30 Year Old with Q's on 401k - old and new

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Topic Author
Sayonara
Posts: 4
Joined: Wed Feb 26, 2014 6:32 am

30 Year Old with Q's on 401k - old and new

Post by Sayonara »

Thank you in advance. Just a few general questions below.

Emergency funds: 3 months
Debt:
Mortgage, 3.95% 30 year fixed, $340,000 outstanding
Student Debt, 4-6%, $8,000 outstanding
Tax Filing Status: Single
Tax Rate: 25% Federal
Age: 30
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 20% of stocks


Current retirement assets


401k – old job
Currently I’m invested in one of their pre-set investment choices with a 90% stock / 10% bond mix. It includes many of the investment choices below.

401k – new job

5% Vanguard Total Bond Mkt Index Inst (VBTIX) (0.07%)
40% Vanguard Inst Index Fund Inst (VINIX) (0.04%)
21% Vanguard Mid-Cap Index Fund Inv (VIMSX) (0.24%)
21% Vanguard Small-Cap Index Fund Inv (NAESX) (0.24%)
13% Vanguard Emerging Mkts Stk Idx Inv* (VEIEX) (0.33%)

5% match. Currently contributing 5%.

Available funds

Funds available in 401(k) - old job

Fund (Ticker) (Gross Expense Ratio)

STOCKS/EQUITIES
AMERICAN EURO PACIFIC (RERGX) (0.50%)
AMERICAN GROWTH FUND OF (RGAGX) (0.34%)
ARTISAN MID CAP VALUE FUND INV (ARTQX) (1.20%)
BLACKROCK EMERGING MRKT IND TR (ZEMERT) (0.20%)
BLACKROCK EXTENDED FD CL K (BEEMT) (0.12%)
BLACKROCK MSCI EAFE EQTY NL M (BCMMT) (0.08%)
DODGE & COX INTERNATIONAL ST (DODFX) (0.64%)
GOLDMAN SACHS GRTH OPP FD CL I (GGOIX) (1.01%)
HOTCHKIS AND WILEY SML CP VL I (HWSIX) (1.04%)
MFS VALUE FD R5 (MEIKX) (0.57%)
MORGAN STANLEY GLBL REAL (MRLAX) (1.02%)
PARAMETRIC EMRGNG MRKTS INSTL (EIEMX) (1.16%)
VANGUARD EE BENEFIT INDEX FD (VKPMG) (0.02%)
VANGUARD EXPLORER ADMIRAL (VEXRX) (0.34%)
VANGUARD REIT INDEX FD CL INST (VGSNX) (0.08%)

BOND/FIXED INCOME
GOLDMAN SACHS HIGH YIELD INSTL (GSHIX) (0.71%)
MFS EMERGING MARKETS FD CL R5 (MEDHX) (0.81%)
TEMPLETON GLOBAL TOTAL CL R6 (FTTRX) (0.70%)
VANGUARD INFLATION-PROTECTED (VIPIX) (0.07%)
VANGUARD INTER TERM TREAS ADM (VFIUX) (0.10%)
VANGUARD SHRT TRM BD INDX INST (VBITX) (0.07%)
VANGUARD TOTAL BOND MKT INDEX (VBMPX) (0.05%)

Funds available in 401(k) - new job

Fund name (Ticker) (Total annual operating expenses)
Vanguard Target Retirement Income (VTINX) (0.16%)
Vanguard Target Retirement 2010 (VTENX) (0.16%)
Vanguard Target Retirement 2015 (VTXVX) (0.16%)
Vanguard Target Retirement 2020 (VTWNX) (0.16%)
Vanguard Target Retirement 2025 (VTTVX) (0.17%)
Vanguard Target Retirement 2030 (VTHRX) (0.17%)
Vanguard Target Retirement 2035 (VTTHX) (0.18%)
Vanguard Target Retirement 2040 (VFORX) (0.18%)
Vanguard Target Retirement 2045 (VTIVX ) (0.18%)
Vanguard Target Retirement 2050 (VFIFX) (0.18%)
Vanguard Target Retirement 2055 (VFFVX) (0.18%)
Vanguard Target Retirement 2060 (VTTSX) (0.18%)

Other options
Vanguard Prime Money Mkt Fund (VMMXX) (0.17%)
Vanguard Retire Savings Trust IV (-) (0.43%)

Bond Funds
Vanguard High-Yield Corp Fund Inv (VWEHX) (0.23%)
Vanguard Short-Term Federal Inv (VSGBX) (0.20%)
Vanguard Total Bond Mkt Index Inst (VBTIX) (0.07%)

Balanced Funds (Stocks and Bonds)
Vanguard Wellington Fund Inv (VWELX) (0.25%)

