Switching Roth IRA ( from American Funds to Vanguard)
"You can have as many IRA accounts as you want (whether Roth or Traditional), so you can have a Roth IRA with American Funds and another Roth IRA with Vanguard if you like. One disadvantage of  having too many IRA accounts with small balances in each is that most custodians  (including Vanguard) charge an annual fee for maintaining IRA accounts with small balances but waive the fee if the balance is large. So it is best to keep your Roth IRA in just one or two funds with just one or two custodians until such time as investment returns plus additional contributions made over the years makes the balances large enough to diversify further. Remember also that you cannot contribute the maximum to each IRA; the sum total of all your IRA contributions (doesn't matter whether to Roth or to Traditional IRAs) for any year must satisfy the limit for that year. You can move money from one IRA of yours to another IRA (of the same type) of yours without any tax issues to worry about. Such movements (called rollovers or transfers) are  not contributions and do not count towards the annual contribution limit. The easiest way to do move money from one IRA account to another IRA account is by a trustee-to-trustee transfer where the money goes directly from one custodian (American Funds in this case) to the other custodian (Vanguard in this case). The easiest way of accomplishing this is to call Vanguard or go online on their website, tell them that you are wanting to  establish a Roth IRA with them, and that you want to fund it by transferring money held in a Roth IRA with American Funds. Give Vanguard the account  number of your existing American Funds IRA, tell them how much  you want to transfer over -- $1000 or $20,000 or the entire balance as the case may be -- and tell Vanguard to go get the money.  In a few days' time, the money will appear in your new Vanguard Roth IRA and the American Funds Roth IRA will have a smaller balance, possibly a zero balance, or might even be closed if you told Vanguard to collect the entire balance.  DO NOT approach American Funds and tell them that you want to transfer money to a new Roth IRA with Vanguard: they will bitch and moan and drag their heels about doing so because  they are unhappy to lose your business, and will probably screw up the transfer. Talk to Vanguard only. They are eager to get their hands on your IRA money and will gladly take care of the whole thing for you at no charge to you. DO NOT cash in any stock shares, or mutual fund shares, or whatever is in your Roth IRA in preparation for ""cashing out of the old account"". There is a method where you take a ""rollover distribution"" from your American Funds Roth IRA and then deposit the money into your new Vanguard Roth IRA within 60 days, but I recommend most strongly against using this because too many people manage to screw it up. It is 60 days, not two months; the clock starts from the day American Funds cuts your check, not when you get the check, and it is stopped when the money gets deposited into your new account, not the day you mailed the check to Vanguard or the day that Vanguard received it,  and so on. In short, DO NOT try this at home:  stick to a trustee-to-trustee transfer and avoid the hassles."
"You can definitely open an IRA and roll the money over. I suggest instead of trying opening online calling the institution and asking what would be the procedure in your specific case. If not, I will have to cash out my 401K. Who do I contact to find out   if my country has some sort of deal with the US in regards to taxes? I   would of course prefer to not pay the penalty (20 % federal + 10 %   state tax), and instead reinvest the money in a retirement fund in my   country. US embassies some times have listings of tax advisers who work with US expats in the countries they cover. You can check for such a list on the website of your local US embassy. These people will be able to answer this question. However it is highly unlikely that you'll be able to avoid the tax and penalty in the US in this scenario. It is not likely that you could ""roll-over"" into a foreign retirement fund (from your country's laws perspective), but maybe your country has some solution for this." What you want is a position transfer, likely by ACATS.   This is a transfer from one IRA to another without having to liquidate positions to do so.  In effect, the brokerage firm is just transferring records from your existing IRA to your new IRA.  You will need to watch out to make sure your new IRA account can hold your positions for this to work.  For example, some brokerages allow you to hold fractional shares but others don't.  (The fractional share amounts would be sold automatically prior to transfer.)  