Target Date Retirement a Good Option?
-
- Posts: 3
- Joined: Tue Jun 20, 2017 11:50 am
Target Date Retirement a Good Option?
I'm new to investing and have been reading up on options for retirement. Currently, I have a 401(K) set up by my employer. There is an annual company contribution of 5% of my eligible base compensation with an additional discretionary profit-sharing contribution of up to 10% more. The default fund selected is the Schwab Managed Retirement Trust Fund 2045 (SWMRX). The fund operating expense is 0.35%. Is it possible to customize my 401(K) and select index funds that have a lower operating expense? Or would I be better served to stay put with the target fund as is? Any thoughts or feedback welcomed.
-
- Posts: 4384
- Joined: Mon May 26, 2008 10:20 am
- Location: Second star on the right and straight on 'til morning
Re: Target Date Retirement a Good Option?
Welcome to the forum.
You can do fairly well with three index funds. See If You Can by Bernstein. viewtopic.php?f=2&t=138576&newpost=2048893
But, if that's too much trouble - rebalance perhaps every year or two -, the target date fund should do OK, too. Especially with the matches noted in your post. All you need is money and time.
You can do fairly well with three index funds. See If You Can by Bernstein. viewtopic.php?f=2&t=138576&newpost=2048893
But, if that's too much trouble - rebalance perhaps every year or two -, the target date fund should do OK, too. Especially with the matches noted in your post. All you need is money and time.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
-
- Posts: 409
- Joined: Mon May 15, 2017 5:25 pm
Re: Target Date Retirement a Good Option?
What other cheap fund options do you have in your 401k?
-
- Posts: 3
- Joined: Tue Jun 20, 2017 11:50 am
Re: Target Date Retirement a Good Option?
There's an option for a Personal Choice Retirement Account® (PCRA). I believe I'm able to have more control and select from over 2,700 funds with no fees. I guess, I'm wondering if I should totally customize it with total market index funds and bonds or just stick with the target date fund.BogleAlltheWay wrote:What other cheap fund options do you have in your 401k?
Re: Target Date Retirement a Good Option?
I would use the PCRA to hold very low cost funds or ETFs, possibly Vanguard. Is it really true there is no fee? I bet there are transaction costs to buy and sell in the PCRA, so you want to check your options for No Transaction Fee funds. I like keeping basic asset classes separate even if you have to rebalance now and then. I think getting a 0.35% ER to below 0.10% is in the area of worth doing, all other factors being equal.mnorman031 wrote:There's an option for a Personal Choice Retirement Account® (PCRA). I believe I'm able to have more control and select from over 2,700 funds with no fees. I guess, I'm wondering if I should totally customize it with total market index funds and bonds or just stick with the target date fund.BogleAlltheWay wrote:What other cheap fund options do you have in your 401k?
-
- Posts: 1571
- Joined: Thu Apr 30, 2015 12:30 pm
- Location: Florida
Re: Target Date Retirement a Good Option?
I use the PCRA (Charles Schwab) in my 457 plan. Nationwide charges $50.00 a year to use the PCRA. No trading fee from Charles Schwab. I use the recommended 3 fund index a t Schwab.
If you are young with so much better things to do, and your plan does not charge trading fees, I would go with the Target Dated Index Fund in your PCRA. Why it just makes everthing better and you don't have to worry about reballancing, how much to have in internationals how much bonds ect etc. The Target Dated Index Fund will match you age with the correct fund. You should be able to find a cheaper Target Dated Index Fund in your PCRA.
Also, you willl have to have your biweekly contributions but in a money market account and then transfer yourself into the Schwab PCRA. This could be another problem if you get busy and don't want to do this or forget. So you may even be better off with defult fund.
Some of us enjoy playing with the funds, so it depends what is going on in your busy life.
I found this on Scwab 2043 - 2047 SWYHX Schwab Target 2045 Index Fund Institutional Shares 0.08
If you are young with so much better things to do, and your plan does not charge trading fees, I would go with the Target Dated Index Fund in your PCRA. Why it just makes everthing better and you don't have to worry about reballancing, how much to have in internationals how much bonds ect etc. The Target Dated Index Fund will match you age with the correct fund. You should be able to find a cheaper Target Dated Index Fund in your PCRA.
Also, you willl have to have your biweekly contributions but in a money market account and then transfer yourself into the Schwab PCRA. This could be another problem if you get busy and don't want to do this or forget. So you may even be better off with defult fund.
Some of us enjoy playing with the funds, so it depends what is going on in your busy life.
I found this on Scwab 2043 - 2047 SWYHX Schwab Target 2045 Index Fund Institutional Shares 0.08
-
- Posts: 3
- Joined: Tue Jun 20, 2017 11:50 am
Re: Target Date Retirement a Good Option?
I believe there are no fees for Schwab funds, but I'm there are fees when buying or trading other funds. What is the advantage of ETF's over Index funds?
Re: Target Date Retirement a Good Option?
Seeing that you are brand new, I think I would go with the Schwab 2045 fund. Morningstar rates it as a Four Star fund. The asset allocation looks good: 60.55% US Stocks, 26.47% International Stocks, 8.37% bonds, 3.53% cash, and 1.09% other. Stay with this for a couple of years and then I would explore alternatives. In the meantime, learn as much about investing as you can. The Wiki is a great place to start.mnorman031 wrote:I'm new to investing and have been reading up on options for retirement. Currently, I have a 401(K) set up by my employer. There is an annual company contribution of 5% of my eligible base compensation with an additional discretionary profit-sharing contribution of up to 10% more. The default fund selected is the Schwab Managed Retirement Trust Fund 2045 (SWMRX). The fund operating expense is 0.35%. Is it possible to customize my 401(K) and select index funds that have a lower operating expense? Or would I be better served to stay put with the target fund as is? Any thoughts or feedback welcomed.
A fool and his money are good for business.
Re: Target Date Retirement a Good Option?
A low cost target date fund is a good option. .35% is not bad at all. Unless you want to read a handful of books and self manage, the target date is a great way to go.
Good luck!
Good luck!
Submit to the relentless rules of humble arithmetic and avoid the tyranny of compounding costs.
Re: Target Date Retirement a Good Option?
I love the signature line of "neurosphere": If you have to ask if a target date fund is right for you, it is!
Or as I put it, there are 187,431 portfolios that are worse than a low expense target date fund.
Or as I put it, there are 187,431 portfolios that are worse than a low expense target date fund.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: Target Date Retirement a Good Option?
One thing to keep in mind is not the the percentage number the ER is but also what that is in dollar terms.mnorman031 wrote:I'm new to investing ....
If you put $10,000 into the 401K an ER of 0.35% is $35. By going to a three fund portfolio of lower cost index funds you might be able to cut that down by $25 if everything goes perfectly and you have great index funds in your 401k.
The problem is that the target date fund will automatically be rebalanced daily but you might several times a year so you results will vary some and you will not get the advantage of daily rebalancing.
I think that the Target date fund is a really good choice and when you have several years of saving in it you could look at this again to see if using a three fund portfolio might be worth while.
There is a quote that is often posted here. "The enemy of a good plan is a perfect plan."
FYI, here is a link to the wiki on a three fund portfolio.
https://www.bogleheads.org/wiki/Three-fund_portfolio