?

I'm thinking about the general vanguard account and the retirement 2050 mutual fund to get things started... Does that sound reasonable?

My wife has 2 401k plans we would like to roll over to the IRA, is that something Vanguard would handle for us? I want to try to do it this year so we can still contribute the full $5500 next year.

I'm 29 (tomorrow my BD) and wife is 33. Been in school my whole life with too many degrees and just now have a real job.. I feel like I'm so far behind!

Any specific advice is much appreciated. EDIT: nevermind, I see the 3 books you recommended in another post.

Thanks for the links, your posts are excellent and very well explained. Any very beginner level reading you can recommend is also appreciated.

We have been on the Dave Ramsey plan and are at the 4th step (invest). Paid off $50k in student loans in a year and paid off both cars! We live very conservative lifestyles, so saving is pretty easy for us...

Anyways, thanks again!

Call Vanguard, they can absolutely help with that but it will be easiest to figure it out if you call them. There are some hoops and hurdles for rolling over a 401k and if you haven't done it before it may be best to have an experienced person walk you through it on the phone.

I just want to thank everyone for their input.

Although I'm a little terrified by all of this (still learning), I setup my Vanguard Roth IRA today with the initial $1k. I plan on putting it into the Vanguard Timed Retirement 2050 mutual fund.

I also talked with them about creating my wife an account with her old 401K as the original contribution (so we can max out this year's contributions without having to take any money out of our savings).

The guy was very helpful and told me to call back with the account information and he can take care of everything..


I'm pretty impressed with how easy everything was to setup and the customer service seemed excellent.


So thanks again!

I think you are misunderstanding how rollovers work.  The 401k rollover has nothing to do with your IRA contribution - you can do both.  The rollover doesn't affect your contribution limit.  Note that the 401k is most likely a Traditional plan and you would want to put that in a Traditional IRA account unless you want to put it in a Roth IRA and are prepared to convert it and pay the taxes on the conversion.  You can have both a Traditional and Roth account, you can contribute to both in the same year, but your limit in total is $5,500 (this year).

In case you haven't read this far yet: you can make the $5,500 contribution for 2014 between now and April 15, 2015, So any contribution up to that amount or date that you make you should make as a 2014 contribution to leave room in your 2015 contribution amount in case you find some more money to stash in there later in the year (through April 15th the following year).

1) Thanks for that information, you're right: I was completely clueless on that..

So let me make sure I understand.. If she has say $15k in her 401K, we can roll all of that over into a traditional IRA, not just $5500?

2) I also didn't know the cutoff was April 15th, that makes a whole lot of sense though! haha.. We were actually planning on stuffing our tax refund back into the IRA too, so that makes it a little easier on us since we can put the tax refund in the 2014 contribution and still have 2015 left to contribute to throughout the year.

Thanks again, you guys are awesome!

Keep the advice coming! Today's my birthday and for my birthday present I started an IRA

Happy Birthday!

and yes, you are understanding correct now, you can convert the entire $15,000 and you can still contribute $5,500.  You need to make sure you understand the differences between Traditional and Roth type accounts and the tax consequences of each.

When you file your taxes you can fill out the form with the amount that you WILL put in as a "2014 Contribution", just make sure you actually do it before April 15th (tax day).

DieselEngineer already gave a link to Bogleheads.org, I highly recommend visiting that site and asking questions, read up in their WIKIs, they have tons of information and are very willing to help.  The simplest of questions they may direct you to a WIKI to read for yourself, but as for actual advice they are usually willing to go through options with people.

Thanks for the info here guys. My wife and I are in this same boat.

American Funds are generally well managed mutual funds. Like anything, you can do it yourself, or pay someone to do it.  Like landscapers, HVAC guys, automechanics, carpenters, painters, any service you want, financial advisors have their place.

American Funds usually has front-end loads. That means you lose about 6% of your investment right off the bat to pay the middleman. Better go with Vanguard instead.

I ended up going with a vanguard index mutual fund. I like what I've read about index funds, especially at a 0.18% expense ratio and no fees!

Reading the bogle heads guide to investing now, great resource!

Do these front-end loads still occur when you don't have a physical person as your broker with American Funds and you do it all yourself online?

the front end sales load on any given fund is found in the fund prospectus and is typically independent of whether the sale is "broker-assisted" versus "online".

ar-jedi