Help with 401K selections, please

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TheOtherGuy
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Joined: Sun Aug 06, 2017 6:58 pm

Help with 401K selections, please

Post by TheOtherGuy » Sun Aug 06, 2017 7:18 pm

Hi,

I’m hoping for some advice on my 401k choices. I want to put them in a bond fund or funds similar to those used in a 4 fund plan, perhaps emulating a LifeStrategy fund overall. We’re 54 and 52. We’re going to start maxing out our 401k’s as we’ve realized that we have more than we need on the taxable side. Also, my wife has 2 IRAs and a 401k as well. So I think it’s OK if I can only pick one type of bond fund for this account.

The list of easy options are here: http://www.benefitanswersplus.com/FundFactSheets.html
The Bond Fund (managed by Blackrock) is https://hewitt.lipperweb.com/?symbol=0754410006#viewall and has .16% expenses.

I also have the option of a Self-Directed Brokerage Account (http://www.benefitanswersplus.com/globa ... ccount.pdf ). It has .08 administrative costs and gives me access to many fund families https://www.hewittfs.com/pdf/HFS_Fund_F ... R-2017.pdf . But it has high transaction fees, https://www.hewittfs.com/pdf/Retail_and ... 014_v2.pdf , unless I choose what I assume are loaded funds in their No-Transaction Fund list: https://www.hewittfs.com/pdf/NTF_Fund_List.pdf .

So does the easy access Bond Fund look reasonable? Or is there a better path through the fee laden Self-directed brokerage account?

Thanks!

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Tyler Aspect
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Re: Help with 401K selections, please

Post by Tyler Aspect » Sun Aug 06, 2017 7:57 pm

The quoted bond fund appeared to be an investment grade intermediate term bond fund. It is a good 401k option for bond investment.
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centrifuge41
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Re: Help with 401K selections, please

Post by centrifuge41 » Tue Aug 08, 2017 2:26 pm

Doesn't look like much that's good on the NTF self directed list. I saw some stuff in the .4% to .5% range but didn't find anything lower, after combing through it quickly. Likewise, self-directed costs too much.

You have solid choices though, so don't worry.
US Equity Index fund costs 0.06% and is a decent total US equity index.
International Equity Index fund costs 0.09% and has EAFE + Canada. But be aware that there's not much emerging market nor international small cap here.
And as you mentioned, the bond fund costs 0.16%. Not sure how the Citi BIG index compares to Barclay's aggregate bond index.

Good enough to build a 3 fund portfolio. You could supplement with emerging markets and small intl elsewhere if desired.

retiredjg
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Re: Help with 401K selections, please

Post by retiredjg » Tue Aug 08, 2017 4:33 pm

I think the bond fund is fine.

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celia
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Re: Help with 401K selections, please

Post by celia » Tue Aug 08, 2017 5:07 pm

Although a bond fund is good in any tax-deferred account, you need to keep an eye on your Asset Allocation (since you will be shoveling so much into one account). Check your overall portfolio every year AND when markets drop or rise 10% or more, to see if you need to rebalance.

Here's another thing to consider. Since you think you already have "enough" in taxable, you should also consider how much is "enough" in tax-deferred. This is especially true if you both have a pension and SS that are enough to cover your living expenses. What will RMDs do to your tax bracket after age 70.5? Will you be doing Roth conversions between your retirement date and age 70.5? How much will that bring down your post 70.5 RMDs?

In other words, it is not worth tax-deferring so much that it ends up putting you in a higher tax bracket later on.

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