Can you change your mutual fund within your Roth IRA?

[Skooby]

If you have a mutual fund in a Roth IRA but want to change it to another mutual fund...are there any fees are penalties for this?

[jpg7n16]

That depends on which fund you own, how long you've owned it, which fund you're buying into, and which company you work with.

At some companies with certain funds, it may be completely free. With other funds, there may be a commission or a load or a short term redemption fee.

The best thing to do is just to call the company that handles your Roth IRA, tell them what you're looking to do, and ask what (if any) fees would be involved.


What's prompting the investment change?

[Skooby]

I have the T Rowe Price 2040 Retirement fund...for about three and half years. I work for the federal government.

What's prompting this? I figured I should have a Roth IRA so I got one and invested in the 2040 Fund since it was a "set it and forget about" Fund.

Now i'm wondering if that was the right decision.

[kork13]

Now i'm wondering if that was the right decision.

It certainly wasn't a BAD decision. Could you do better with a different fund? Possibly. But if your goal is to have a practical, "set it and forget it" fund, a target-date fund like you have is a great option.

Do you have any plans for what fund you would move into? Any particular reasons for that choice?

Personally, I'd say you're set up just fine for now, particularly if you don't have any pressing concerns or reasons to leave the fund you're in now.

[kv968]

What's prompting this? I figured I should have a Roth IRA so I got one and invested in the 2040 Fund since it was a "set it and forget about" Fund.

You should have a Roth IRA, but to answer you initial question, no there won't be any fees for you transferring to a different fund in T.Rowe Price. The question is, as kork13 asked, what fund are you looking to put it into and why?

[Nobulladvisor]

Different investments have different fees or penalties. When it comes to Mutual Funds it all depends on the Share Class. the four common shares classes are A, B and C and no load.
A share- have no fee to sell. because you paid a fee to you bought it.
B share- there are fees to sell it. after 5 to 7 years tey wont charge a fee any more
C share- There is no fee to sell. but you have to hold it for atleast one year.
No load- have no fees
There are also instituional share which has no fee at all

So. check to see which share you have.

There is another option. If you move from T Rowe Price 2040 Retirement fund to another T Rowe Price Fund. That is called an exchange. there are no fees if you stay inside the T Rowe Price Company

Second, Target date funds are one of the worst investment you can be in. basically any fund that have a date on the title. For example T rowe 2030 funds. It designed to become more conserative the older you get. BUT, it doesnt't really perform they way it should AND it expensive. The expense ratio looks small becasue you have paying to the funds inside that funds.

Third, A Roth IRA only makes sense of your are young, and making $30K a year or less excpeting you income to grow later in life. for someone older making more the $30K a Reg IRA make more TAX sense.

Most Importnat!!!! no investments is a "Set it and forget it" you should always educate youself in the investments you own and stay on top of it. Things change all the time in the Financial markets. A funds could be great one year, but five years later could be the worst. exceptally in Mutual funds, Mutual Funds manager and changing all the time. Some to the good , however most to the worst.

[BuckyBadger]

Second, Target date funds are one of the worst investment you can be in. basically any fund that have a date on the title. For example T rowe 2030 funds. It designed to become more conserative the older you get. BUT, it doesnt't really perform they way it should AND it expensive. The expense ratio looks small becasue you have paying to the funds inside that funds.

Third, A Roth IRA only makes sense of your are young, and making $30K a year or less excpeting you income to grow later in life. for someone older making more the $30K a Reg IRA make more TAX sense.

I disagree with both these statements.

What is your evidence for saying that target date funds don't do what they are supposed to? They rebalance your investments so that as you reach your target retirement date you get more conservative. I promise you that if more people had target date funds in this country you would have heard a lot less of the "I was going to retire next year but because the market crashed now I have to work for 10 more years" that we have all just heard. Plus, target date funds don't have to be expensive. Vanguard ones aren't.

And I also disagree with your statements about the Roth. It's all a gamble on if you think taxes are going to go up or down when you retire. If you think you'll pay less tax now, pay it now and get a Roth with after-tax money. If you think you'll pay less tax later, pay it later and use a savings vehicle paid for using pre-tax dollars. Hedging your bets and having both kinds of accounts is never a bad plan.

[Nobulladvisor]

I disagree with both these statements.

What is your evidence for saying that target date funds don't do what they are supposed to? They rebalance your investments so that as you reach your target retirement date you get more conservative. I promise you that if more people had target date funds in this country you would have heard a lot less of the "I was going to retire next year but because the market crashed now I have to work for 10 more years" that we have all just heard. Plus, target date funds don't have to be expensive. Vanguard ones aren't.