Domestic Stock Funds
Vanguard Explorer Fund Investor (VEXPX ) (0.51%)
Vanguard Inst Index Fund Inst (VINIX) (0.04%)
Vanguard Mid-Cap Growth Fund (VMGRX) (0.51%)
Vanguard Mid-Cap Index Fund Inv (VIMSX) (0.24%)
Vanguard Selected Value Fund (VASVX) (0.43%)
Vanguard Small-Cap Index Fund Inv (NAESX) (0.24%)
Vanguard U.S. Growth Fund Investor (VWUSX) (0.45%)
Vanguard Windsor Fund Investor (VWNDX) (0.37%)

International Stock Funds
Vanguard Emerging Mkts Stk Idx Inv (VEIEX) (0.33%)
Vanguard International Growth Inv (VWIGX) (0.48%)

Questions:

1. I did not rollover my old 401K. Since it was with a large company I assumed it was a good plan with lots of choices. Based on the available funds and expense ratios, should I move / convert this plan?

2. Any general suggestions on funds to select in both my old 401K and new 401K.

3. Looking to start a Roth IRA in 2014 based on already investing in my 401K up to the full match, and I anticipate consistent growth in my earnings. Currently have $60,000 in my old 401K and $5,000 in my new 401K. Probably went too big with my home purchase 2 years ago. Rather than putting a lot into my retirement in my 20's I saved up for my down payment. Is a Roth IRA the right next step or increase 401K, regular IRA?
placeholder
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Joined: Tue Aug 06, 2013 12:43 pm

Re: 30 Year Old with Q's on 401k - old and new

Post by placeholder »

I don't see much reason to keep the old 401k and you're on the edge as far as whether more 401k or Roth is better so it doesn't matter too much there.
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ruralavalon
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Location: Illinois

Re: 30 Year Old with Q's on 401k - old and new

Post by ruralavalon »

Welcome to the forum :) .

A substantial down payment was probably a good choice, so don't worry about that.

Both 401ks have some very nice fund choices offered.

In your old 401k I see "VANGUARD EE BENEFIT INDEX FD (VKPMG) (0.02%)". Any idea what that fund invests in, what index it tracks? I don't recognize the fund name or ticker, and google didn't help. Are you sure that you have the ticker symbol listed correctly?

Will your current 401k accept a transfer from your old 401k?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Stan Dup
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Joined: Fri May 10, 2013 10:25 am

Re: 30 Year Old with Q's on 401k - old and new

Post by Stan Dup »

Sayonara wrote:I anticipate consistent growth in my earnings.
This may not be realistic. The stock market goes up and down. Historically, it has had an upward trend but it has gone down for various periods.

This may seem obvious but it may help you stay the course when there is a downturn in the market. Stick to your asset allocation and invest regularly. You won't know if you were right until the end.
"The tyranny of compounding expenses is the eighth deadly sin." - George Sisti
Luke Duke
Posts: 1333
Joined: Tue Jun 18, 2013 11:44 am
Location: Texas

Re: 30 Year Old with Q's on 401k - old and new

Post by Luke Duke »

Stan Dup wrote:
Sayonara wrote:I anticipate consistent growth in my earnings.
This may not be realistic. The stock market goes up and down. Historically, it has had an upward trend but it has gone down for various periods.

This may seem obvious but it may help you stay the course when there is a downturn in the market. Stick to your asset allocation and invest regularly. You won't know if you were right until the end.
I presume that earnings = salary
Topic Author
Sayonara
Posts: 4
Joined: Wed Feb 26, 2014 6:32 am

Re: 30 Year Old with Q's on 401k - old and new

Post by Sayonara »

ruralavalon wrote:Welcome to the forum :) .

A substantial down payment was probably a good choice, so don't worry about that.

Both 401ks have some very nice fund choices offered.

In your old 401k I see "VANGUARD EE BENEFIT INDEX FD (VKPMG) (0.02%)". Any idea what that fund invests in, what index it tracks? I don't recognize the fund name or ticker, and google didn't help. Are you sure that you have the ticker symbol listed correctly?

Will your current 401k accept a transfer from your old 401k?
Yes, current 401k will accept transfer. Any tips to expedite the process / make sure it goes smoothly? Below is from the site:

Request forms from - Vanguard
Return forms to - Vanguard
Rollover instructions provided by - Vanguard
Plan sponsor approval required - No
Authorized signature obtained from - Not applicable
Documentation required - A certified letter from a Qualified Plan
Transfer funds by - Participant cashiers check, money order
Check made payable to - Vanguard Fiduciary Trust Company (VFTC) for the benefit of (FBO) your name, social security number and plan number
Send check to - Vanguard

Regarding that fund. It may be unique to my former employer. Details below:

IVR Fund Code: 19938
Asset Category: EQUITY/STOCK

Objective and Strategy
The Fund seeks to track the investment performance of the Standard & Poor’s 500 Index, an unmanaged benchmark representing U.S. large-capitalization stocks. Using full replication, the commingled trust portfolio holds all stocks in the same capitalization weighting as the index.