Another example might be different fund families could be allowed between different brokerages. The general process is open your new IRA account, initiate the ACATS xfer from your new account, your old IRA account brokerage sends the positions over, and after a week or so your new IRA brokerage notifies you that everything is transferred. I've switched IRAs a couple times via this mechanism and never been charged a fee, but I've always stuck with the larger brokerages like Fidelity, TD Ameritrade, and Interactive Brokers. Since you're 20-30 years out of retirement, you should be 90% to 100% in stocks, and in one or two broad stock market funds likely. I'm not sure about the minimums at TD Ameritrade, but at Vanguard even $3k will get you into the basic funds. One option is the Targeted Retirement Year funds, which automatically rebalance as you get closer to retirement.  They're a bit higher expense usually than a basic stock market fund, but they're often not too bad.  (Look for expenses under 0.5% annually, and preferably much lower - I pay 0.05% on mine for example.)   Otherwise, I'd just put everything into something simple - an S&P500 tracker for example (SPY or VOO are two examples) that has very low management fees.  Then when your 401(k) gets up and running, that may have fewer options and thus you may end up in something more conservative - don't feel like you have to balance each account separately when they're just starting, think of them as one whole balancing act for the first year or two.  Once they're each over $10k or so, then you can balance them individually (which you do want to do, to allow you to get better returns). Your biggest concern will be what happens during the transition period. In the past when my employer made a switch there has been a lockout period where you couldn't move money between funds. Then over a weekend the money moved from investment company A to investment Company B. All the moves were mapped so that you knew which funds your money would be invested in, then staring Monday morning you could switch them if you didn't like the mapping. No money is lost because the transfer is actually done in $'s. Imagine both investment companies had the same S&P 500 fund, and that the transfer takes a week. If when the first accounts are closed the S&P500 fund has a share value of $100 your 10 hares account has a value of $1000. If the dividend/capital gains are distributed during that week; the price per share when the money arrives in the second investment company will now be $99. So that instead of 10 shares @ $100 you now will buy 10.101 shares @ $99. No money was lost. You want that lookout period to be small, and you want the number of days you are not invested in the market to be zero. The lockout limits your ability to make investment changes, if for instance the central bank raises rates. The number of days out of the market is important if during that period of time there is a big price increase, you wouldn't want to miss it. Of course the market could also go lower during that time. Here are the specific Vanguard index funds and ETF's I use to mimic Ray Dalio's all weather portfolio for my taxable investment savings. I invest into this with Vanguard personal investor and brokerage accounts. Here's a summary of the performance results from 2007 to today:  2007 is when the DBC commodity fund was created, so that's why my results are only tested back that far. I've tested the broader asset class as well and the results are similar, but I suggest doing that as well for yourself. I use portfoliovisualizer.com to backtest the results of my portfolio along with various asset classes, that's been tremendously useful. My opinionated advice would be to ignore the local investment advisor recommendations. Nobody will ever care more about your money than you, and their incentives are misaligned as Tony mentions in his book.  Mutual funds were chosen over ETF's for the simplicity of auto-investment.  Unfortunately I have to manually buy the ETF shares each month (DBC and GLD). I'm 29 and don't use this for retirement savings. My retirement is 100% VSMAX. I'll adjust this in 20 years or so to be more conservative. However, when I get close to age 45-50 I'm planning to shift into this allocation at a market high point.  When I approach retirement, this is EXACTLY where I want to be. Let's say you had $2.7M in your retirement account on Oct 31, 2007 that was invested in 100% US Stocks. In Feb of 2009 your balance would be roughly $1.35M. If you wanted to retire in 2009 you most likely couldn't. If you had invested with this approach you're account would have dropped to $2.4M in Feb of 2009.  