Please provide some feedback on 401k allocation

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Shamrock71
Posts: 22
Joined: Fri May 05, 2017 11:38 am

Please provide some feedback on 401k allocation

Postby Shamrock71 » Thu May 18, 2017 1:04 pm

Hi there.

I’m reaching the home stretch of activating my personal investment plan. I’m looking at the options I have in my largest fund holding—$300,000 in my past-employer 401k. I’m keeping the money there because the fees and ER seem reasonable ($28/year flat fee on top of the fund’s ER), and it will allow me to do yearly backdoor Roth IRAs. I can’t have any tIRAs given the pro-rata rule.

My retirement portfolio will contain:
1. My old-employer 401k plan (discussed here) - about $300,000
2. My current employer 401k plan – about $82,000
I’ll be using Vanguard Total Bond Market Index Adml (VBTLX), Vanguard Total International Stock Index Adml (VTIAX), and Vanguard Total Stock Market Index Adml (VTSAX) in this plan.
3. Taxable account in Vanguard – about $50,000 all equity using admiral-level
4. Annual backdoor Roth IRAs in Vanguard - $5,500 annually


The feedback I’m looking for focuses around my asset allocation within that plan. Currently, it’s all in FIAM Index Target Date 2030 Commingled Pool Class Y. Here’s the fund’s composition:

Asset Allocations as of 3/31/2017

Domestic Equity Funds 54.65%

Equity Funds 53.38%
FIAM US Broad Mkt Indx LP 53.38%
Commodity Funds 1.27%
FIAM Commodity Strategy 1.27%

International Equity Funds 24.09%
FIAM Global Ex-US Indx LP 24.09%

Bond Funds 21.27%
Investment Grade Bond Funds 20.39%
FIAM US Bond Index 20.39%
Inflation-Protected Bond Funds 0.87%
FIAM TIPS Pool 0.87%

Short-Term Funds & Net Other Assets -0.01%
NET OTHER ASSETS 0.00%



For reference, here are all the plan’s fund offerings. I bolded ones that I think are viable based on fund AA and ER.

FUND NAME
Inception Date Gross ER


FID CONTRAFUND POOL
01/17/2014 0.43%
TRP EQUITY INCOME (PRFDX)
10/31/1985 0.66%
TRP INST LGCAP GRTH (TRLGX)
10/31/2001 0.56%
VANGUARD INST INDEX (VINIX)
07/31/1990 0.04%

ARTISAN MID CAP INST (APHMX)
06/27/1997 0.95%
FID EXT MKT IDX PR (FSEVX)
11/05/1997 0.07%

H & W MID CAP VAL I (HWMIX)
01/02/1997 1.02%
ABF SM CAP VAL INST (AVFIX)
12/31/1998 0.84%
MSIF SMALL CO GRTH I (MSSGX)
11/01/1989 1.17%
AF NEW PERSPECT R6 (RNPGX)
03/13/1973 0.45%
FID DIVSFD INTL POOL
12/13/2013 0.58%
FID GLB XUS IDX INS (FSGSX)
09/08/2011 0.09%
FIAM INX TD 2005 Y
07/02/2007 0.07%
FIAM INX TD 2010 Y
07/02/2007 0.07%
FIAM INX TD 2015 Y
07/02/2007 0.07%
FIAM INX TD 2020 Y
07/02/2007 0.07%
FIAM INX TD 2025 Y
07/02/2007 0.07%
FIAM INX TD 2030 Y
07/02/2007 0.07%
FIAM INX TD 2035 Y
07/02/2007 0.07%
FIAM INX TD 2040 Y
07/05/2007 0.07%
FIAM INX TD 2045 Y
07/02/2007 0.07%
FIAM INX TD 2050 Y
01/08/2016 0.07%
FIAM INX TD 2055 Y
01/08/2016 0.07%
FIAM INX TD 2060 Y
01/08/2016 0.07%
FIAM INX TD INCOME Y
01/08/2016 0.07%
MIP II CL 1
04/20/1993
7 day yield as of
04/30/2017 1.46% 0.57%
PIM TOTAL RT INST (PTTRX)
05/11/1987 0.47%
VANG TOT BD MKT INST (VBTIX)
12/11/1986 0.04%

VANG INFL PROT ADM (VAIPX)
06/29/2000 0.1%
FMMT RETIRE GOV II (FRTXX)
12/02/1988
7 day yield as of
04/30/2017 0.38% 0.42%


So, I’m either considering:

1. Leaving the money in the FIAM Index Target Date 2030 and re-balancing yearly by moving it to another target-date fund (if necessary) based on stock/bond ratio. I’d also rebalance my current-employer 401k, Roth IRA, and taxable account at the same time to match my overall AA goal. Is this a reasonable thing to do with target-date funds, basically shifting all of the funds to a different target-date fund to change the AA?