Risk
It is not possible to invest directly in an index.

This investment option is not a mutual fund, registered under the Investment Company Act of 1940. A prospectus is not available and shares are not publicly traded or listed on exchanges.
Topic Author
Sayonara
Posts: 4
Joined: Wed Feb 26, 2014 6:32 am

Re: 30 Year Old with Q's on 401k - old and new

Post by Sayonara »

Luke Duke wrote:
Stan Dup wrote:
Sayonara wrote:I anticipate consistent growth in my earnings.
This may not be realistic. The stock market goes up and down. Historically, it has had an upward trend but it has gone down for various periods.

This may seem obvious but it may help you stay the course when there is a downturn in the market. Stick to your asset allocation and invest regularly. You won't know if you were right until the end.
I presume that earnings = salary
Yes. I don't have ambitions to become a rainmaker but think I can assume normal / decent raises (2-8%) based on my career path. But I realize there are no guarantees...thus the emergency fund / savings now.
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ruralavalon
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Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: 30 Year Old with Q's on 401k - old and new

Post by ruralavalon »

Sayonara wrote:Age: 30
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 20% of stocks
In my opinion it might be better if you had a minimum of 20% in bonds: link to wiki discussion on risk. Otherwise your desired asset allocation is within the range of what is reasonable in my opinion.

That would work out to about: 20% bonds; 15% international stocks; and 65% domestic stocks.

Sayonara wrote:Questions:

1. I did not rollover my old 401K. Since it was with a large company I assumed it was a good plan with lots of choices. Based on the available funds and expense ratios, should I move / convert this plan?

2. Any general suggestions on funds to select in both my old 401K and new 401K.

3. Looking to start a Roth IRA in 2014 based on already investing in my 401K up to the full match, and I anticipate consistent growth in my earnings. Currently have $60,000 in my old 401K and $5,000 in my new 401K. Probably went too big with my home purchase 2 years ago. Rather than putting a lot into my retirement in my 20's I saved up for my down payment. Is a Roth IRA the right next step or increase 401K, regular IRA?
Both 401ks have good funds. I suggest that you roll your old 401k over into your new 401k. Contact Vanguard, and have them help you do a trustee to trustee transfer. You could achieve some minor expense savings (~ $12/yr) by leaving your old 401k where it is and using the slightly lower cost funds there, but the simplicity and ease of management from the consolidation would be worth it it my opinion.

The idea is to look at all accounts as a single unified whole in order to get the best overall combination of funds. Strive for a combination of broad diversification (to reduce risk) and low expenses (to increase your net gain): link to wiki article on 3 fund portfolio.

Using an S&P 500 fund (like VINIX) and small cap fund (like NAESX) in a 5:1 ratio will approximate domestic total stock market: link to wiki article.

You mention opening a Roth IRA. You can still make an IRA contribution for 2013 if you hurry, and then make a contribution for 2014, for a total of $11k. There is no good broadly diversified international index fund in either 401k, so an IRA will be a good place for your international investing.

In my opinion a good account funding priority in your situation could be:
(a) contribute enough to the 401k to get the full match each year (its free money); and then
(b) contribute the maximum $5.5k/yr to an IRA; and then
(c) contribute the rest of the $17.5k/yr max employee contribution to the 401k.
link to wiki article.

Here is an example portfolio to consider, assuming you can make the $11k contribution (for 2013 and 2014) to the new IRA. All percentages are rounded off.

Current 401k, with rollover of old 401k (89%, $65k; add $17.5k/yr plus employer match; over 76% of new annual contributions)
20%, Vanguard Total Bond Mkt Index Inst (VBTIX) (0.07%)
54%, Vanguard Inst Index Fnd Inst (VINIX) (0.04%)
11%, Vanguard Small-Cap Index Fnd Inv (NAESX) (0.24%)
04%, Vanguard Emerging Mkts Stk Idx Inv* (VEIEX) (0.33%), <= no new contributions here initially

Roth IRA @ Vanguard (14%; $11k; add $5.5k/yr; 24% of new annual contributions)
11%, Vanguard Total International Stock Index Fnd Admiral Shares (VTIAX), er = 0.14%

The example portfolio will overweight emerging markets at the start, but that will diminish as you go along.


I suggest that you read one or two of the books from the General Investing section of this list: link.

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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