1st Post: Contributions & 401k Fund Questions

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slow123
Posts: 11
Joined: Fri Sep 05, 2014 1:32 pm

1st Post: Contributions & 401k Fund Questions

Post by slow123 » Fri Sep 05, 2014 1:45 pm

Hello! I just found this website and am super excited! I have just jumped into personal finance and am really motivated to learn as much as I can! Thanks for all your help in advance. I apologize if anything is not correct.

Emergency Funds: 12k (in the process of rebuilding – my AC went out in the middle of our master bathroom remodel last month. So that took us down roughly 13K)
Debt: Mortgage 175K @ 4.49% fixed
Tax Filling Status: Married Filing Jointly
Tax Rate: 25% (Fedral) 0% (State)
State: FL
Age: 33

Current Assets:
His 401K @ Merrill Lynch
3.78% - Columbia Small Cap Value Fund (CSCZX) (1.07%)
6.27% - MFS INSTL:INTL Equity (MIEIX) (0.74%)
18.64% - Northern TR CL EAFE INDX FDII (NTDET) (0.10%)
16.98% - Northern TR CL S&P 400 IDX II (NTDPT) (0.07%)
28.43% - Northern TR CL S&P 500 IDX II (NTCST) (0.03%)
3.03% - PIMCO Total Return Port. INTSL (PTTRX) (0.46%)
13.05% - Vanguard Total Bond MKT (VBTIX) (0.07%)
9.82% - Wells Fargo Stable Return FDC (WESRT) (0.52%)

His Company Equity Plan – ISO $38K ($31 vested so far)

His Roth IRA @ Vanguard – (Just opened this year) I have $5,810
Targeted Retirement 2045

Her IRA @ Vanguard – $13K
Targeted Retirement 2045

Her Roth IRA @ Vanguard – $0 but I plan on opening in the next 2 months

Contributions:
I make just over a 100K a year.
401K - I’m currently contributing 9% from each paycheck. My company matches 4%. Total 401k value of $120k
$5,500 his Roth IRA


Available Funds:
Stocks:
AllianceBernStein Small CAP GR (QUAIX) (0.92%)
Columbia Small Cap Value Fund (CSCZX) (1.07%)
Invesco Diversified DIV CL R5 (DDFIX) (0.60%)
MFS INSTL:INTL Equity (MIEIX) (0.74%)
MFS Mass Investors GR Stock R4 (MIGKX) (0.50%)
Northern TR CL EAFE INDX FDII (NTDET) (0.10%)
Northern TR CL S&P 400 IDX II (NTDPT) (0.07%)
Northern TR CL S&P 500 IDX II (NTCST) (0.03%)

Bond/Fixed Income:
PIMCO Total Return Port. INTSL (PTTRX) (0.46%)
Vanguard Total Bond MKT (VBTIX) (0.07%)

Money Market/Stable Value:
Wells Fargo Stable Return FDC (WESRT) (0.52%)

Allocation Funds:
JPM Smart Rtrmnt 2015 Fund (JSFIX) (0.76%)
JPM Smart Rtrmnt 2020 Fund (JTTIX) (0.80%)
JPM Smart Rtrmnt 2025 Fund (JNSIX) (0.84%)
JPM Smart Rtrmnt 2030 Fund (JSMIX) (0.88%)
JPM Smart Rtrmnt 2035 Fund (SRJIX) (0.92%)
JPM Smart Rtrmnt 2040 Fund (SMTIX) (0.95%)
JPM Smart Rtrmnt 2045 Fund (JSAIX) (0.98%)
JPM Smart Rtrmnt 2050 Fund (JTSIX) (1.01%)
JPM Smart Rtrmnt Income (JSIIX) (0.71%)


Questions:
1.) Should I reduce the 9% I’m currently contributing to my 401K down to the company match of 4%, to make sure that I am fully funding a Roth IRA for both my wife and I? (She’s a stay-at-home)

2.) Which funds that are offered through my employers 401K would serve me best?

3.) When opening a Roth IRA for my wife through Vanguard, is it bad to have several 2045 Targeted Retirement Funds (too many eggs in one basket)?

Thanks for your help!!! :D
Last edited by slow123 on Fri Sep 05, 2014 2:25 pm, edited 1 time in total.

