Advice for 401k plan. 31 years old. Thanks!

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tomfoolery11
Posts: 5
Joined: Tue Jun 21, 2016 10:14 pm

Advice for 401k plan. 31 years old. Thanks!

Post by tomfoolery11 »

I’m been using the Bogleheads blog as a resource for a while but I am a first time poster. Thank you everyone in advance for your advice and recommendations. :D :D :D

1. I have a high tolerance for risk and want to maximize the growth of my retirement accounts. I also just purchased a 100 year house, and expect to put in about $15k per year into it or so, probably over the next 5 years or so. I’d like to increase my contributions to max out, but I am a few years away from doing that because of living costs, etc. Does anyone have any recommendations on how I can better maximize the potential of my portfolio? Or perhaps add other accounts? On average, I might have $400-$500 per month to invest or just add to a savings account.

2. I’m also the 401k manager for my company, and recently added the Vanguard funds to my company’s portfolio of options (thanks Bogleheads!). My company is now also picking up the advisor’s fees and the plan manager fees. So the only fees that participants pay should only be the index fund fee. Are there any other fund options that should be added to optimize my company’s options?

Please let me know if there’s any other information I can provide so I can receive helpful recommendations. Thank you!

Emergency funds: about 6 months of savings, $30k

Debt:
- Mortgage: $443,600 remaining principal @ 4.0% interest rate.
- No other debt

Tax Filing Status: Single
Tax Rate: 28% Federal, 8.5% State
State of Residence: District of Columbia
Age: 31
Desired Asset allocation: 86% stocks / 14% bonds
Desired International allocation: (unknown)

Current retirement assets

401k, about $105k total in assets
86% Vanguard Total Stock Mrk Index - Admiral (VTSAX) (.05% net expense ratio)
14% Vanguard Total Bond Market Index Admiral (VBTLX) (.06% net expense ratio)

Company match is up to 4% of salary

Contributions

My Annual Contributions
4% paycheck contribution to 401k (also receiving 4% employer matching contributions)

Available funds

Funds available in 401(k)

JPMorgan SmartRetirement 2055 R6 (JFFYX) (.62%)
JPMorgan SmartRetirement 2025 R6 (JNSYX) (.57%)
JPMorgan SmartRetirement 2045 R6 (JSAYX) (.62%)
JPMorgan SmartRetirement 2015 R6 (JSFYX) (.50%)
JPMorgan SmartRetirement 2030 R6 (JSMYX) (.59%)
JPMorgan SmartRetirement 2050 R6 (JTSYX) (.62%)
JPMorgan SmartRetirement 2020 R6 (JTTYX) (.55%)
JPMorgan SmartRetirement 2040 R6 (SMTYX) (.62%)
JPMorgan SmartRetirement 2035 R6 (SRJYX) (.61%)
Dreyfus Government Cash Mgmt Instl (DGCXX)
BlackRock High Yield Bond Instl (BHYIX) (.60%)
JPMorgan SmartAllocation Income R6 (BHYIX) (.48%)
PIMCO Short-Term Instl (PTSHX) (.45%)
Vanguard Total Bond Market Index Admiral (VBTLX) (.06%)
Western Asset Core Bond Fund FI (WAPIX) (.81%)
MFS Value R5 (MEIKX) (.51%)
Delaware US Growth Instl (DEUIX) (.79%)
Vanguard Growth Index -Admiral (VIGAX) (.08%)
Vanguard Total Stock Mrk Index - Admiral (VTSAX) (.05%)
Vanguard Value Index - Admiral (VVIAX) (.08%)
Vanguard 500 Index Fund - Admiral (VFIAX) (.05%)
Columbia Mid Cap Growth R5 (CMGVX) (.81%)
Janus Triton Fund I (JSMGX) (.77%)
Oppenheimer Main Street Mid Cap I (OPMIX)
Vanguard Mid-Cap Value Index Admiral (VMVAX) (.08%)
Vanguard Mid-Cap Growth Index Admiral (VMGMX) (.08%)
Vanguard Mid Cap Index Adm (VIMAX) (.08%)
Delaware Small Cap Core I (DCCIX) (1.02%)
Delaware Small Cap Value Instl (DEVIX) (.96%)
Vanguard Small Cap Index Fund - Admiral (VSMAX) (.08%)
Vanguard Developed Markets Index Admiral (VTMGX) (.09%)
pkcrafter
Posts: 14684
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
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Re: Advice for 401k plan. 31 years old. Thanks!