My evidence is in 2008-2010. The Targer funds 2010. Crashed just as much as a 2040 fund. Bonds out performed stock during that time and the funds which are suppose to be overweighted in bond weren't. Mutual Funds are limited in there ability to move large amounts of money at one time. resulting in not having the right allocation when they need to. Many firm are getting rid of these funds. Its to much of a liability for them. Lots of 401K firms and other retirement firms likes these funds because it take away to needs to provide guildance to there employees. Making it cheap for the company who sponser the plan.

I like vanguard. They are cheap, but not cheaper then one of their gular index fund. Remember a targer date fund in a fund that has funds in it. That mean you are paying double expenses. even though Vangaurd is a tenth of a percent. it adds up.

[disneysteve]

Target date funds are one of the worst investment you can be in. basically any fund that have a date on the title. For example T rowe 2030 funds. It designed to become more conserative the older you get. BUT, it doesnt't really perform they way it should AND it expensive. The expense ratio looks small becasue you have paying to the funds inside that funds.

A Roth IRA only makes sense of your are young, and making $30K a year or less excpeting you income to grow later in life. for someone older making more the $30K a Reg IRA make more TAX sense.

A funds could be great one year, but five years later could be the worst. exceptally in Mutual funds, Mutual Funds manager and changing all the time. Some to the good , however most to the worst.

This post is filled with inaccurate statements.

Target funds need not be expensive. Vanguard's target funds have expense ratios of 0.19% That is miniscule by any measure.

I have no idea what the basis is for your statement that they don't perform as they should.

As for Roths for people making less than 30K, I don't understand that either. I would much rather pay taxes today at the historically low tax rates we currently enjoy and not have to pay them 20 or 30 or 40 years from now when they are almost guaranteed to be higher. And I earn considerably more than 30K/year.

Your statement about mutual funds changing and managers changing is true, but the target funds typically use index funds, not actively managed funds, so that statement doesn't apply. Even if you aren't using a target fund, if you stick to index funds, there is no management to worry about.

[disneysteve]

My evidence is in 2008-2010.

Two responses to this.
1. You can't cherry pick a small period of time to judge long-term results. Show me any investment and I'm sure I can find a time span when it did lousy.

2. That said, there is some truth to what you said. And as a result, target funds changed after 2008. They adjusted their allocation models to try and prevent the same thing from happening again in the future.

For anyone considering a target fund investment, they are not all the same even if they target the same year. Compare the allocations and compare the glide paths, how and when they re-allocate over time.

I like vanguard. They are cheap, but not cheaper then one of their gular index fund. Remember a targer date fund in a fund that has funds in it. That mean you are paying double expenses. even though Vangaurd is a tenth of a percent. it adds up.

This is simply false. The Vanguard target funds have an annual expense ratio of 0.19%. That's it. Period. That is the total expense ratio that you pay.

[Nobulladvisor]

I agree with my grammer mistakes. I'm typing on an Iphone.
Do some research on the Target date funds. Then respond. There are lots of other fees in mutual fund besides the the Expense ratios.

By the way. Most funds in targer dates funds are NOT index funds. Vangaurd and maybe 5 other firms are index funds.

[Nobulladvisor]

Target dates are products created to making things easier for institutions. They are new and they havent been proven.

like I said in the begining. Educate yourself in the investments you own. If you don't, money hungry advisor will take advantage. and you'll miss out of better quailty investments.

[disneysteve]

There are lots of other fees in mutual fund besides the the Expense ratios.

By the way. Most funds in targer dates funds are NOT index funds. Vangaurd and maybe 5 other firms are index funds.

There are no other fees in the Vanguard target funds. I'm not saying that is true of all target funds. I'm sure there are some that rape you with fees but I'd never recommend those to anyone.

As for them not all using index funds, same response. I'm sure some are lousy investments and I'd never suggest anyone invest in them. Stick with the big 3 and you're okay - Vanguard, Fidelity and T. Rowe Price.

[Nobulladvisor]

The Expense Ratio includes administrative cost and the 12-b1 fees. (some funds don’t have 12b-1 fees) 12b-1 fee is the commission the advisor get annually. These are the only cost that the regulators require the funds the disclose. There are other fees such as Trading cost and spread cost. The average of these cost in a active managed fund in 2-3%. you can request these charge if you call the funds and ask for them. It will shock you.

I agree vanguard is one of the best fund company out there.

My suggestion stick with ETFs. no hidden fees. in addition its passive, so you don’t have to worry about the human emotion effecting you performance

[BuckyBadger]

Between this thread and the other one that Nobulladvisor started, am I the only one who feels like he's going to try to sell us something soon?