401K Investment Options
by joemartens3 » Tue Mar 18, 2014 6:07 pm
My wife and I are both coming up on one year of employment at our respective companies, allowing us to start investing in 401K. In our previous employer’s 401K, we simply invested in the target retirement date fund. However, I no longer have that option and am not sure where to start. It seems that most of the options have high expenses.
Pre-tax salary: $112,000
Emergency funds: Six months of emergency funds saved (after house down payment… see line below)
Debt: No debt, though looking to buy a house this summer. Likely a 15-year mortgage with 20% down and a monthly payment between $1,100 and $1,300.
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, 0% State
State of Residence: TX
Age: 36, wife is 31
Desired Asset allocation: unsure
Desired International allocation: unsure
Current retirement assets ~$60K total
Previous employer 401k
51% LifePath Index 2040 Q (ticker symbol??) (.22%)
Roth IRA at Vanguard
10% Vanguard Target Retirement 2050 Fund (VFIFX) (.18%)
Wife’s Previous employer 401K
13% LifePath Index 2040Q (ticker symbol ??) (.22%)
15% LifePath Index 2050Q (ticker symbol ??) (.22%)
Wife’s Rollover IRA
1% Fidelity Freedom 2050 (FFFHX) (.82%)
Wife’s Roth IRA at Vanguard
10% Vanguard Target Retirement 2055 Fund (VFFVX) (.18%)
Contributions
New annual Contributions
up to $2,850 (5%) his 401k (employer match up to 2%)
up to $2,750 (5%) her 401K (employer to contribute 3% automatically, then match up to 4% for a total of 7%)
$5,500 his Roth IRA
$5,500 her Roth IRA
Available funds:
Bond Funds
Blackrock Inflation Protected Bond C (BPRCX) (1.58%)
Blackrock Low Duration Bond Portfolio C (BLDCX) (1.53%)
Blackrock US Gov’t Bond Portfolio C (BIGCX) (1.82%)
Templeton Global Bond C (TEGBX) ( 1.28%)
Equity Funds
Aberdeen Global Natural Resources C (GGNCX) (2.16%)
Blackrock Emerging Markets C (MCDCX) (2.46%)
Blackrock Equity Dividend C (MCDVX) (1.7%)
Blackrock Focus Growth C (MCFOX) (2.37%)
Blackrock Global Allocation (MCLOX) (1.89%)
Blackrock Global Opportunities Portfolio C (BROCX) (2.14%)
Blackrock Health Sciences Opportunities Portfolio C (SHSCX) (1.95%)
Blackrock Latin America C (MCLTX) (2.35%)
Blackrock S&P 500 Stock A (BSPAX) (.49%)
Blackrock Small Cap Growth Equity PortF C (CGICX) (1.95%)
Invesco Van Kampen Small Cap Growth C (VCSCX) (2.08%)
Ivy Pacific Opportunities C (IPOCX) (2.53%)
Ivy Science & Technology C (WSTCX) (2.07%)
Nuveen Tradewinds Value Opportunities C (NVOCX) (2.09%)
Oppenheimer Gold & Special Minerals C (OGMCX) (1.87%)
Thornburg International Value C (THGCX) (2.03%)
Money Market Funds
Blackrock Ready Assets Prime Money (MRAXX) (.69%)
Questions:
1. Any advice as what percentage I should invest, and how I should allocate would be greatly appreciated. As you can see, until now I’ve been set it and forget it with the Target Retirement date funds. Thank you!
Posts: 2
Joined: 18 Mar 2014
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Re: 401K Investment Options
by deikel » Tue Mar 18, 2014 9:01 pm
Wow, I have not seen funds with >2% fees in a while...thats rediculous, the bond funds are downright outrages given their current return....
I think your best bet is to put all your 401k contributions into the S+P500 - thats still a higher fee than necessary, but the best you can do.
You also decided to contribute your future IRA money into a Roth-IRA - you might want to think about an T-IRA contribution to get a tax deduction (since you are in the 25% bracket with less than 120k salary - combined ?)
I would roll old 401ks into IRAs if it were me, but that would depend on your decision pro ROth and against IRA that you might have already made for some reason I don't see
You might want to reconsider your target funds. Your have another 20 years to work before possible early retirement around age 55. I see little need or reason to hold any bonds at this point (they are also at historic low and give little return - they are basically cash IMO) - bonds might become more interesting later and closer to retirement. Rolling it into Fidelity or Vanguard accounts may open up some other choices for you. I assume you like simplicity and shoot and forget, so maybe just straight all market funds ? There is little diversification between ROW and S+P500, so no need to have international funds and your total account is not large enough to worry too much about it yet.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immidiatly and destroy any copy or remembrance of it.
Posts: 81
Joined: 25 Jan 2014
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Re: 401K Investment Optionsby kerplunk » Tue Mar 18, 2014 9:52 pm
Those expense ratios are absurd. I would be offended, if I were you.
Blackrock S&P 500 Stock A (BSPAX) (.49%) is your best option, as deikel has mentioned.
