401K Advice

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401K Advice

Postby passionit » Wed May 22, 2013 2:02 pm

Please comment on the 401 distribution i have and suggest if it is good or do i need to make any adjustment. I am 40 years old. Company matches 50% up to 6%. At present i am contributing 7% income. I have following election currently. It has yielded 2.54% from its inception date of March of this year.
TEMPLETON GLOBAL EQUITY SERIES TGESX 35%
VANGUARD, TARGET RTMT 2040 INV VFORX 35%
PIMCO TOTAL RETURN INSTL PTTRX 30%
Another Options i have available is as follows.
BLUE CHIP GROWTH FUND TRBCX
DFA U.S. SMALL CAP INST
DODGE AND COX STOCK FUND DODGX
DODGE&COX INTERNATIONAL STOCK DODFX
TRP STABLE VALUE FUND - N
VANGRD FTSE ALLWLD US IDX INST VFWSX
VANGUARD, TARGET RTMT INC INV VTINX
VNGRD TOT STK MKT IND SIGNAL VTSSX
VNGRD TTL BND MRKT IDX SIGNAL VBTSX
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Re: 401K Advice

Postby ruralavalon » Wed May 22, 2013 6:17 pm

Welcome to the forum :) .

More information is needed, please see this for format -- viewtopic.php?t=6212 .

What are the expense ratios of the funds used/offered in the 401k?
Is there a match? if so what is it?
Do you have any other investing or retirement accounts?
If so, whats in those accounts?
What is yur desired asset allocation?
Tax rates?
Marital status?
Tax filing status?
Debt?
etc.
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Re: 401K Advice

Postby Grt2bOutdoors » Wed May 22, 2013 8:38 pm

If you're going to use a Target Retirement fund, using other funds in conjunction with other funds kind of defeats the purpose of it. A target retirement fund is designed to be a well diversified (domestic, international and fixed income) portfolio that automatically rebalances itself.
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Re: 401K Advice

Postby passionit » Thu May 23, 2013 3:26 pm

Hi Thanks for the response
Match is 50% up to 6%
Marital Status:Married
Debt: Mortgage 150K and Car debt 16K
I have HSA account which is giving decent return.
Please see expense ratio
TEMPLETON GLOBAL EQUITY SERIES TGESX 35% .95%
VANGUARD, TARGET RTMT 2040 INV VFORX 35% .18%
PIMCO TOTAL RETURN INSTL PTTRX 30% .46%

BLUE CHIP GROWTH FUND TRBCX .77%
DFA U.S. SMALL CAP INST NA
DODGE AND COX STOCK FUND DODGX .52%
DODGE&COX INTERNATIONAL STOCK DODFX .64%
TRP STABLE VALUE FUND - N .20%
VANGRD FTSE ALLWLD US IDX INST VFWSX .12%
VANGUARD, TARGET RTMT INC INV VTINX .16%
VNGRD TOT STK MKT IND SIGNAL VTSSX .06%
VNGRD TTL BND MRKT IDX SIGNAL VBTSX .10%
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Re: 401K Advice

Postby sometimesinvestor » Thu May 23, 2013 5:14 pm

I predict this group will suggest the vanguard funds because of their low fees and I won't disagree.What I would suggest is that you check out the rate on the TRP stable value fund. If it is 2.5% or more I would put at least 10% in it and compensate by using a farther out target rate fund such as the 2050.
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Re: 401K Advice

Postby ruralavalon » Thu May 23, 2013 5:17 pm

passionit wrote:Please comment on the 401 distribution i have and suggest if it is good or do i need to make any adjustment. I am 40 years old. Company matches 50% up to 6%. At present i am contributing 7% income. . . . .

Its great to see that you are contributing enough to get the full employer match.

You are fortunate to have some very nice funds to choose from in your 401k.


You have not stated what your desired assset allocation might be, so I can't say if you are hitting the mix you intend.

Per Morningstar "Instant X-ray", your current 401k portfolio is:
66 equity/33 fixed,
with 51% of total equities in international,
at an expense ratio of 0.53%.

US Stocks 32%
Int'l Stocks 34%
bonds 47%
cash -14%

Equity Style box is:
26/29/21
06/06/07
02/02/02

Fixed is:
intermediate term
high credit quality

In my opinion, the above asset allocation is within the range of what is reasonable for a 40 year old person, even though I personally think the international part is a bit high. I would rather see international in the range of 20 - 40% of total stocks, but I wouln't try to talk anyone out of a 50/50 split if thats what they want.


As Grt2bOutdoors has already said, "If you're going to use a Target Retirement fund, using other funds in conjunction with other funds kind of defeats the purpose of it." A primary benefit of using a TR fund is its set-it-and-forget-it simplicity when used alone as a one fund portfolio. When you add in other funds you defeat that purpose and lose that intended benefit, all you do is make it more difficult to keep track of exactly what you have, and hard to adhere to your intended asset allocation.


Using different funds in your 401k, you could get an almost identical portfolio at much lower cost, like this:

34%, VANGRD FTSE ALLWLD US IDX INST VFWSX .12%
33%, VNGRD TOT STK MKT IND SIGNAL VTSSX .06%
33%, VNGRD TTL BND MRKT IDX SIGNAL VBTSX .10%,

which would give you an overall expense ratio of just 0.09%, a meaningful improvement over your current expense ratio of 0.53%. And it will always be easy for you to keep track of what you have in terms of stocks, bonds and international.


I hope that this helps.
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Re: 401K Advice

Postby Ged » Thu May 23, 2013 5:20 pm

You are lucky. I'd kill to have a plan with such nice choices. You have a number of ways to implement a good passive investment strategy.

DFS Small Cap, the Stable Value Fund and anything that starts with a V should be the places your money should go.
Lack of planning on your part does not constitute an emergency on my part.
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Re: 401K Advice

Postby Laura » Thu May 23, 2013 11:04 pm

For someone who is not an experienced investor and really doesn't want to take the time to manage a portfolio, I strongly recommend using the Target Retirement fund with an asset allocation that most closely matches your target. We don't know your age or your target asset allocation so I am unable to suggest the specific fund.

I also encourage you to focus on paying down the car debt. You don't mention the interest rate on that or your mortgage but car loans are never a good idea. Once you finish paying this car loan you should keep paying yourself the monthly payment and use that money to buy your next car for cash.

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Re: 401K Advice

Postby passionit » Fri May 24, 2013 11:19 am

Thanks Everyone for the detailed responses. I would definitely make the changes as per the advice.
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