ShowMeTheER
Posts: 335
Joined: Mon May 24, 2010 9:12 am

Re: 1st Post: Contributions & 401k Fund Questions

Post by ShowMeTheER » Fri Sep 05, 2014 2:16 pm

Your federal tax rate would go a long way towards answering #1. Thank you.

slow123
Posts: 11
Joined: Fri Sep 05, 2014 1:32 pm

Re: 1st Post: Contributions & 401k Fund Questions

Post by slow123 » Fri Sep 05, 2014 2:33 pm

Edited: added, tax info. thx!

jf89
Posts: 426
Joined: Sun Aug 11, 2013 11:53 pm

Re: 1st Post: Contributions & 401k Fund Questions

Post by jf89 » Fri Sep 05, 2014 2:56 pm

2. The S&P 500 and 400 funds are large and mid cap, so with those two and maybe a small cap fund elsewhere you have something close to total US market. Could just go with the 500 and call it a day. Add the EAFE fund and Vanguard Total Bond to your desired asset allocation, and you've got yourself a pretty good set of funds that doesn't cost much and gives you broad diversification. I'd avoid the JPM target retirement funds, because they are expensive, complex, and change little things within the allocation quite a bit.

3. I'm not sure I understand this question. Where are all of these 2045 funds held?

Just a quick additional note from me, do what you want with it.

To me an emergency fund is for bills, food, mortgage/rent, and other absolute necessities when I have no other way of paying. Depending on where you live, losing AC in the middle of the summer could be an absolute necessity, but for me that money would come from somewhere else.

I have separate "General Savings" for unexpected costs that don't fit my definition of an emergency fund, and that's where the AC money would come from (along with things like car issues).

Now maybe you just have an extra large emergency fund, because you view it as one big pot for all unexpected costs and know you should always leave $x in there for absolute emergencies. I'd rather have that fund that I never touch (and hopefully never touch my entire life).
"Save as much as you can, diversify diversify diversify, and you can't go wrong with tech stocks" | -First investing advice I recall from my parents in the 90's (two outta three ain't bad)

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BL
Posts: 7950
Joined: Sun Mar 01, 2009 2:28 pm

Re: 1st Post: Contributions & 401k Fund Questions

Post by BL » Fri Sep 05, 2014 2:59 pm

You have some good index funds in your 401k. I would get rid of any fund over 0.5 and maybe over 0.4% ER. If you later have an extra $3k in your IRA to devote to small/value fund, I would get that Vangaurd index then.

Having the same TR funds makes sense to me. Each is well-diversified. Pick date name by how great the stock/bond ratio is rather than by retirement date.

$4k in 401k is same as $3k in Roth in terms of your current income. (If you can afford to put 3k into a Roth, you can afford to put $4k into a 401k.) You get back $1 in tax refund for every 4 dollars you put in 401k, so I vote for 401k but try to fill both as soon as you can.

You might want to read up on using Roth as an second-line emergency fund as contributions can be removed without cost at any time. I would keep it in money market or short-term bonds until you have the E-fund covered elsewhere. Hopefully you won't need it and it could be used for tax-free withdrawals during retirement. It might be one way to get funds into it when you are short otherwise.

ShowMeTheER
Posts: 335
Joined: Mon May 24, 2010 9:12 am

Re: 1st Post: Contributions & 401k Fund Questions

Post by ShowMeTheER » Fri Sep 05, 2014 3:12 pm

Have you considered a Traditional IRA for her instead of Roth? Maybe even for yourself as well (if your Modified AGI fits the limits)?

If you have that 9% of income to work with, at your 25% bracket, I'd be doing max to get company match in 401(k) and then TIRA where possible; as long as you are happy with your ER Fund and don't view the Roth another area to add ER Funds.


Solid, core index funds available in your 401(k) - stick with those.

Don't worry about the Target funds - you are fine to have multiples.

Good luck and good work to get started!

dickenjb
Posts: 2941
Joined: Tue Jan 05, 2010 1:11 pm
Location: Philadelphia PA

Re: 1st Post: Contributions & 401k Fund Questions

Post by dickenjb » Fri Sep 05, 2014 3:22 pm

slow123 wrote:Hello! I just found this website and am super excited! I have just jumped into personal finance and am really motivated to learn as much as I can! Thanks for all your help in advance. I apologize if anything is not correct.

