Holding "Cash & Equivalents" in 401(k)

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Holding "Cash & Equivalents" in 401(k)

Postby Savvy » Wed May 08, 2013 11:26 pm

My wife's 401(k) options are pretty bad. The least bad option is the American Bond Fund (RLBCX) with an ER of 0.95%. Here is the breakdown of holdings:

-- 64.4% U.S. Equities
-- 20.7% U.S. Bonds
-- 7.8% Non-U.S. Equities
-- 2.6% Non-U.S. Bonds
-- 4.5% Cash & Equivalents

Why would I want Cash & Equivalents? Wouldn't the conservative portion at least be in short-term bonds? We don't want to be in cash at 24 years old.

Or, should we suck it up and pay the ER of 1.22% for American Funds 2050 Target Date Retirement Fund (RCITX)?

Thanks!
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Re: Holding "Cash & Equivalents" in 401(k)

Postby john94549 » Wed May 08, 2013 11:44 pm

It's not a bond fund, it's a balanced fund. Fairly high ER, but many 401Ks have similar. The cash is probably for in-and-out.

RCITX, while having a higher ER, seems a tad more age-appropriate (and aggressive). I would note it also has a fairly large cash stash, maybe larger.

Any way to get 80/20 and mix-and-match with a lower ER? Does the 401K have a low ER all-stock and a low ER all-bond, for example?
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Re: Holding "Cash & Equivalents" in 401(k)

Postby Savvy » Thu May 09, 2013 6:00 pm

john94549 wrote:It's not a bond fund, it's a balanced fund. Fairly high ER, but many 401Ks have similar. The cash is probably for in-and-out.

RCITX, while having a higher ER, seems a tad more age-appropriate (and aggressive). I would note it also has a fairly large cash stash, maybe larger.

Any way to get 80/20 and mix-and-match with a lower ER? Does the 401K have a low ER all-stock and a low ER all-bond, for example?


Thank you. For reference, both our Roths are at Vanguard and my 401(k) is with Fidelity so lots of flexibility in those accounts.

Her 401(k) choices have a Total Bond Fund with ER of 0.98, a few Int'l Stock funds with ER of 1.25 - 1.50, and the Target Retirement funds with ER of 1.2 - 1.3. The lowest ER (besides MM) are 0.95 for Balanced Fund and 0.98 for Total Bond Fund. Not much to choose from.
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Re: Holding "Cash & Equivalents" in 401(k)

Postby Duckie » Thu May 09, 2013 9:55 pm

Savvy wrote:For reference, both our Roths are at Vanguard and my 401(k) is with Fidelity so lots of flexibility in those accounts.

Her 401(k) choices have a Total Bond Fund with ER of 0.98, a few Int'l Stock funds with ER of 1.25 - 1.50, and the Target Retirement funds with ER of 1.2 - 1.3. The lowest ER (besides MM) are 0.95 for Balanced Fund and 0.98 for Total Bond Fund. Not much to choose from.

Given that, I'd use the Total Bond Fund (0.98%) to avoid the balanced fund. It's only 0.03% more.
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Re: Holding "Cash & Equivalents" in 401(k)

Postby Savvy » Thu May 09, 2013 11:12 pm

Duckie wrote:
Savvy wrote:For reference, both our Roths are at Vanguard and my 401(k) is with Fidelity so lots of flexibility in those accounts.

Her 401(k) choices have a Total Bond Fund with ER of 0.98, a few Int'l Stock funds with ER of 1.25 - 1.50, and the Target Retirement funds with ER of 1.2 - 1.3. The lowest ER (besides MM) are 0.95 for Balanced Fund and 0.98 for Total Bond Fund. Not much to choose from.

Given that, I'd use the Total Bond Fund (0.98%) to avoid the balanced fund. It's only 0.03% more.


Thanks Duckie. Now that I am home and looking at the info online I see they added a few funds from our pamphlet and ERs have slightly changed. Here's the full list (with ER):

-- EuroPacific Growth Fund (1.14) RERCX
-- SMALLCAP World Fund (1.42) RSLCX
-- The Growth Fund of America (0.98) RGACX
-- Capital World Growth and Income Fund (1.10) RWICX
-- The Investment Company of America (0.98) RICCX
-- Capital Income Builder (0.98) RIRCX
-- American Balanced Fund (0.95) RLBCX
-- Short-Term Bond Fund of America (1.03) RAMCX
-- The Bond Fund of America (0.92) RBFCX
-- American Funds Money Market Fund (0.52) RACXX
-- American Funds 2055 Target Date Retirement Fund (1.34) RCMTX
-- American Funds 2050 Target Date Retirement Fund (1.22) RCITX
-- American Funds 2045 Target Date Retirement Fund (1.22) RCHTX
-- American Funds 2040 Target Date Retirement Fund (1.21) RCKTX
-- American Funds 2035 Target Date Retirement Fund (1.20) RCFTX
-- American Funds 2030 Target Date Retirement Fund (1.19) RCETX
-- American Funds 2025 Target Date Retirement Fund (1.19) RCDTX
-- American Funds 2020 Target Date Retirement Fund (1.16) RCCTX
-- American Funds 2015 Target Date Retirement Fund (1.14) RCJTX
-- American Funds 2010 Target Date Retirement Fund (1.13) RCATX
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Re: Holding "Cash & Equivalents" in 401(k)

Postby Duckie » Sat May 11, 2013 9:03 pm

Well, (RBFCX) American Funds Bond Fund of America (0.92%) isn't a great fund, but given your choices it'll do.
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