Disclaimer: I'm not a financial planner or advisor, nor do I claim to be. I'm a software engineer and I've heavily researched this approach solely for my own benefit. I have absolutely no affiliation with any of the tools, organizations, or funds mentioned here and there's no possible way for me to profit or gain from this. I'm not recommending anyone use this, I'm merely providing an overview of how I choose to invest my own money. Take or leave it, that's up to you. The loss/gain incured from this is your responsibility, and I can't be held accountable. I wrote an article about this a while ago with detailed instructions, so I'll link to it here. Here's a snippet about how to use the Roth IRA loophole and report it properly: You don’t have any Traditional/Rollover IRA at all. You deposit up to the yearly maximum (currently $5500) into a traditional IRA. In your case, you re-characterized, which means you essentially deposited. The fact that it lost money may help you later if you have extra amounts in Traditional IRA. You convert your traditional IRA to become Roth IRA ($5500 change designation from Traditional IRA to Roth IRA).  You fill IRS form 8606 and attach it to your yearly tax return, no tax due. You have  a fully funded Roth IRA account. If you have amounts in the Traditional IRA in excess to what you contributed last year - it becomes a bit more complicated and you need to prorate. See my article for a detailed example. On the form 8606 you fill the numbers as they are. You deposited to IRA 5500, you converted 5100, your $400 loss is lost (unless you have more money in IRA from elsewhere). If you completely distribute your IRA, you can deduct the $400 on your Schedule A, if you itemize. Yes, each of Vanguard's mutual funds looks only at its own shares when deciding to upgrade/downgrade the shares to/from Admiral status. To the best of my knowledge, if you hold a fund in an IRA as well as a separate investment,  the shares are not totaled in deciding whether or not the shares are accorded Admiral shares status; each account is considered separately.  Also, for many funds, the minimum investment value is not $10K but is much larger (used to be $100K a long time ago, but recently the rules have been relaxed somewhat). I know in the instance that if my MAGI exceeds a certain point, I can   not contribute the maximum to the Roth IRA; a traditional IRA and   subsequent backdoor is the way to go. My understanding is that if you ever want to do a backdoor Roth, you don't want deductible funds in a Traditional account, because you can't choose to convert only the taxable funds. From the bogleheads wiki: If you have any other (non-Roth) IRAs, the taxable portion of any   conversion you make is prorated over all your IRAs; you cannot convert   just the non-deductible amount. In order to benefit from the   backdoor, you must either convert your other IRAs as well (which may   not be a good idea, as you are usually in a high tax bracket if you   need to use the backdoor), or else transfer your deductible IRA   contributions to an employer plan such as a 401(k) (which may cost you   if the 401(k) has poor investment options). The matching funds are free money, so it is a very good idea to take that money off the table.  Look at it as free 100% return: you deposit $1000, your employer matches that $1000, you now have $2000 in your 401(k).  (Obviously, I'm keeping things simple.  Vesting schedules mean that the employer match isn't yours to keep immediately, but rather after some time; usually in chunks.) Beyond the employer match, you need to consider what is available for investment in a 401(k).  Typically, your options are more limited then in an IRA.  The cost of the 401(k) should be considered, as it isn't trivial for most.  (The specifics will of course vary, but in large IRA accounts are cheaper.) So, it's about the opportunity costs.  Up to the employer match, it doesn't matter as much that your investment choices are more limited in a 401(k), because you're getting 100% return just on the matching funds.  Once that is exhausted, you have more opportunity for returns, due to having more options available to you, by going with an account that provides more choices. The overall principle here is that you have to look at the whole picture.  This is similar to the notion that you should pay-down your high interest debt before investing, because from the perspective of investing the interest you're paying represent a loss, or negative return on investment, since money is going out of your accounts.  Specific to your question, you have to consider the various types of investment vehicles available to you.  It is not just about 401(k) and IRA accounts.  You may also consider a straight brokerage account, a savings account, CDs, etc.  The costs and returns that you can typically expect are your guides through the available choices. Yes, I have done this and did not feel a change in cash flow - but I didn't do it a the age of 23.  I did it at a time when it was comfortable to do so.  I should have done it sooner and I strongly encourage you to do so.   Another consideration:  Is your companies program a good one?  if it is not among the best at providing good funds with low fees then you should consider only putting 6% into your employer account to get the match.  Above that dollar amount start your own ROTH IRA at the brokerage of your choice and invest the rest there.  The fee difference can be considerable amounting to theoretically much higher returns over a long time period. If you choose to do the max , You would not want to max out before the end of the year.  