Allocation across multiple 401ks and a possible rollover to IRA situation - Help needed

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dalekinvades
Posts: 4
Joined: Wed Sep 13, 2017 10:19 am

Allocation across multiple 401ks and a possible rollover to IRA situation - Help needed

Post by dalekinvades » Wed Sep 13, 2017 11:27 am

Hello Boggleheads

I have been reading these forums and the wiki for a while and this is my first time asking a question. Thanks in advance for your inputs.<br/>

We have a 401k plan at my workplace and also at my wife's work. Both have index funds selection across all asset classes with low expense ratios. Currently I use mirror allocation method in both plans

I am switching jobs and now have the option to rollover my 401k to the new employer, leave it with previous employer (no loans) or move it to a new IRA.

My previous employer's 401k
- $33,000
- no further contributions accepted
Fund Ticker ER Allocation
FID 500 INDEX FUSVX 0.035% 48%
FID MID CAP IDX FSCKX 0.05% 11%
FID SM CAP IDX FSSVX 0.05% 9%
FID INTL INDEX FSIVX 0.06% 22%
FID US BOND IDX FSITX 0.045% 10%

My wife's employer's 401k
- $1,000
- set up to contribute $17k more in 2017
Fund Ticker ER Allocation
FID 500 INDEX INST FXSIX 0.03% 48%
VANG MIDCAP IDX ADM VIMAX 0.06% 11%
VANG SM CAP IDX ADM VSMAX 0.06% 9%
VANG DEV MKT IDX ADM VTMGX 0.07% 22%
VANG TOT BD MKT ADM VBTLX 0.05% 10%


New Employer's 401k
- yet to contribute
- eligible to contribute 6k for 2017
The new employer's 401k is with Vanguard and has very good index funds for S&P 500, medium cap and bonds. I don't see any index fund option for international stocks. Also, the index funds for small cap is skewed heavily towards growth.


Vanguard Institutional Index Fund Institutional Plus Shares S&P 500 VIIIX 0.02%
Vanguard Mid-Cap Index Fund Institutional Plus Shares VMCPX 0.04%
Vanguard Small-Cap Growth Index Fund Institutional Shares VSGIX 0.06%
Vanguard International Growth Fund Admiral Shares VWILX 0.33%
Vanguard International Value Fund VTRIX 0.43%
Vanguard Total Bond Market Index Fund Institutional Plus Shares VBMPX 0.03%

I used the mirror allocation before because both our 401k plans looked similar. My new 401k plan doesnt' have an index fund for international and the small cap index fund is a growth fund.

I need some help with these questions

1. Would you recommend that I use the international growth and value funds with my new employer or should i use my wife's plan for international index entirely? I have no idea about these international funds with new employer. Only thing I noticed is they are not index funds.

2. Same question as above for small cap. I am not sure if its a good idea to use a growth skewed index fund. I have read the differences between growth and value. Would you recommend that I use the small cap growth funds with my new employer or should i use my wife's plan for small cap entirely?

3. I have to decide what to do with my $33k in old employer's 401k. I guess the answers to above questions will decide how good is my new employer's plan. If I can't use my new employer's fund for international and US small cap, then am I better off moving this to a new IRA account with Vanguard? The advantage is that I can allocate how I wish without any constraints. But, I am not eligible to make any contribution to IRA. Our tax bracket (AGI $230K+) and given that we both have 401k employer plans, we can't contribute to IRA. Is it a good idea to put that money into IRA which can't take any more contributions (until and unless I switch jobs again)

Update

I just got to know that I cannot retain funds with my old employer for long. I can either move to new 401k, move to new IRA or cash out. Of course, I don't want to cash out.

If not for the lack of an international index fund, I would move the money to new employer's 401k. If I were to move $33k to new employer's 401k, I am afraid I have to invest $16k in my wife's 401k in international + small cap.

This is my desired target state at the end of 2017

(Using the formula from wiki TSM = 81% S&P, 4% Midcap, 15% Small cap)

S&P 500 - 48.6%
US Mid Cap Index - 2.4%
US Small Cap Index - 9%
International Index - 20%
Total Bond Market Index - 20%

Total funds at the end of 2017 in retirement accounts
Previous Employer's 401k - 33k
New Employer's 401k - 6k
Wife's Employer's 401k - 18k

International and US Small cap is 29% of my portfolio which would be around $16k+

From 2018, it should hopefully get simpler since we are going to try 18k in each account. But, if for any reason, my wife stops working (don't foresee that in the immediate future but have to keep it mind) I could get into a tough situation if I want to re-balance by buying more international stocks, isnt it?

Any inputs on if an IRA would be better as opposed to rolling over to new 401k is much appreciated. I will also update the original post with this information.
Last edited by dalekinvades on Thu Sep 14, 2017 2:12 pm, edited 2 times in total.

JBTX
Posts: 943
Joined: Wed Jul 26, 2017 12:46 pm

Re: Allocation across multiple 401ks and a possible rollover to IRA situation - Help needed

Post by JBTX » Wed Sep 13, 2017 4:57 pm

As to decision of 401k vs roll over to IRA, if you think there is ever a chance you may want to do a backdoor Roth , then leave it in prior 401k or move it to new 401k. You can look up backdoor Roth in wiki. If you have a regular IRA then attempting a backdoor Roth will end converting some of of your traditional IRAs and leave you with a tax bill.

If you are absolutely sure you would never back door roth then rollover is viable option. If you aren't sure I'd keep it in one or the other 401k.