OR

2. Moving the money out of FIAM Index Target Date 2030 and putting it into a combo of funds (VINIX, FSEVX, and/or VBTIX). I could put more of the money in the bond fund here (VBTIX) and put the rest in the large-cap index (VINIX). That would mean using just 2 funds in this 401k plan. I’m not sure if that’s diverse enough. And this is the largest chunk of my retirement portfolio. My taxable account would probably be all equity, and I can compensate with my current-employer 401k plan as well.


I’d appreciate thoughts on either (or some other) approach.

Thanks.

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ruralavalon
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Location: Illinois

Re: Please provide some feedback on 401k allocation

Postby ruralavalon » Thu May 18, 2017 1:16 pm

What is your age? What is your desired stock/bond allocation? What is your desired domestic/international stock allocation?

What is the expense ratio on the target retirement fund you are using in the old 401k? If that is low, then leaving the old 401k with that fund is reasonable if the fund fits your desired stock/bond allocation. You really won't have to switch allocation every year.

If you switch to individual index funds in the old 401k, then in addition to the index funds you put in bold face I would add Fidelity Global Ex-U.S. Index Fund Premium Class (FSGDX) ER 0.09%.

Will your new 401k accept a rollover from your old 401k? Many 401k plans allow that. If so and if the new plan offers low expense ratios (you didn't state the expense ratios charged in the new 401k) without extra fees, then rolling the old 401k over into the new 401k may be the better choice. This would be my choice if possible.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Shamrock71
Posts: 22
Joined: Fri May 05, 2017 11:38 am

Re: Please provide some feedback on 401k allocation

Postby Shamrock71 » Thu May 18, 2017 3:05 pm

ruralavalon wrote:What is your age? What is your desired stock/bond allocation? What is your desired domestic/international stock allocation?

What is the expense ratio on the target retirement fund you are using in the old 401k? If that is low, then leaving the old 401k with that fund is reasonable if the fund fits your desired stock/bond allocation. You really won't have to switch allocation every year.

If you switch to individual index funds in the old 401k, then in addition to the index funds you put in bold face I would add Fidelity Global Ex-U.S. Index Fund Premium Class (FSGDX) ER 0.09%.

Will your new 401k accept a rollover from your old 401k? Many 401k plans allow that. If so and if the new plan offers low expense ratios (you didn't state the expense ratios charged in the new 401k) without extra fees, then rolling the old 401k over into the new 401k may be the better choice. This would be my choice if possible.


Age: 46

Stock/bond allocation: 80/20 (I based this on research [here and other web sources], my looking at FD and VG target-date funds, and my risk/loss comfort level.)

Domestic/intl stock allocation: 60/40 (or maybe 70/30, I haven't decided)

ER of current target-date fund in old 401k: 0.07%

My current employer will accept rollovers, but the fees of my old 401k (fees = 0.01% [$28 flat yearly fee]) are worse than my current-employer 401k (fees = 0.28%). They'll more than offset (in a negative way) any ER advantages.

User avatar
ruralavalon
Posts: 10284
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Please provide some feedback on 401k allocation

Postby ruralavalon » Thu May 18, 2017 3:18 pm

Shamrock71 wrote:
ruralavalon wrote:What is your age? What is your desired stock/bond allocation? What is your desired domestic/international stock allocation?

What is the expense ratio on the target retirement fund you are using in the old 401k? If that is low, then leaving the old 401k with that fund is reasonable if the fund fits your desired stock/bond allocation. You really won't have to switch allocation every year.

If you switch to individual index funds in the old 401k, then in addition to the index funds you put in bold face I would add Fidelity Global Ex-U.S. Index Fund Premium Class (FSGDX) ER 0.09%.

Will your new 401k accept a rollover from your old 401k? Many 401k plans allow that. If so and if the new plan offers low expense ratios (you didn't state the expense ratios charged in the new 401k) without extra fees, then rolling the old 401k over into the new 401k may be the better choice. This would be my choice if possible.


Age: 46

Stock/bond allocation: 80/20 (I based this on research [here and other web sources], my looking at FD and VG target-date funds, and my risk/loss comfort level.)

Domestic/intl stock allocation: 60/40 (or maybe 70/30, I haven't decided)

ER of current target-date fund in old 401k: 0.07%

My current employer will accept rollovers, but the fees of my old 401k (fees = 0.01% [$28 flat yearly fee]) are worse than my current-employer 401k (fees = 0.28%). They'll more than offset (in a negative way) any ER advantages.

I don't understand the last paragraph about the expenses in each 401k.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | | Wiki article link:Getting Started

Shamrock71
Posts: 22
Joined: Fri May 05, 2017 11:38 am

Re: Please provide some feedback on 401k allocation

Postby Shamrock71 » Thu May 18, 2017 3:57 pm

ruralavalon wrote:
Shamrock71 wrote:
ruralavalon wrote:What is your age? What is your desired stock/bond allocation? What is your desired domestic/international stock allocation?