Calculate your deferral very carefully to make sure you at least put in 6% deferral on every paycheck to the end of the year.  Otherwise you may miss out on your company match.  It is wise to consider a ROTH but it is extremely tough to know if it will be good for you or not.  It all depends on what kind of taxes (payroll, VAT, etc) you pay now and what you will pay in the future.  On the other hand the potential for tax-free capital accumulation is very nice so it seems you should trend toward Roth. "Here's the detailed section of IRS Pub 590 It looks like you intended to have a ""trustee to trustee conversion"", but the receiving trustee dropped their ball.  The bad news is, a ""rollover contribution"" needed to be done in 60 days of the distribution.  There is good news, you can request an extension from the IRS, with one of the reasons if there was an error by one of the financial institutions involved. Other waivers.   If you do not qualify for an automatic waiver, you can apply to the IRS for a waiver of the 60-day rollover requirement. To apply for a waiver, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. This revenue procedure is generally published in the first Internal Revenue Bulletin of the year. You must also pay a user fee with the application. The information is in Revenue Procedure 2016-8 in Internal Revenue Bulletin 2016-1 available at www.irs.gov/irb/2016-01_IRB/ar14.html.    In determining whether to grant a waiver, the IRS will consider all relevant facts and circumstances, including: Whether errors were made by the financial institution (other than      those described under Automatic waiver , earlier); Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a      foreign country, or postal error; Whether you used the amount distributed (for example, in the case of payment by check, whether you cashed the check); and How much time has passed since the date of distribution. You can also see if you can get ETrade to ""recharacterize"" the equity position to your desired target IRA.  The positive here is that the allowed decision window for calendar year 2016 rollovers is October 15 2017; the negatives are this is irrevocable, and restricts certain distributions from the target for a year (unlikely to impact your situation, but, you know, ""trust but verify"" anonymous internet advice); and it requires ETrade to recognize the original transaction was a rollover to a Roth IRA, which they currently don't.  But if their system lets them put it through you could end up with the amount in a traditional IRA with no other taxable events to report, which appears to be your goal.   Recharacterization FAQ" "The policy you quoted suggests you deposit 6% minimum. That $6,000 will cost you $4,500 due to the tax effect, yet after the match, you'll have $9,000 in the account. Taxable on withdrawal, but a great boost to the account.  The question of where is less clear. There must be more than the 2 choices you mention. Most plans have 'too many' choices. This segues into my focus on expenses. A few years back, PBS Frontline aired a program titled The Retirement Gamble, in which fund expenses were discussed, with a focus on how an extra 1% in expenses will wipe out an extra 1/3 of your wealth in a 40 year period. Very simple to illustrate this - go to a calculator and enter .99 raised to the power of 40. .669 is the result. My 401(k) has an expense of .02% (that's 1/50 of 1%) .9998 raised to the same 40 gives .992, in other words, a cost of .8% over the full 40 years. My wife and I are just retired, and will have less in expenses for the rest of our lives than the average account cost for just 1 year.  In your situation, the knee-jerk reaction is to tell you to maximize the 401(k) deposit at the current (2016) $18,000. That might be appropriate, but I'd suggest you look at the expense of the S&P index (sometime called Large Cap Fund, but see the prospectus) and if it's costing much more than .75%/yr, I'd go with an IRA (Roth, if you can't deduct the traditional IRA). Much of the value of the 401(k) beyond the match is the tax differential, i.e. depositing while in the 25% bracket, but withdrawing the funds at retirement, hopefully at 15%. It doesn't take long for the extra expense and the ""holy cow, my 401(k) just turned decades of dividends and long term cap gains into ordinary income"" effect to take over. Understand this now, not 30 years hence.  Last - to answer your question, 'how much'? I often recommend what may seem a cliche ""continue to live like a student."" Half the country lives on $54K or less. There's certainly a wide gray area, but in general, a person starting out will choose one of 2 paths, living just at, or even above his means, or living way below, and saving, say, 30-40% off the top. Even 30% doesn't hit the extreme saver level. If you do this, you'll find that if/when you get married, buy a house, have kids, etc. you'll still be able to save a reasonable percent of your income toward retirement.  