As to which 401k, I'd keep your existing one and then contribute new contributions to your new one. That will give you better international index options and the fees are pretty low on your original 401k.

That said your new plan looks good too. Even those managed funds have comparatively low fees. You'd just have to own both growth and value pieces to get the entire market. I wouldn't worry about those funds until you have substantially more to invest.

dalekinvades
Posts: 4
Joined: Wed Sep 13, 2017 10:19 am

Re: Allocation across multiple 401ks and a possible rollover to IRA situation - Help needed

Post by dalekinvades » Wed Sep 13, 2017 7:25 pm

Thank you for your response. I am hearing about backdoor roth for the first time. I read about it real quick and I don't understand enough to make a decision about it right away. I guess, in that case, you are suggesting that I leave the funds in existing 401k or rollover to new 401k.

If I decide to leave it in my old 401k, is there a list of additional fees that I need to check with my previous company about? I mean, because I don't work for them it is possible that they might charge me some maintenance fees, isn't it? I was told that I cannot apply for a loan or make more contributions. I am totally fine with that. I am assuming I should be able to rebalance, if needed.

As to the international funds on the new 401k, I had two concerns - fees and that they are actively managed. The fees are less, I agree. But, I read in several threads that it is best to stick with index funds in the long run over choosing actively managed funds. Are you suggesting if do 50% of the value and 50% of growth it would be the same as the international index fund with Vanguard?

dalekinvades
Posts: 4
Joined: Wed Sep 13, 2017 10:19 am

Re: Allocation across multiple 401ks and a possible rollover to IRA situation - Help needed

Post by dalekinvades » Thu Sep 14, 2017 12:55 pm

I did more reading about backdoor roth, and I don't think I would take that route considering our current high tax bracket (and hoping it would continue to be this way for a while)

I also read about the international growth and value actively managed funds by Vanguard. Their past performance seem to be very superior to the index (at least the growth, if I interpreted correctly) but it seems to be focused on a 100 odd companies vs the index which is a few thousand companies. Just based on the theory of diversification, I am incline towards the index fund.

So, I guess I can stick with my old employer's plan as long as they dont charge any extra fees. But, if they do, the IRA seems to be a better option. Compared to managing a 401k, is managing an IRA any difficult? Sorry if that is a poor question.

livesoft
Posts: 55945
Joined: Thu Mar 01, 2007 8:00 pm

Re: Allocation across multiple 401ks and a possible rollover to IRA situation - Help needed

Post by livesoft » Thu Sep 14, 2017 1:03 pm

Since you have Vanguard accounts and use mostly Vanguard funds, have you used the Vanguard Portfolio Watch tool to see your ALL-ACCOUNTS asset allocation?

You also seem to have Fidelity accounts. Have you use the Fidelity Analysis tab to see your ALL-ACCOUNTS and holdings asset allocation?

With both Vanguard and Fidelity tools one can enter the shares and ticker symbols of their inside and outside holdings and see exactly what their allocation across multiple 401(K)s and IRAs and taxable actually is.

See this thread on how to do that: viewtopic.php?t=150267

Then you can mix and match and stop mirroring to get to any overall portfolio asset allocation that you desire. Otherwise, I think you are just flailing around in the dark.
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dalekinvades
Posts: 4
Joined: Wed Sep 13, 2017 10:19 am

Re: Allocation across multiple 401ks and a possible rollover to IRA situation - Help needed

Post by dalekinvades » Thu Sep 14, 2017 2:11 pm

I don't have funds in Vanguard yet. So, I have not tried any of their tools. My 401k and my wife's 401k were both with Fidelity though there are Vanguard funds in them. I have not tried any of Fidelity's tools either. I will look into both tools and the link you provided. I have been using Personal Capital where all these accounts are linked and it gives a good perspective without requiring any manual entry.

Update

I just got to know that I cannot retain funds with my old employer for long. I can either move to new 401k, move to new IRA or cash out. Of course, I don't want to cash out.

If not for the lack of an international index fund, I would move the money to new employer's 401k. If I were to move $33k to new employer's 401k, I am afraid I have to invest $16k in my wife's 401k in international + small cap.

This is my desired target state at the end of 2017

(Using the formula from wiki TSM = 81% S&P, 4% Midcap, 15% Small cap)

S&P 500 - 48.6%
US Mid Cap Index - 2.4%
US Small Cap Index - 9%
International Index - 20%
Total Bond Market Index - 20%

Total funds at the end of 2017 in retirement accounts
Previous Employer's 401k - 33k
New Employer's 401k - 6k
Wife's Employer's 401k - 18k

International and US Small cap is 29% of my portfolio which would be around $16k+

From 2018, it should hopefully get simpler since we are going to try 18k in each account. But, if for any reason, my wife stops working (don't foresee that in the immediate future but have to keep it mind) I could get into a tough situation if I want to re-balance by buying more international stocks, isnt it?

Any inputs on if an IRA would be better as opposed to rolling over to new 401k is much appreciated. I will also update the original post with this information.

livesoft
Posts: 55945
Joined: Thu Mar 01, 2007 8:00 pm

Re: Allocation across multiple 401ks and a possible rollover to IRA situation - Help needed

Post by livesoft » Thu Sep 14, 2017 2:16 pm

dalekinvades wrote:
Thu Sep 14, 2017 2:11 pm
Any inputs on if an IRA would be better as opposed to rolling over to new 401k is much appreciated.
Rolling to 401(k) is generally advised if the fund selection and expense ratios are reasonably good in the 401(k). Rolling over int a traditional IRA is a poor choice if one intends to do the so-called back door Roth thing.
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