401K/Roth Portfolio Advice for Beginner

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Joined: Sat Dec 29, 2012 1:14 pm

401K/Roth Portfolio Advice for Beginner

Post by Jado » Sat Dec 29, 2012 3:54 pm

Hi everyone,

I have a very basic understanding of this stuff, so please bare with me.

I've had a T. Rowe Price Roth IRA account, but due to my past financial situation (part-time work, CC debt), I could only contribute a very tiny amount of money. I became employed full-time about a year ago, paid off my debt, and over the summer got access to the company's retirement options with Vanguard. I finally set it up a couple of months ago and now set aside a much better amount of money. Having no clue what to pick in terms of funds, I just set it to Vanguard Target Retirement 2050 Fund for both the 401K and Roth IRA (for now). Does this make any sense? I listed the available funds below and wonder if any are particularly worth looking into (e.g. Vanguard Health Care Fund?).

I still have mid four-figures in my T. Rowe Roth IRA account (Personal Strategy Growth). Should I transfer this over to the Vanguard and close the T. Rowe account? Or should I keep the T. Rowe account (more fund choices?) and close the Vanguard Roth IRA? My Vanguard fund options are limited but still look decent (please see below), the Vanguard expenses are considerably lower, and of course there's the possible ease and simplicity of just dealing with one company/website.

I currently live with my longtime gf and we plan to marry at some point. She works from home and earns a small salary, which we use to pay for food and household expenses -- thus it doesn't factor much into retirement savings. We have no major expenses now nor coming up later -- we rent in a nice affordable area, don't drive, no desire for an expensive wedding, no kids for a couple more years.

Thanks in advance for all your help. This stuff isn't the easiest to wrap one's head around, so I'm glad that there are individuals who understand if far better than I do and can give good advice.

General Information
Emergency funds: Two to three months of expenses
Debt: None
Tax Filing Status: Single, Head of Household
Tax Rate: 25% Federal, 6.45% State, 3% Local
State of Residence: NY
Age: 28 (no kids yet)
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 27% of stocks

Household income: mid/high five-figures
Current total portfolio: High four-figures (low because my financial situation was much worse a year ago)

Current retirement assets
11% Vanguard Target Retirement 2050 Fund (VFIFX) (0.19%)
Company match? No

11% Vanguard Target Retirement 2050 Fund (VFIFX) (0.19%)

Roth IRA at T. Rowe Price
78% Personal Strategy Growth (TRSGX) (0.93%)
-the Vanguard accounts will surpass this relatively soon with my current setup. What's here took several years to slowly save up.

New annual Contributions
$4800 his 401k
$4968 his Roth IRA
$2000 taxable (for retirement, not short term goals)

Available funds
Vanguard Target Retirement Income and 20xx Funds

Short-Term Reserves
Vanguard Prime Money Mkt Fund
Vanguard Retirement Savings Trust

Bond Funds
Vanguard High-Yield Corp Fund Inv
Vanguard Inflation-Protect Sec Inv
Vanguard Total Bond Mkt Idx Signal

Balanced Funds (Stocks and Bonds)
Vanguard Wellington Fund Inv

Domestic Stock Funds
Vanguard Explorer Fund Investor
Vanguard Extended Mkt Index Inv
Vanguard Mid-Cap Growth Fund
Vanguard Morgan Growth Fund Inv
Vanguard Selected Value Fund
Vanguard U.S. Value Fund
Vanguard Windsor Fund Investor
Vanguard 500 Index Fund Signal

International Stock Funds
Vanguard Total Intl Stock Ix Inv

Specialty Stock Funds
Vanguard Health Care Fund Inv
Vanguard REIT Index Fund Inv

Client Specific Funds
Vanguard Brokerage Option Fund

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Re: 401K/Roth Portfolio Advice for Beginner

Post by Watty » Sat Dec 29, 2012 6:48 pm

I just set it to Vanguard Target Retirement 2050 Fund for both the 401K and Roth IRA (for now). Does this make any sense?

That is a great choice and if you never used anything else you will be doing better than the vast majority of people. When you save up to a year or so income in the 401k then you might take a look at doing some minor fine tuning of your choices then.

Should I transfer this over to the Vanguard and close the T. Rowe account?
There is often some sort of account transfer or closure fee that might be $50 to $150 dollars when you move an account. Unless there is some sort of annual fee at T. Rowe I would just leave it there for now if you will be charged this fee.

Vanguard is really good at mutual funds, but their brokerage accounts are not so good. If you might buy individual stocks or ETF's someday that could be another reason to leave the money at T. Rowe. Compared to a lot of places where you could have your account at T. Rowe is actually a pretty decent place.

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