What is the expense ratio on the target retirement fund you are using in the old 401k? If that is low, then leaving the old 401k with that fund is reasonable if the fund fits your desired stock/bond allocation. You really won't have to switch allocation every year.

If you switch to individual index funds in the old 401k, then in addition to the index funds you put in bold face I would add Fidelity Global Ex-U.S. Index Fund Premium Class (FSGDX) ER 0.09%.

Will your new 401k accept a rollover from your old 401k? Many 401k plans allow that. If so and if the new plan offers low expense ratios (you didn't state the expense ratios charged in the new 401k) without extra fees, then rolling the old 401k over into the new 401k may be the better choice. This would be my choice if possible.


Age: 46

Stock/bond allocation: 80/20 (I based this on research [here and other web sources], my looking at FD and VG target-date funds, and my risk/loss comfort level.)

Domestic/intl stock allocation: 60/40 (or maybe 70/30, I haven't decided)

ER of current target-date fund in old 401k: 0.07%

My current employer will accept rollovers, but the fees of my old 401k (fees = 0.01% [$28 flat yearly fee]) are worse than my current-employer 401k (fees = 0.28%). They'll more than offset (in a negative way) any ER advantages.

I don't understand the last paragraph about the expenses in each 401k.


Here are some more details:

In my old 401k plan, the ER of the fund is 0.07%, and the fees are a flat $28/year (given my balance, that's 0.01% for the fees). So it's a total annual cost of 0.08%.

In my current-employer 401k plan, the ER of the target-date fund is 0.16%. I can get that down with VTSAX (0.05%), VTIAX (0.11%), and VBTLX (0.05%). The annual fee for the plan is 0.28%.

My reasoning is that even if I can get the ER for my current employer plan down to, say, 0.06%, adding in the 0.28% annual fee would make the cost of my current employer plan 0.34% vs 0.08% of my old 401k plan. So I'd keep the money in the lower-cost plan.

Let me know if you think I'm not seeing this right.

User avatar
ruralavalon
Posts: 10284
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Please provide some feedback on 401k allocation

Postby ruralavalon » Fri May 19, 2017 8:59 am

Shamrock71 wrote:
ruralavalon wrote:
Shamrock71 wrote:
ruralavalon wrote:What is your age? What is your desired stock/bond allocation? What is your desired domestic/international stock allocation?

What is the expense ratio on the target retirement fund you are using in the old 401k? If that is low, then leaving the old 401k with that fund is reasonable if the fund fits your desired stock/bond allocation. You really won't have to switch allocation every year.

If you switch to individual index funds in the old 401k, then in addition to the index funds you put in bold face I would add Fidelity Global Ex-U.S. Index Fund Premium Class (FSGDX) ER 0.09%.

Will your new 401k accept a rollover from your old 401k? Many 401k plans allow that. If so and if the new plan offers low expense ratios (you didn't state the expense ratios charged in the new 401k) without extra fees, then rolling the old 401k over into the new 401k may be the better choice. This would be my choice if possible.


Age: 46

Stock/bond allocation: 80/20 (I based this on research [here and other web sources], my looking at FD and VG target-date funds, and my risk/loss comfort level.)

Domestic/intl stock allocation: 60/40 (or maybe 70/30, I haven't decided)

ER of current target-date fund in old 401k: 0.07%

My current employer will accept rollovers, but the fees of my old 401k (fees = 0.01% [$28 flat yearly fee]) are worse than my current-employer 401k (fees = 0.28%). They'll more than offset (in a negative way) any ER advantages.

I don't understand the last paragraph about the expenses in each 401k.


Here are some more details:

In my old 401k plan, the ER of the fund is 0.07%, and the fees are a flat $28/year (given my balance, that's 0.01% for the fees). So it's a total annual cost of 0.08%.

In my current-employer 401k plan, the ER of the target-date fund is 0.16%. I can get that down with VTSAX (0.05%), VTIAX (0.11%), and VBTLX (0.05%). The annual fee for the plan is 0.28%.

My reasoning is that even if I can get the ER for my current employer plan down to, say, 0.06%, adding in the 0.28% annual fee would make the cost of my current employer plan 0.34% vs 0.08% of my old 401k plan. So I'd keep the money in the lower-cost plan.

Let me know if you think I'm not seeing this right.

Yes, keep the money in the lower cost plan.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | | Wiki article link:Getting Started

Shamrock71
Posts: 22
Joined: Fri May 05, 2017 11:38 am

Re: Please provide some feedback on 401k allocation

Postby Shamrock71 » Fri May 19, 2017 10:53 am

ruralavalon wrote: Yes, keep the money in the lower cost plan.


Cool. Thanks for all the feedback.


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