20Dukes11 wrote:I mentioned to him my concern with the high expense ratios of the Target Fund, to which he replied that those expenses would be "worth it" if the funds were better performing than funds that had lower ER's.
Can someone basically reiterate what my "best" options are given the mentioned plan and its available funds?
2. Take my additional contributions (currently another 6%) and put it into a Roth IRA. Within this IRA, I'd like to beef up my stock allocations (since the STAR fund is a little bond-heavy for my age), so I'm thinking either just VTSMX, or a blend of VTSMX and VGTSX. I'd like to initially just go with the VTSMX, since I'm assuming each one of these requires a $3,000 initial investment. Or is that a $3,000 minimum investment for the entire IRA?
Midcap funds? The same ones which also happen to be some of the most costly ones available to you? Was the "other stuff" the small-cap funds?20Dukes11 wrote:Sorry to reintroduce this post,
I still haven't switched gears from being entirely in the 2050 Target Date fund I mentioned earlier. This is because the more I hear/read, the more confused I become! I spoke with our "401K manager" earlier today, and I mentioned to him the idea of moving my current allocations from the Target Date fund over to a blend of the STAR and the Large Cap S&P 500 Index. He said I'd be missing out on things like "mid cap" funds, and some other stuff. I mentioned to him my concern with the high expense ratios of the Target Fund, to which he replied that those expenses would be "worth it" if the funds were better performing than funds that had lower ER's.
The other thing that you might want to consider is using an extended market index fund like VEXMX. If you take 4 parts S&P 500 and 1 part VEXMX, then you're getting an approximation of the total stock market index. I don't know what the proper ratio of star to the extended market index would be, but you could just choose something sane like 5:1 or you could actually crunch the numbers...
20Dukes11 wrote:The other thing that you might want to consider is using an extended market index fund like VEXMX. If you take 4 parts S&P 500 and 1 part VEXMX, then you're getting an approximation of the total stock market index. I don't know what the proper ratio of star to the extended market index would be, but you could just choose something sane like 5:1 or you could actually crunch the numbers...
Hmmm... So instead of splitting between STAR and the Principal Large Cap S&P500 Index, you're suggesting something like a blend of just STAR and VEXMX? I guess in my head, its all a balancing act between dropping down to just 6% contributions to the 401K, and then where to go contribution-wise with an external Roth IRA. Sorry for spinning in circles here!
In addition to this TSERS program, she's also contributing an additional 2% to a 403B. She has the option of using either Fidelity or TIAA-CREF as a vendor for this, and right now the entirety of her contributions are in the Fidelity Freedom K 2050 target date plan.
I can't tell you how frustrated I am with Fidelity. Her 403B plan has 261 different fund options. So for new investors like us, its basically seems like you can either sign up for one of these target date plans with a terrible expense ratio (hers is .68%), or try your hand at their 260+ funds. If it would help, I'd be happy to write out the available funds, because if I'm being honest with myself, there's too many options in there for me to really digest.
20Dukes11 wrote:She has access to the following Vanguard and Spartan funds:
Spartan® Total Market Index Fund - Fidelity Advantage Class (0.07%)
Spartan® Extended Market Index Fund - Fidelity (0.07%)
Vanguard Total International Stock Index Fund Signal Shares (0.16%)
You could put the S&P 500 Index in His 401k and complete it with the Extended Market in her 403b. Roughly 80% large caps (500 Index) plus 20% mid/small caps (Extended Market) makes up the total US stock market.
20Dukes11 wrote:The S&P500 Index you're referring to is my Vanguard STAR fund, correct?
That would mean 80% of our entire contributions would fall into this STAR fund, and then remaining 20% would go into the Extended Market to boost our mid/small cap exposure?
20Dukes11 wrote:I'll assume we don't want to consider her TSERS in this analysis, but stop me if I'm mistaken.
20Dukes11 wrote:So this additional 6% I'm no longer putting into the 401K (or any additional amount) could now be going into the wife's 403b?
20Dukes11 wrote:1. The figures you used for the 2 specific accounts - $15K for the 401K, and $20K for the 403B - are these roughly the amounts we want to see in the accounts before we start moving things into various index funds?
2. Should my wife's 403b be entirely Roth at this point? This may be one of those "its up to you, since we don't know what taxes will be like in XX years" type questions. Currently, my 401K contributions are entirely Roth, based off of my own opinion that I'll (presumably) be in a higher tax bracket whenever I start making withdrawals. I'd assume we'd want her 403b to be entirely Roth as well.
3. I feel really smart asking this one: How do I go about contributing to my wife's 403b? Is there a certain correct process in which I actually put money into the account? I can totally see myself doing that "wrong" per say, if that makes any sense.
20Dukes11 wrote:How do I, her spouse, contribute to her plan?
20Dukes11 wrote:Since switching my future contributions over to the VGSTX fund, I have some more noob questions. Obviously, since I just switched over to this fund from the Lifetime 2050, about 97% of my balance still lies in the Lifetime 2050. Do I transfer the entirety of this balance over into the VGSTX? Additionally, with my new contributions to my wife's 403b, we should also be moving that entire balance over to the VGEMX fund, correct?
20Dukes11 wrote:I guess the most obvious solution is to do a one-time dump of some cash into the 403b account to help it catch up
So, you have $15K in your 401k. How much does she have in her 403b? Do you have any IRAs yet? Are you still in STAR and Wellington?
Your best bet here is to stop obsessing about exact allocation, and start figuring out how to contribute the most money possible. In summary, you should do this:
1. Contribute to your 401k up to the employer match (done?)
2. Contribute to spouse's TSERS up to the employer match if any (done?)
3. Fully fund Roth IRA's for both you and spouse. This should be your emergency fund. Are you doing this?
4. Any extra, split the difference between her 403b and your 401k, up to max in each.
20Dukes11 wrote:3. Fully fund Roth IRA's for both you and spouse. This should be your emergency fund. Are you doing this?
Nope. Wife and I have an emergency fund of $15K in a local credit union savings account (earns .75% interest). I have not found any other investing or savings vehicle that I feel properly educated about to put this emergency fund in. I don't believe there's anything out there as liquid as this savings account. Isn't an emergency fund for...emergencies? Like, "I need this $ now because my hot water heater just went out." I was thinking putting this $15K anywhere else would "tie it up", and that's not what emergency funds are for.
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