Help Rebalancing 401k Allocation

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Tutty59
Posts: 14
Joined: Wed Jan 18, 2017 12:12 pm

Help Rebalancing 401k Allocation

Post by Tutty59 » Tue Oct 03, 2017 1:23 pm

Hello all,

I know there are plenty of these posts, but I've need of some strong financial advice and can't think of a better place to ask. Below I've included all of the 401(k) options my company currently offers. Right now I'm 100% in the T. Rowe Price 2060 Target Fund, but I looked at the expense ratio of 0.74 and decided that was way too high. I like the Vanguard funds because their ratios are considerably lower, but I wasn't sure how I should allocate within this choosing. My desired AA would hover between 85/15 and 90/10, as I have something similar in my Roth. I'm looking for any and all advice on this, thanks in advance!!!

Short Bonds/Stable/MMkt

Prudential Principal Preservation Sep. Account
Transamerica High Quality Bond R4

Interm./Long-Term Bonds

Transamerica Intermediate Bond R4
Vanguard Total Bond Market Index Adm

Large-Cap Stocks

JHancock Disciplined Value I
Vanguard Institutional Index I
Transamerica Large Growth R4

Small/Mid-Cap Stocks

Transamerica Mid Cap Value Opportunities R4
Transamerica Mid Cap Growth R4
Vanguard Small Cap Index I

International Stocks

Transamerica International Equity R4
Vanguard Total Intl Stock Index Admiral

Multi-Asset/Other

T. Rowe Price Retirement 2005
T. Rowe Price Retirement 2010
T. Rowe Price Retirement 2015
T. Rowe Price Retirement 2020
T. Rowe Price Retirement 2025
T. Rowe Price Retirement 2030
T. Rowe Price Retirement 2035
T. Rowe Price Retirement 2040
T. Rowe Price Retirement 2045
T. Rowe Price Retirement 2050
T. Rowe Price Retirement 2055
T. Rowe Price Retirement 2060


Tutty

User avatar
David Jay
Posts: 4077
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Help Rebalancing 401k Allocation

Post by David Jay » Tue Oct 03, 2017 1:53 pm

You can get close to a "3-fund" (it takes 4 because there is no Total US) style portfolio with your options.

First, you need to pick your international percentage. 25% to 33% is common, but some people feel strongly that they don't want any international. I will use 25% and let you adjust to suit.

For 85/15, it would look like this (small cap to complement the SP500 in an 18/82 ratio). I rounded to the nearest 5% on each because it is a lot easier to maintain and 1% or 2% isn't going to move your results:

Vanguard Institutional Index (SP500) - 50% (82% of 64%)
Vanguard Small Cap - 10% (18% of 64%)
Vanguard Total International - 20% (25% of 85%)
Vanguard Total Bond - 15%
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

EHEngineer
Posts: 636
Joined: Sat Feb 28, 2015 4:35 pm

Re: Help Rebalancing 401k Allocation

Post by EHEngineer » Tue Oct 03, 2017 2:05 pm

I am an indexer with portfolio ER about 0.10%. VAnguard's Target retirement portfolio has 0.17% ER, yet has outperformed my self managed protfolio.

Have you plotted a chart of the T Rowe Price 2060 fund? It has a 0.74%ER, but the fund performance beats Vanguard's 2060 with 0.17%ER, since inception a few years ago. T Rowe Price has history of reasonable performing active funds. IMO you are making a mistake trading the convenience of a very well run all-in-one fund for the headache of managing a portfolio.

To get a little more history of TRP's retirement funds try comparing TRP vs. Vanguard 2030 fund including the 2007/8 great recession. Small difference at the trough, and TRP has outperformed since.

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius

User avatar
David Jay
Posts: 4077
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Help Rebalancing 401k Allocation

Post by David Jay » Tue Oct 03, 2017 8:35 pm

EHEngineer wrote:
Tue Oct 03, 2017 2:05 pm
To get a little more history of TRP's retirement funds try comparing TRP vs. Vanguard 2030 fund including the 2007/8 great recession. Small difference at the trough, and TRP has outperformed since.

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
The TR Price 2030 fund has 5% fewer bonds (22%) so one would expect some minor outperformance compared to Vanguard 2030 (27%), especially over the recent years of excellent market growth.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

User avatar
David Jay
Posts: 4077
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Help Rebalancing 401k Allocation

Post by David Jay » Tue Oct 03, 2017 8:48 pm

That being said, a Target Date fund may be appropriate. BH member "neurosphere" has the signature line: "If you don't know if a Target Date fund is right for you... it is."

Don't select by date, select by bond allocation (i.e. select a fund with 15% bonds, not necessarily the date when you expect to retire).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

EHEngineer
Posts: 636
Joined: Sat Feb 28, 2015 4:35 pm

Re: Help Rebalancing 401k Allocation

Post by EHEngineer » Wed Oct 04, 2017 12:32 pm

David Jay wrote:
Tue Oct 03, 2017 8:35 pm
EHEngineer wrote:
Tue Oct 03, 2017 2:05 pm
To get a little more history of TRP's retirement funds try comparing TRP vs. Vanguard 2030 fund including the 2007/8 great recession. Small difference at the trough, and TRP has outperformed since.

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
The TR Price 2030 fund has 5% fewer bonds (22%) so one would expect some minor outperformance compared to Vanguard 2030 (27%), especially over the recent years of excellent market growth.
Both of the funds are GREAT funds. Expense Ratio is an indicator, not a guarantee. DIY management may help or hurt. DIY is a burden. My perspective.
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius

KSActuary
Posts: 177
Joined: Fri Jan 13, 2012 10:53 pm

Re: Help Rebalancing 401k Allocation

Post by KSActuary » Wed Oct 04, 2017 12:38 pm

TRP Target Date funds are more aggressive than other TDF families, IMO, but do quite well in terms of performance.

Post Reply