In response to your comment, what counts as retirement savings? There's a concept used as part of the budgeting process known as the envelope system. For those who have an income where there's little discretionary money left over each month, the method of putting money aside into small buckets is a great idea. In your case, say you take me up on the 30-40% challenge. 15% of it goes to a hard and fast retirement account. The rest, to savings, according to the general order of emergency fund, 6-12 months expenses, to cover a job loss, another fund for random expenses, such as new transmission (I've never needed one, but I hear they are expensive), and then the bucket towards house down payment. Keep in mind, I have no idea where you live or what a reasonable house would cost. Regardless, a 20-25% downpayment on even a $250K house is $60K. That will take some time to save up. If the housing in your area is more, bump it accordingly.  If the savings starts to grow beyond any short term needs, it gets invested towards the long term, and is treated as ""retirement"" money. There is no such thing as Saving too much. When I turned 50 and was let go from a 30 year job, I wasn't unhappy that I saved too much and could call it quits that day. Had I been saving just right, I'd have been 10 years shy of my target." Your financial advisor got a pretty good commission for selling you the annuity is what happened. As for transferring it over to Vanguard (or any other company) and investing it in something else, go to Vanguard's site, tell them that you want to open a new Roth IRA account by doing a trustee-to-trustee transfer from your other Roth IRA account, and tell them to go get the funds for you from your current Roth IRA trustee.  You will need to sign some papers authorizing Vanguard to go fetch, make sure all the account numbers and the name of the current trustee (usually a  company with a name that includes Trust or Fiduciary as shown on your latest statement) are correct, and sit back and wait while your life improves. Don’t take the cash deposit whatever you do. This is a retirement savings vehicle after all and you want to keep this money designated as such.   You have 3 options:  1) Rollover the old 401k to the new 401k. Once Your new plan is setup you can call who ever runs that plan and ask them how to get started. It will require you filling out a form with the old 401k provider and they’ll transfer the balance of your account directly to the new 401k.  2) Rollover the old 401k to a Traditional IRA. This involves opening a new traditional IRA if you don’t already have one (I assume you don’t). Vanguard is a reddit favorite and I can vouch for them as Well. Other shops like Fidelity and Schwab are also good but since Vanguard is very low cost and has great service it’s usually a good choice especially for beginners.  3) Convert the old 401k to a ROTH IRA. This is essentially the same as Step 2, the difference is you’ll owe taxes on the balance you convert. Why would you voluntarily want to pay taxes f you can avoid them with options 1 or 2? The beauty of the ROTH is you only pay taxes on the money you contribute to the ROTH, then it grows tax free and when you’re retired you get to withdraw it tax free as well. (The money contained in a 401k or a traditional IRA is taxed when you withdraw in retirement).   My $.02. 401k accounts typically have higher fees than IRAs, even if they own the same mutual funds the expense ratios are usually more in the 401k. The last 2 times I’ve changed jobs I’ve converted the 401k money into my ROTH IRA. If it’s a small sum of money and/or you can afford to pay the taxes on the money I’d suggest doing the same.  You can read up heavily on the pros/cons of  ROTH vs Traditional but My personal strategy is to have 2 “buckets” or money when I retire (some in ROTH and some in Traditional). I can withdraw as much money from the Traditional account until I Max out the lowest Tax bracket and then pull any other money I need from the ROTH accounts that are tax free.This allows you to keep taxes fairly low in retirement.  If you don’t have a ROTH now this is a great way to start one. Another, completely different way to look at your huge mistake: It's not a huge mistake. You're getting your money out of a restricted account.  You're paying taxes now (plus an extra tax of 10%) to regain some of your privacy of where you're putting your money. You're paying up now as a trade-off to paying much later, when the rules can be completely different and the tax rates much higher. You're deciding not to put the money into another restricted account, which has yearly reporting requirements to the IRS above and beyond those required with taxable earnings. It's a cost-benefit analysis whether you roll your money over to an IRA account or not.  You hear about the benefits a lot more often than you hear about the costs, which it what I'm introducing you to with my answer.