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Transferring 401K to IRA - Which version of index funds recommended?
Posted on 10/16/26 at 9:08 am
Posted on 10/16/26 at 9:08 am
I retired this year and am doing a roll over from my 401K to utilize the tax advantage for Net Unrealized Appreciation of my company stock holdings. For those not familiar with NUA, you are allowed to pay the taxes for each pretax purchased company stock share based on the original purchase price of the stock, Future taxes on those shares will be taxed based on capital gains. Utilizing the NUA strategy requires me to move my remaining index funds from my 401K to an outside IRA.
Questions - What things should I consider when reinvesting my index funds? What is the best outside fund that follows the S&P 500, Dow, Nasdaq, others?
From a quick search I see there are several funds such as VOO that follow the S&P 500. I haven’t seen a simple table that compares why one company’s index fund is better than another’s. While I’m researching this more, does anyone have experience with a particular S&P, Dow, etc fund that could influence my decision?
Questions - What things should I consider when reinvesting my index funds? What is the best outside fund that follows the S&P 500, Dow, Nasdaq, others?
From a quick search I see there are several funds such as VOO that follow the S&P 500. I haven’t seen a simple table that compares why one company’s index fund is better than another’s. While I’m researching this more, does anyone have experience with a particular S&P, Dow, etc fund that could influence my decision?
Posted on 10/16/26 at 9:13 am to Ramblin Wreck
The different versions of the 500 are similar. The majority of my 401 is in the Russell1000 and the 500.
Posted on 10/16/26 at 9:31 am to KWL85
Best set-it-and-forget-it ETFs
S&P 500 - VOO
Total Market - VTI
Nasdaq - QQQ
S&P 500 - VOO
Total Market - VTI
Nasdaq - QQQ
Posted on 10/16/26 at 9:40 am to Texas Tea 123
I see that the expense ratio for FXAIX is 0.015% while VOO is .03%. Does that mean I am charged those fees for owning those funds or does that amount get deducted from the value of the fund? Some are listed as mutual funds and others ETF’s. What is the advantage / disadvantage?
Posted on 10/16/26 at 9:50 am to Ramblin Wreck
quote:
I see that the expense ratio for FXAIX is 0.015% while VOO is .03%. Does that mean I am charged those fees for owning those funds or does that amount get deducted from the value of the fund? Some are listed as mutual funds and others ETF’s. What is the advantage / disadvantage?
https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds
I generally prefer ETFs over mutual funds especially in a taxable account as they can be more tax efficient. The one big advantage for ETFs is they can be transferred in kind to another brokerage. I don't think that's available for most mutual funds.
Posted on 10/16/26 at 10:01 am to gpburdell
Unless you have billions, that delta in fees is just not material. We're talking $150/yr per $1 million invested
And ETFs are generally a little more user friendly (taxes, liquidity, transferring to other brokers, etc)
And ETFs are generally a little more user friendly (taxes, liquidity, transferring to other brokers, etc)
This post was edited on 10/16/26 at 10:03 am
Posted on 10/16/26 at 10:13 am to gpburdell
Thanks for the link, that is very helpful.
Posted on 10/16/26 at 11:06 am to Texas Tea 123
quote:Quick correction for OP. QQQ has a slightly higher expense ratio than QQQM.
Best set-it-and-forget-it ETFs
S&P 500 - VOO
Total Market - VTI
Nasdaq - QQQ
QQQ is the better ticker for active traders. QQQM is slightly better for buying and holding for the long run.
Posted on 10/16/26 at 12:47 pm to Ramblin Wreck
I'd just avoid any proprietary funds like the Fidelity zero funds that have no expense ratio but can't be moved to another brokerage. Otherwise, any low expense mutual fund or ETF that tracks the index you prefer should be good. ETF tax advantage only applies to taxable account not retirement accounts (traditional or Roth).
Posted on 10/16/26 at 5:06 pm to Texas Tea 123
quote:
Unless you have billions, that delta in fees is just not material. We're talking $150/yr per $1 million invested
If they are mostly the same, why pay a 0.03% VOO fee versus one with a 0.01% fee. I know it seems small but the difference between $100 and $300 per million can add up. If I see two identical items in the store and one is $100 and the other $300, I’m buying the $100 one. What am I missing?
Posted on 10/16/26 at 7:28 pm to Ramblin Wreck
I just learned about the 5 year rule on roth IRA retirement account last night. Never knew that.
Posted on 10/16/26 at 8:15 pm to Ramblin Wreck
quote:
If they are mostly the same, why pay a 0.03% VOO fee versus one with a 0.01% fee. I know it seems small but the difference between $100 and $300 per million can add up. If I see two identical items in the store and one is $100 and the other $300, I’m buying the $100 one. What am I missing?
In the example of VOO vs FXAIX, you're right FXAIX should give you the higher overall return with its lower expense ratio. This assumes that they both have nearly identical performance which they should.
Though according to this VOO still comes out slightly ahead:
https://testfol.io/?s=ldlXuUs6UQ8
So for a long time, pretty much only Vanguard offered mutual funds or ETFs with very low expense ratios. Over time more and more companies started offering low expense ETFs and eventually even mutual funds.
Fidelity even offers 0% expense mutual funds but those definitely cannot be moved to another brokerage.
Going back to VOO vs FXAIX, even if FXAIX came out a little ahead I would still buy VOO. I prefer Vanguard investment products as all Vanguard funds/ETFs are owned by the underlying mutual funds themselves which are owned by the shareholders. They are like the Greenbay Packers of the investment world.
When I first started investing, I used to have most of investments at Vanguard. When Vanguard started offering ETFs, I moved everything to Fidelity. At the time, Fidelity was a far superior brokerage/cash management platform which I still believe it is.
I have all of my investment accounts at Fidelity now but 80% of investments are Vanguard ETFs.
This post was edited on 10/16/26 at 8:19 pm
Posted on 10/16/26 at 8:28 pm to Ramblin Wreck
VOO
QQQ
QQQ
Posted on 10/17/26 at 12:42 am to Ramblin Wreck
Have used FXAIX before but switched to SPYM and SPYG, I prefer the ETF’s, one thing I noticed is if you use FXAIX or other mutual funds and decide to make a sell or change investments, it takes considerably longer to accomplish that than with the ETF’s, they are pretty instantaneous.
Posted on 10/17/26 at 5:30 pm to HighlyFavoredTiger
quote:
one thing I noticed is if you use FXAIX or other mutual funds and decide to make a sell or change investments, it takes considerably longer to accomplish that than with the ETF’s, they are pretty instantaneous.
All mutual funds settle at the end of the trading day; they don't trade intraday like stocks or ETFs. The one advantage of this is that mutual funds aren't subject to bid-ask spread.
Posted on 10/18/26 at 3:51 am to beaverfever
Likewise I think SPYM is cheaper than SPY
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