New job for DW; what to do with her 401(k)

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pmardo
Posts: 18
Joined: Sat Jun 09, 2012 6:18 pm

New job for DW; what to do with her 401(k)

Postby pmardo » Sat Mar 18, 2017 5:52 pm

Hello, Bogleheads. I am a longtime reader of the forum. I would first like to extend my gratitude for all that I have learned from this community.

My wife is leaving her current employer and joining my employer in approximately one month, after which we will both have access to the investment options in “His 401(k)” set forth below. With my wife switching employers, we are wondering what to do with her 401(k). I have read the Wiki post on 401(k) rollovers. A few considerations are:

1. We want to continue to make backdoor Roth IRA contributions.

2. We have struggled to find a good location to hold bonds within our portfolio. His 401(k) has poor bond options (high expense ratio), while her 401(k) does have one good bond option (the Fidelity U.S. Bond Index Fund which we are currently invested in). We would prefer to hold stocks rather than bonds in our Roth IRA’s. We have been investing in municipal bonds in our taxable account at Vanguard but for the sake of diversification, I would like to limit the percentage of bonds in our portfolio that are muni’s to around 50%, and it is currently around 45% (maybe I am off base in this concern).

3. Starting in 2018, due to expected promotions, we will likely both have access to a Keogh plan through our employer (and in fact be required to participate in this at some level). I believe the investment options in the Keogh will be the same as those listed under His 401(k) below.

4. We’d like to keep our portfolio as simple as possible and continue to self-manage it.

My take on the options for her 401(k) are as follows:

A. Rolling over to a traditional IRA is not an option as it would essentially prevent us from being able to continue to do backdoor Roth IRA contributions.

B. Rolling over into her new employer’s / my current employer’s 401(k) plan is not a great option as there are no good bond options. There is a “Schwab Personal Choice Retirement Account” option which appears to be a brokerage account within your 401(k) that might be worth exploring but would add a layer of complexity I would rather avoid.

C. Perhaps leaving it as-is makes the most sense although it would be nice to have everything consolidated.

I would appreciate anyone’s thoughts and recommendations. Thank you!

Portfolio Information:

Emergency funds: ~ 10 months in an online savings account

Debt: None.

Tax Filing Status: Married Filing Jointly

Tax Rate: 33% Federal; 4.25% State (flat); 2.4% City (flat)

State of Residence: Michigan

Age: 32 (him), 30 (her). No kids at the moment.

Desired Asset allocation: 80% stocks / 20% bonds

Desired International allocation: 30% of stocks

Total Portfolio Size: high 6 figures

Current assets:

Cash (excluding emergency fund)
1.7%

Taxable Account at Vanguard
8.2% Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX) (0.09%)
23.7% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11%)
23.6% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.05%)

His 401(k) at Charles Schwab
10.3% Vanguard Institutional Index Fund Institutional Shares (VINIX) (0.04%)
No company match.

His Roth IRA at Vanguard
2.7% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.06%)
7.6% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.05%)

Her 401(k) at Fidelity
4.5% Fidelity U.S. Bond Index Fund - Premium Class (FSITX) (0.05%)
7.0% Legal & General S&P 500 Collective Investment Trust Fund Class A (no ticker) (0.01%)
No company match.

Her Roth IRA at Vanguard
2.6% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.06%)
7.4% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.05%)

Her Health Savings Account
0.3% Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX) (0.04%)
0.2% Cash
(new employer does not have an HSA as an option so we will likely spend down this account to zero in the next couple years)

New Annual Contributions

$18k his 401(k) (no employer match)
$18k her 401(k) (no employer match)
$5.5k his Roth IRA (backdoor)
$5.5k her Roth IRA (backdoor)
$100k+ available annually to contribute to our taxable account or other investments

Available Funds

Funds available in his 401(k)
Schwab Managed Retirement Trust Fund 2010, Unit Class IV (no ticker) (0.45%)
Schwab Managed Retirement Trust Fund 2020, Unit Class IV (no ticker) (0.45%)
Schwab Managed Retirement Trust Fund 2030, Unit Class IV (no ticker) (0.45%)
Schwab Managed Retirement Trust Fund 2040, Unit Class IV (no ticker) (0.45%)
Schwab Managed Retirement Trust Fund 2050, Unit Class IV (no ticker) (0.45%)
Schwab Managed Retirement Trust Income Fund, Unit Class IV (no ticker) (0.45%)
Invesco Growth and Income Fund R5 Class (ACGQX) (0.48%)
T Rowe Price Growth Stock CIT Class D (TRGSD?) (unclear; link does not work)
Vanguard Institutional Index Fund Institutional Shares (VINIX) (0.04%)
JPMorgan Small Cap Value Fund Select Class (PSOPX) (1.0%)
Morgan Stanley Institutional Fund, Inc. Small Company Growth Portfolio Class I (MSSGX) (1.0%)
Vanguard Mid-Cap Index Fund Institutional Shares (VMCIX) (0.07%)
DFA Emerging Markets Value Portfolio Institutional Class (DFEVX) (0.56%)
T. Rowe Price International Value Equity Fund Class I (TRTIX) (0.67%)
Cohen & Steers Institutional Realty Shares (CSRIX) (0.75%)
JPMorgan Core Bond Fund Select Class (WOBDX) (0.5%)
Galliard Retirement Income Fund-Fee Class 35 (no ticker) (0.66%)

