Maxed Out Both Roth IRAs, New Goal

This last week I maxed out the 2006 Roth IRAs for both my wife and I, a $4,000 contribution for each. I kept it simple and bought Vanguard’s Target Retirement 2045 Fund (VTIVX) for both, tilting our retirement portfolio asset allocation more towards 90% equities.

My new goal is to get $50,000 in total assets at Vanguard. I am at about $37,000 right now. The reason is that once I get to that level Vanguard will waive the $10 annual fee for each IRA mutual fund with less than $5,000 in it. I can then buy lots of specific funds separately and fine-tune my desired asset allocation. I may open up a taxable account and/or a SEP IRA with them to achieve this. Does this make me a Boglehead?

Comments

  1. I think you might have your Vanguard funds reversed. Are you doing the 2035 or 2045? Here they are:

    Vanguard Target Retirement 2035 (VTTHX)
    Vanguard Target Retirement 2045 (VTIVX)

    Neo

  2. You are correct. I’m doing the 2045 for now. Thanks!

  3. Speaking of Roth’s. There is a new 401K Roth that your employer may offer starting in 2006. Difference from traditional Roth is that the contribution level is $15,000 in after tax money and $5,000 after tax contribution catch-up for those over 50.

  4. These new 401K Roths do not have the income level caps of the traditional Roths and employers can make matching contributions.

  5. Forget the $10 annual fee (how many funds could you need?), I am trying to get to $50k in my Vanguard account to switch to Admiral shares to improve my return.

  6. Admiral shares are only available at $50K if you have had an account there for 10+ years. Otherwise, the breakpoint for admiral shares is $100K. (link)

    I can’t wait to get there :)

  7. I spoke with my employer about the Roth 401(k) and they are holding off as I am sure many other companies are. We actually had a Vanguard rep at our location to give a quick rundown of their services and when asked about the Roth 401(k), he said that they currently only have 19 companies taking advantage of this service through them.

    Vanguard isn’t a small firm so does that tell you anything?

    Neo

  8. …and you need $100,000 in EACH mutual fund (“fund account”) to get Admiral shares for that ONE mutual fund, not just $100,000 in total assets.

    I’m also researching a Solo Roth 401(k) through Vanguard. I don’t need no stinkin’ employer ;) It seems to be possible, with some paperwork issues.

  9. Curses Batman, are you sure? Here is what Vanguard says:

    You?re eligible for Admiral Shares if you:

    1) Have $100,000 or more invested in a single Vanguard fund account that offers Admiral Shares.

    2)Have owned a single Vanguard fund account for at least ten years that now has a balance of $50,000 or more, and you’re registered for online access to your Vanguard accounts.

    It will take me forever to get there! Have you talked to them for clarification on this? I tried to call but they are closed of course. I will call on Tuesday and confirm. This frustrates me so…

    Keep us posted on the Solo Roth (I know you will).

  10. No, I’m not 100% sure. I’ll call on Tuesday too. Are Admiral shares an all-or-nothing proposition? Either you can buy Admiral shares of any fund, or you can’t? I’ve been perpetually confused by their wordings of accounts, fund accounts, etc.

    How hard is it to say “You are eligible for Admiral shares for ALL our mutual funds…” or “You are only eligible for Admirals shares in the one account you have over $100k…”? Sigh.

    Either way, I’m very far from having $100,000 in even one account!

  11. Upon reading some threads from the Morningstar Diehards forums, I still *believe* that it is the way I stated it initially. Here is one reason why: If you look at each Admiral share listing (ex. VFIAX) Each fund has a minimum opening amount of $100k/$50k. People in the forums also speak of “making Admiral” in certain funds, but not others.

    I just don’t see Vanguard letting me keep $5k in a bunch of various Admiral Class funds just becuase I have $100k in one other fund.

    Again, still speculation until I call up Vanguard!

  12. Vanguard target retirement 2045 is a good fund of fund. Another decent one that is actively managed is the STAR Fund, which has 1,000 minimum.

  13. I dont know if you have covered this before, but if you are making a lump sum purchase why dont you buy a VIPER. I realize that you are trying to reach your 50k goal, but a VIPER will give you a low expense ratio (like .11%) and only the cost of commission which I am sure you could get around $10 and you only pay that once, not annually.

  14. Admiral shares require $100k per fund (or $50k with the tenure requirement), not just $100k in your name at Vanguard. Even if I had the cash I wouldn’t die for Admiral shares, I’d rather have smaller accounts to manage my allocation than save 6 basis points to put all my money in one fund.

  15. Just called Vanguard and confirmed that you must have $100k in each mutual fund that you wish to convert to Admiral shares.

    Their “single fund account” wording means that you can’t have, say, $50k in VTIVX in a Scottrade IRA and another $50k in VTIVX in a taxable account, and qualify for Admiral shares. You must have it all in one single fund in one single account. Bummer.

    I’ll probably get to Voyager before I get any Admiral shares.

  16. I guess it makes sense now that I think about it. Thanks Jonathan and Ted for the clarification. I am sure I will be halfway to Flagship before it will be appropriate for me (that’s a long way to go).

  17. Congrats on getting those Roth IRAs maxed out Jonathan. We’re sitting at $48,286.22 in total Vanguard assets right now, so $50K is right around the corner for us, however, we’re above the $5K mark on all of our IRAs, so there is no real benefit for us.

    We’re also solely invested in VTIVX, but will go to a more slice-n-dice approach when we have enough capital to have at least $10K per index fund so that we can avoid the index fund fee of $10 a year per fund (except for the REIT Index which does not have this requirement).

  18. Lawrence Groves says:

    It looks like to need to change to a different retirement vehicle. Like a Solo 401k plan. The maximum contribution for a solo 401k plan for 2007 is $50,000. If married and your spouse works in the business, the combined total for both of you would be $100,000.
    That’s the information from the Solo 401k administrators at http://www.solo-k.com. They provide a self directed approach so you can invest just about anywhere

  19. Yep, I already have a Solo 401k from Fidelity. I looked at Solo-K but the fees were to high for my tastes. There is also 401k-Brokers.com that is self-directed and cheaper as well.

  20. My wife and I each have our own Roth IRA at Vanguard. I’m guessing we won’t be able to get to Admiral Shares until each of us has $100k in our accounts ($200k total for us), is that correct?

  21. @Mike Yes, that’s correct, the Admiral Shares threshold apply separately to each account—you need $100k in each of your accounts.

    On another note, the information in this post regarding Vanguard’s fees is outdated. The $10 annual fee Jon mentioned can now be waived by signing up for electronic statements:
    http://www.mymoneyblog.com/arc.....ments.html

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  1. [...] Of course, once you’ve saved it you still have to avoid the tax man. We maxed out our Roth IRAs and opened up and funded a Self-Employed 401k account. I’m very happy about that. [...]

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