Post by pkcrafter »

401k, about $105k total in assets
86% Vanguard Total Stock Mrk Index - Admiral (VTSAX) (.05% net expense ratio)
14% Vanguard Total Bond Market Index Admiral (VBTLX) (.06% net expense ratio)
I didn't think Vanguard offered Admiral shares in 401k plans.

Tom, your plan looks simple and effective. If you want international, you could use developed markets but you would be missing emerging markets. Suggested allocation between 20% and 40%.

What % of income is going into investments?

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Topic Author
tomfoolery11
Posts: 5
Joined: Tue Jun 21, 2016 10:14 pm

Re: Advice for 401k plan. 31 years old. Thanks!

Post by tomfoolery11 »

Thanks Paul!

When talking to our plan managers, they told me that if our total company portfolio was over $1 million we would have access to the Admiral shares. So I worked with them and some other employees to do some roll overs that would get us there.

What's the advantage of international and emerging markets? I think most of my assets are in US based stocks. But not sure where to find some good literature on reallocating to international and emerging markets.

I sincerely appreciate the help.
Topic Author
tomfoolery11
Posts: 5
Joined: Tue Jun 21, 2016 10:14 pm

Re: Advice for 401k plan. 31 years old. Thanks!

Post by tomfoolery11 »

Oh also, 4% of my income is going to investments, and being matched by company at 4% also. So about 10k per year total
golfallday
Posts: 118
Joined: Sat Feb 14, 2009 3:43 am
Location: College Point, NY

Re: Advice for 401k plan. 31 years old. Thanks!

Post by golfallday »

Welcome to the forum! You are off to a great start. I like your 401(k) allocation very much; it's simple and very solid. Keep in mind the Total US Stock Index has a significant international footprint. You will find very strong opinions (both sides) on this forum as to whether an international allocation is necessary in your portfolio. Mr. Bogle doesn't think so; while Mr. Larimore, Dr. Bernstein, and Mr. Ferri advocate in favor of an international equity position. Google these brilliant men on the topic and you will learn quite a bit. Best wishes.
pkcrafter
Posts: 14684
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Advice for 401k plan. 31 years old. Thanks!

Post by pkcrafter »

Tom, I don't have a strong opinion on international, but I do hold 30% in total international. Right now international has been underperforming U.S., but that is not a good reason not to own it.

You do not hold any international stock, although some would argue that U.S. stock does have ties in international. Developed Markets is available in your 401k plan and it consists of Canada and the major markets of Europe and the Pacific region. Total International adds emerging markets. So, if you want to offer one of these at your company, total international would be the broadest option.

4% is considered a low rate for retirement saving. I know you have other commitments, but try and increase your contributions to 10% as soon as you can.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Engineer250
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Joined: Wed Jun 22, 2016 1:41 pm

Re: Advice for 401k plan. 31 years old. Thanks!

Post by Engineer250 »

I am a newbie so take my things to think about with a grain of salt:

1) At 4% are you getting the biggest match from your employer? If not increase so that you are getting the full match.

2) I assume with a 28% tax bracket you make too much to contribute to a Roth IRA. Does your company offer a Roth 401(k)? Have you considered contributing to a traditional IRA and then rolling the money periodically into a Roth IRA? I am a fan of fund diversification as well as tax diversification. There are a lot of questions that you might ask yourself here and speculation on taxes, but I think even if you think you will be being lower taxes in retirement, a Roth can still make a lot of sense for someone under 40. Just look into it and make your own decision.

3) You should eventually build up to 15% of your own funds (consider the matching a bonus) contributed to retirement. Are the repairs on the house really necessary? Can you cut those back at all? I see no problem paying for emergencies (i.e., roof) and things for immediate comfort. But I would hold off on things that won't really make you feel better but only *might* increase home value.

4) You say you are willing to take on higher risk, so how come 15% bonds? What made you arrive at that number? It might be the right one for you, just something to consider. I think the old formulas have young people getting into bonds too soon and old people staying in stocks too long. If you are trying to retire early it might make sense, but otherwise you could go riskier. Obviously I could say that and bonds could suddenly go up this year right after you reduce your allocation, so future is unknown.

5) Agree with the earlier comments to consider some international exposure, but also that people have a variety of views on this.
Where the tides of fortune take us, no man can know.
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