Funds available in her 401(k)
Fidelity Puritan Fund - Class K (FPUKX) (0.46%)
T. Rowe Price Retirement 2005 Fund (TRRFX) (0.6%)
T. Rowe Price Retirement 2010 Fund (TRRAX) (0.59%)
T. Rowe Price Retirement 2015 Fund (TRRGX) (0.62%)
T. Rowe Price Retirement 2020 Fund (TRRBX) (0.66%)
T. Rowe Price Retirement 2025 Fund (TRRHX) (0.69%)
T. Rowe Price Retirement 2030 Fund (TRRCX) (0.72%)
T. Rowe Price Retirement 2035 Fund (TRRJX) (0.74%)
T. Rowe Price Retirement 2040 Fund (TRRDX) (0.76%)
T. Rowe Price Retirement 2045 Fund (TRRKX) (0.76%)
T. Rowe Price Retirement 2050 Fund (TRRMX) (0.76%)
T. Rowe Price Retirement 2055 Fund (TRRNX) (0.76%)
Wells Fargo Stable Value Fund Class C (no ticker) (0.57%)
Dreyfus/Standish Global Fixed Income Fund Class I (SDGIX) (0.52%)
Fidelity Capital & Income Fund (FAGIX) (0.75%)
Fidelity U.S. Bond Index Fund - Premium Class (FSITX) (0.05%)
PIMCO Total Return Fund Institutional Class (PTTRX) (0.46%)
Vanguard Federal Money Market Fund Investor Shares (VMFXX) (0.11%)
Fidelity Blue Chip Growth Fund - Class K (FBGKX) (0.7%)
Fidelity Contrafund - Class K (FCNKX) (0.58%)
John Hancock Funds Disciplined Value Fund Class R6 (JDVWX) (0.7%)
Legal & General S&P 500 Collective Investment Trust Fund Class A (no ticker) (0.01%)
Fidelity Extended Market Index Fund - Premium Class (FSEVX) (0.07%)
Janus Enterprise Fund Class N (JDMNX) (0.68%)
Natixis Funds Trust II Vaughan Nelson Value Opportunity Fund Class N (VNVNX) (1.11%)
ClearBridge Small Cap Growth Fund Class IS (LMOIX) (0.78%)
Victory Integrity Small-Cap Value Fund Class Y (VSVIX) (1.15%)
Fidelity International Discovery Fund - Class K (FIDKX) (0.86%)
Hartford International Small Company Fund Class R5 (HNSTX) (1.07%)
PNC International Equity Fund Class Institutional (PIUIX) (0.99%)
RBC Emerging Markets Equity Fund Class I (REEIX) (0.735%)
Legal & General MSCI EAFE Collective Investment Trust Fund Class A (no ticker) (0.02%)
Templeton Foreign Fund Class R6 (FTFGX) (0.72%)

mehta
Posts: 7
Joined: Fri Mar 15, 2013 6:02 pm

Re: New job for DW; what to do with her 401(k)

Postby mehta » Sat Mar 18, 2017 6:32 pm

Just two observations:
1) You should look into the fee schedule of the Schwab Personal Choice Retirement Account (PCRA) option in "his 401 (k)". Its not any more complex than managing any brokerage account. Only costs matter. That makes everything available in that account including Vanguard ETF's or Schwab's own bond ETF (SCHZ)
2) You are allowed to buy upto 20,000 of iBonds per year from Treasury Direct with two SS numbers. It will gradually become a significant "Fixed-Income" part of your portfolio. This is something you can't suddenly build up irrespective of how high your income gets later on because of the annual limit. You will likely be glad as you get older for starting this early in life.
Congratulations on educating yourself about finance earlier in life than I did.

User avatar
alec
Posts: 2814
Joined: Fri Mar 02, 2007 2:15 pm

Re: New job for DW; what to do with her 401(k)

Postby alec » Sat Mar 18, 2017 7:23 pm

I think you should check out what bond like things you can get in the Schwab PCRA. For example, Schwab's cheap bond index funds, CDs, individual treasury bonds and TIPS, etc. If good cheap options, you could roll spouse's old 401(k) into new 401(k), or just keep spouses 401(k) all in bonds as well.

I had a brokerage option in my old 401(k), and had 1 small cap index fund in it. Not really any more complicated.
"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair

pmardo
Posts: 18
Joined: Sat Jun 09, 2012 6:18 pm

Re: New job for DW; what to do with her 401(k)

Postby pmardo » Sun Mar 19, 2017 7:41 pm

Thank you for the helpful replies. I am going to look more into I Bonds and the Schwab PCRA option.

Is there any downside to just leaving her 401(k) with DW's old employer to take advantage of the solid bond offerings in that plan?

jackholloway
Posts: 936
Joined: Mon Jul 08, 2013 3:45 pm

Re: New job for DW; what to do with her 401(k)

Postby jackholloway » Sun Mar 19, 2017 7:47 pm

If it was a bad 401(k), you would want to move. It looks like both are pretty good. I would just keep her old one for a little while will you make sure that your 401(k) options won't change - say, for a year or two, then re-evaluate.

aristotelian
Posts: 2163
Joined: Wed Jan 11, 2017 8:05 pm

Re: New job for DW; what to do with her 401(k)

Postby aristotelian » Sun Mar 19, 2017 7:56 pm

Just leave her old 401k where it is and invest it all in Fidelity Bond Index. Then get the rest of your bond allocation using small amounts of the JP Morgan fund in your 401k and/or VBTLX in your Roth.


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