40% US LC // 40% US SC // 10% Int LC // 10% Int SC
Posts: 463
Joined: 17 Apr 2011
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Re: 401K Investment Options
by Laura » Tue Mar 18, 2014 10:08 pm
The only decent fund in your 401k is Blackrock S&P 500 Stock A (BSPAX) (.49%) so you want to direct all of your 401k money into that one fund. You then have a few options. Because you will be overweighting US stocks by holding only that one fund in your 401k you probably want to move to different target retirement funds that have more bonds in your other accounts. This should get you close to the total asset allocation you want if you prefer to stick with target retirement type funds. Alternatively, you can split out into individual funds in your other accounts or perhaps in some of your other accounts.
Your wife has a very small rollover IRA at Fidelity but in a Fidelity freedom fund. This funds are more expensive and are a collection of a bunch of actively managed funds. Given the tiny size of that account I suggest that she roll it into the roth at Vanguard. This would be a taxable event but for a very small amount.
Current retirement assets ~$60K total
Previous employer 401k
51% LifePath Index 2040 Q (ticker symbol??) (.22%)
Wife’s Previous employer 401K
13% LifePath Index 2040Q (ticker symbol ??) (.22%)
15% LifePath Index 2050Q (ticker symbol ??) (.22%)
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Roth IRA at Vanguard 48% of non former employer 401ks
20% Vanguard Total Bond Market
28% Vanguard Total Stock Market
Wife’s Roth IRA at Vanguard 52% of non former employer 401ks
24% Vanguard Total Intl Stock Market
10% Vanguard Extended Market Index
18% Vanguard Total Stock Market
New Contributions:
his new 401k
$2,850 S&P 500
her new 401k
$2,750 S&P 500
his roth
$3320 Total Bond Market
$2180 Total Stock Market
her roth
$3984 Vanguard Total Intl Stock Market
$1516 Vanguard Extended Market Index
This allows you to use the lowest cost funds in the 401ks and build out from there. You can also switch the old 401ks into individual funds but since I didn't know what options were available I basically ignored them for now. If you have a low cost bond option, for example, it may make more sense to place bonds in the old 401ks and then use the roths for faster growing stocks.
If you can post your fund options in the 401k we can give you suggestions for the entire portfolio.
Laura
Posts: 6931
Joined: 19 Feb 2007
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Re: 401K Investment Options
by Angst » Tue Mar 18, 2014 10:20 pm
I would be offended too. I would wish there were a tactful way to explain to my new employer that I might have rejected them as a potential employer had I known what investment choices their 401k offered. Such extremely poor investment choices have to be a reflection, to some degree at least, of company management (or mismanagement, really). For the time being, I'd put my money in the .49% Index 500 fund. But at some point in the next year, you need to communicate with management. Try the following wiki link for some ideas, and good luck! You really have a lousy 401k. I'm sorry.http://www.bogleheads.org/wiki/How_to_c ... 8k%29_plan
Last edited by Angst on Tue Mar 18, 2014 10:57 pm, edited 1 time in total.
Posts: 671
Joined: 9 Jun 2007
Location: St Louis, MO
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Re: 401K Investment Options
by seamonkey » Tue Mar 18, 2014 10:52 pm
At this point, I agree with the S&P500, only up to the match. I don't know if I would contribute beyond that. If this is a job you don't plan on staying in for very long, I'd definitely not contribute past the match. I would be disciplined about saving money from every paycheck into IRAs (probably Roth, maybe traditional), I-bonds, EE-bonds, 529s, and/or taxable, depending on what you can and wish to save. Get the mortgage down amount further if you can with this extra cash in pocket. And I would lobby the 401k committees at work for some other options.
Posts: 68
Joined: 19 Oct 2012
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Re: 401K Investment Options
by kerplunk » Tue Mar 18, 2014 11:03 pm
seamonkey wrote:At this point, I agree with the S&P500, only up to the match. I don't know if I would contribute beyond that. If this is a job you don't plan on staying in for very long, I'd definitely not contribute past the match. I would be disciplined about saving money from every paycheck into IRAs (probably Roth, maybe traditional), I-bonds, EE-bonds, 529s, and/or taxable, depending on what you can and wish to save. Get the mortgage down amount further if you can with this extra cash in pocket. And I would lobby the 401k committees at work for some other options.
If this is a job the original poster was not planning on staying at long, then I would max out the 401(k) because then he could roll it over to an IRA.
40% US LC // 40% US SC // 10% Int LC // 10% Int SC
Posts: 463
Joined: 17 Apr 2011
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Re: 401K Investment Options
by Random Musings » Tue Mar 18, 2014 11:21 pm
Who says crime does not pay?
RM
Posts: 4839
Joined: 22 Feb 2007
Location: Pennsylvania
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Re: 401K Investment Options
by joemartens3 » Wed Mar 19, 2014 10:12 am
Thank you all for the great advice. I've always been a good saver, but I'm just recently learning about investing.
My new job is with a small, not-for-profit business that contracts out payroll, benefits, and 401K plan to a third party company (Paychex). I do plan on reaching out to my employer and the third party company to inquire about more feasible & economical choices for the 401K.
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