What is the best option for rolling all my retirement funds into one fund?
Q: I’m (finally) going to rollover all my retirement funds into one fund. I have the most money with CitiStreet through my last employer. They are suggesting I roll the money over into a managed account containing mostly Fidelity products but also two Vanguard products and a T. Rowe Price product. The cost for managing the account is about 0.85 percent annually.
I also called Fidelity directly and talked to them about opening a Freedom Fund (2025), which is composed of all Fidelity products. The current expense ratio for the 2025 is 0.78 percent.
I’m considering going with the CitiStreet managed fund because it seems more diversified with the inclusion of the Vanguard and T. Rowe Price products. Plus, the fee is not that much greater than the expense ratio for the Freedom Fund.
Please let me know which option might be the best for me.
A: I can't complain about the costs -- assuming that is the TOTAL cost for the CitiStreet account. Or is it just the management fee, and there are also underlying fund costs? Be sure you're comparing the same things -- not only the management fee, but any fund charges, as well.
I don't know exactly the balance of the different funds inside the CitiStreet account -- you might want to do a side-by-side comparison with the two options, seeing perhaps if one has more exposure to stocks, or lacks exposure to international, etc.
That's the only way to do a comparison -- and you still have no guarantee that one will outperform the other over the next 20 years. And the only way to find out is to roll half into a Citi account, and the other half into the Fidelity account -- research with your own money! And you probably don't have enough money at stake here to justify the experiment.
But you've done your homework -- and you're way ahead of most people who write and either have NO savings, or NO idea what to do with them!
Terry Savage is a registered investment advisor and the author of the newly published The Savage Number: How Much Money Do You Need To Retire? (256 pages, Wiley, $24.95).