Inherited Roth IRA - Fidelity - Which fund?

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Topic Author
jakester03
Posts: 18
Joined: Fri Jun 07, 2013 3:51 pm

Inherited Roth IRA - Fidelity - Which fund?

Post by jakester03 »

Hi All,

My grandmother passed away and left us an inherited Roth IRA at Fidelity worth around $60k. My grandmother was very big on education, so we've decided to honor her by earmarking this money for education for our 9 year old daughter. Wife and I are both 40 years old. We currently max out our Roth IRAs, My work 401k, and my HSA. We also have an adequate emergency fund of 6+ months. We do not need the Inherited Roth IRA money at the moment.

We have decided to leave the money at Fidelity for the maximum allowed 10 years since that is roughly when we'd need to start paying for college for her. Which fund(s) should we choose for a 10 year horizon? Would something like FXIFX make sense or something more aggressive?

Thanks in Advance!
mhalley
Posts: 10424
Joined: Tue Nov 20, 2007 5:02 am

Re: Inherited Roth IRA - Fidelity - Which fund?

Post by mhalley »

I would look at an allocation similar to what a good 529 age based portfolio uses, and adjust it accordingly as she ages, using the fidelity index funds. This is a link to the vanguard 529 for 9yo. It’s basically a 50/50stock bond portfolio with 30% domestic and 20% intl stocks.
https://investor.vanguard.com/529-plan/ ... folio/4656
The 2030 fund is more aggressive, but not that unreasonable. I don’t know the fidelity index glidepaths so you would want to check into that.
whyme
Posts: 209
Joined: Wed Dec 14, 2011 12:22 pm

Re: Inherited Roth IRA - Fidelity - Which fund?

Post by whyme »

FXIFX (Fidelity Freedom Index 2030) sounds like a reasonable choice. Whatever you get, be sure it has the word "index" in the name and look carefully at the expense ratio. Fidelity has many more costly funds with very similar names to their low-cost options.

If you expect you'll be spending this money in 10 years, I don't think you'd want to take on any more risk (many would advise less risk at that time horizon): the last thing you want is to be holding all stocks when the college bills come due, in case of an ill-timed bear market.
LeeMKE
Posts: 2233
Joined: Mon Oct 14, 2013 9:40 pm

Re: Inherited Roth IRA - Fidelity - Which fund?

Post by LeeMKE »

+1 whyme
+1 mhailey
The mightiest Oak is just a nut who stayed the course.
rgs92
Posts: 3436
Joined: Mon Mar 02, 2009 7:00 pm

Re: Inherited Roth IRA - Fidelity - Which fund?

Post by rgs92 »

Yep, FXIFX (fid freedom idx target fund 2030) is a fine fund for this purpose(70/30 stocks/bonds now).
The ER is 12 basis pts.
Or, you could spend $75 commission and get Vang. balanced index VBIAX at 7 basis pts (60/40 constant, not a target fund, no foreign stock).
I would lean to the latter since you are going to hold it for long time.
Topic Author
jakester03
Posts: 18
Joined: Fri Jun 07, 2013 3:51 pm

Re: Inherited Roth IRA - Fidelity - Which fund?

Post by jakester03 »

Another option is that we do currently have Vanguard accounts as well (Rollover IRAs and Roth IRAs). This inherited Roth IRA is the only Fidelity account we have, so we could simplify by moving it to Vanguard as well.
ronno2018
Posts: 567
Joined: Sat Apr 14, 2018 9:31 am

Re: Inherited Roth IRA - Fidelity - Which fund?

Post by ronno2018 »

If you have Vanguard accounts I would do an in kind transfer to Vanguard and then follow the advice above for asset allocation. It is just nicer to consolidate accounts (assuming you are ok with your current brokerage). I moved my inherited IRA to Vanguard then sold the mutual funds and reinvested in my preferred Vanguard ETF's.
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