Dilemma for 401K Rollover

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FB01
Posts: 689
Joined: Fri May 20, 2011 12:36 am

Dilemma for 401K Rollover

Post by FB01 »

Hi,

One of my friend just rolled over 100K to Vanguard from his previous employer. His dilemma:

Should he invest all at once in 50% VFIAX (Vanguard 500 Index Admiral shares) and other 50% in VTIVX (Target Retirment 2045) so should invest 20K now in each and wait for sometime.

Thanks,
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livesoft
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Re: Dilemma for 401K Rollover

Post by livesoft »

I don't think he should do any of the things you mentioned.
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Topic Author
FB01
Posts: 689
Joined: Fri May 20, 2011 12:36 am

Re: Dilemma for 401K Rollover

Post by FB01 »

livesoft wrote:I don't think he should do any of the things you mentioned.
Hi Livesoft,

Can you please explain?

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FreemanB
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Re: Dilemma for 401K Rollover

Post by FreemanB »

As a rule of thumb, you should either invest 100% in a Target Retirement fund or not at all. There's no point in splitting between a TR fund and another index fund, since the TR fund generally consists of index funds already. Either stick with something like the 3-fund portfolio or go 100% in the TR fund, but don't mix the two as your suggestions proposed.

Also, you are usually better off investing a lump sum all at once instead of over time, so investing $20k now and then waiting sometime(Days? Months? Years? It doesn't matter really) usually won't help and can hurt. There are numerous threads on this subject that you can read, but the short version is "If it makes you feel better, spread it out, but investing in a lump sum usually ends up being the best approach long term."
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archbish99
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Re: Dilemma for 401K Rollover

Post by archbish99 »

Livesoft, in his inimitably succinct style presumably means:
  • Don't split money between a target-date fund and something else. A Target Date fund is a complete portfolio, so if your friend is buying that, don't also buy something else.
  • The money is coming from a 401k, where it was presumably already in the market. There's no reason to pull back to cash, then slowly reenter the market. Buy whatever funds are wanted and move on.
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JW-Retired
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Re: Dilemma for 401K Rollover

Post by JW-Retired »

Since you didn't mention anything else I'm guessing this is all of his retirement assets. What was he holding in the 401k? Some (hopefully) lower cost version of that AA might be a starting point. You can probably get that with one TR fund.

I see no logic in taking the money out of the market all at once and then dribbling it back in slowly.
JW
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