24 year old 401K investments

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mscott
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Joined: Sun Jul 05, 2015 1:06 pm

24 year old 401K investments

Post by mscott » Wed Apr 19, 2017 10:09 am

Hello and thanks in advance for any advice.

24 years old - $71K salary.

I currently have the following in my Roth 401K:
Vanguard Institutional Index Fund Plus - $12,944.22 (78.6% of portfolio; 0.02% expense ratio)
Loomis Sayles Core Plus Fixed Income Trust ; Class C - $3,524.15 (21.4% of portfolio; .35% expense ratio)

However, I am thinking of doing:
Moving my current Roth 401K amounts to the Vanguard 2060 Target fund and then start fully contributing to a traditional 401K that has the Vanguard 2060 Target fund.

Is this a recommended move or should I leave my current Roth 401K as is and just start contributing to a Traditional 401K that has the Vanguard 2060 Target fund? I then would be able to increase my stock exposure but still have some diversity of funds.

Will I incur expenses by any of this? Open to other suggestions as well.

Thank you.

MotoTrojan
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Joined: Wed Feb 01, 2017 8:39 pm

Re: 24 year old 401K investments

Post by MotoTrojan » Wed Apr 19, 2017 10:15 am

Buying/selling anything in Roth or 401K should not incur expenses, but of course each fund will have a different Expense Ratio (longterm fee), and this assumes these are no-load funds.

Target fund is not a bad place to be. There are some disadvantages if it doesn't match your desired AA, and it provides less freedom for tax-efficient placement of funds (low tax in taxable, bonds in IRA/401K/Roth, high-growth potentially less tax-efficient equities in Roth). I am personally not a believer in bonds at this age (I am 25) and also think the Vanguard Target Funds are a wee bit high on international. If you are happy with that AA though, it is a great simple way to have hands off rebalancing in a Roth/401K.

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Tyler Aspect
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Re: 24 year old 401K investments

Post by Tyler Aspect » Thu Apr 20, 2017 12:04 pm

mscott wrote: I currently have the following in my Roth 401K:
Vanguard Institutional Index Fund Plus - $12,944.22 (78.6% of portfolio; 0.02% expense ratio)
Loomis Sayles Core Plus Fixed Income Trust ; Class C - $3,524.15 (21.4% of portfolio; .35% expense ratio)
Does your company's 401k selection contain a less expensive bond fund selection?

If you think that you will be in a lower tax bracket when you retire than your current tax bracket, then traditional IRA is likely better. For the reverse situation, Roth IRA is better. When you cannot tell either way, then you can fund both at the same time.

It is generally better to place the bond fund portion into a traditional 401k account. If bond fills up traditional 401k then the next location is the Roth IRA. If Roth IRA also fills up with bond, then the last place is a taxable account.

My view on the Target Retirement funds is that they are quite good for the purpose of starter fund, but once the money in the retirement account reaches $14000 or more then it is a good time to go for the three fund portfolio.
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