Emergency Funds: 12k (in the process of rebuilding – my AC went out in the middle of our master bathroom remodel last month. So that took us down roughly 13K)
Debt: Mortgage 175K @ 4.49% fixed
Tax Filling Status: Married Filing Jointly
Tax Rate: 25% (Fedral) 0% (State)
State: FL
Age: 33

Current Assets:
His 401K @ Merrill Lynch
3.78% - Columbia Small Cap Value Fund (CSCZX) (1.07%) Lose this
6.27% - MFS INSTL:INTL Equity (MIEIX) (0.74%) and this
18.64% - Northern TR CL EAFE INDX FDII (NTDET) (0.10%) keep this
16.98% - Northern TR CL S&P 400 IDX II (NTDPT) (0.07%) and this
28.43% - Northern TR CL S&P 500 IDX II (NTCST) (0.03%) and this
3.03% - PIMCO Total Return Port. INTSL (PTTRX) (0.46%) Lose this
13.05% - Vanguard Total Bond MKT (VBTIX) (0.07%) keep this
9.82% - Wells Fargo Stable Return FDC (WESRT) (0.52%) Lose this

His Company Equity Plan – ISO $38K ($31 vested so far)

His Roth IRA @ Vanguard – (Just opened this year) I have $5,810
Targeted Retirement 2045

Her IRA @ Vanguard – $13K
Targeted Retirement 2045

Her Roth IRA @ Vanguard – $0 but I plan on opening in the next 2 months good plan

Contributions:
I make just over a 100K a year.
401K - I’m currently contributing 9% from each paycheck. My company matches 4%. Total 401k value of $120k
$5,500 his Roth IRA


Available Funds:
Stocks:
AllianceBernStein Small CAP GR (QUAIX) (0.92%)
Columbia Small Cap Value Fund (CSCZX) (1.07%)
Invesco Diversified DIV CL R5 (DDFIX) (0.60%)
MFS INSTL:INTL Equity (MIEIX) (0.74%)
MFS Mass Investors GR Stock R4 (MIGKX) (0.50%)
Northern TR CL EAFE INDX FDII (NTDET) (0.10%)
Northern TR CL S&P 400 IDX II (NTDPT) (0.07%)
Northern TR CL S&P 500 IDX II (NTCST) (0.03%)

Bond/Fixed Income:
PIMCO Total Return Port. INTSL (PTTRX) (0.46%)
Vanguard Total Bond MKT (VBTIX) (0.07%)

Money Market/Stable Value:
Wells Fargo Stable Return FDC (WESRT) (0.52%)

Allocation Funds:
JPM Smart Rtrmnt 2015 Fund (JSFIX) (0.76%)
JPM Smart Rtrmnt 2020 Fund (JTTIX) (0.80%)
JPM Smart Rtrmnt 2025 Fund (JNSIX) (0.84%)
JPM Smart Rtrmnt 2030 Fund (JSMIX) (0.88%)
JPM Smart Rtrmnt 2035 Fund (SRJIX) (0.92%)
JPM Smart Rtrmnt 2040 Fund (SMTIX) (0.95%)
JPM Smart Rtrmnt 2045 Fund (JSAIX) (0.98%)
JPM Smart Rtrmnt 2050 Fund (JTSIX) (1.01%)
JPM Smart Rtrmnt Income (JSIIX) (0.71%)


Questions:
1.) Should I reduce the 9% I’m currently contributing to my 401K down to the company match of 4%, to make sure that I am fully funding a Roth IRA for both my wife and I? (She’s a stay-at-home) I would although your current 401(k) offers excellent choices

2.) Which funds that are offered through my employers 401K would serve me best? The ones I highlighted above as KEEP

3.) When opening a Roth IRA for my wife through Vanguard, is it bad to have several 2045 Targeted Retirement Funds (too many eggs in one basket)? No they are highly diversified fund-of-funds

Thanks for your help!!! :D
You need to decide on a desired asset allocation and what % of equities should be in foreign. As a starting point, age in bonds is a good rule of thumb and 20-40% of equities in foreign is a good range. Say you decide on 70/30 with 30% of equities in foreign:

His 401(k)

S&P500 40%
S&P400 10%
EAFE Idx 20%
Total Bd 30%

Rebalance once a year.

His & Her Roths - a Target Retirement fund that gives you 70% equities (ignore the date!)

slow123
Posts: 11
Joined: Fri Sep 05, 2014 1:32 pm

Re: 1st Post: Contributions & 401k Fund Questions

Post by slow123 » Mon Sep 08, 2014 11:05 am

Really great feedback! Thank you all for taking the time to help me.

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