Help choosing 401k options

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chrisal23
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Joined: Thu Jan 04, 2018 10:07 pm

Help choosing 401k options

Post by chrisal23 » Sun Feb 11, 2018 2:36 pm

Hi,

I've recently switched employers and apparently I had my old investment options out of whack. I'd appreciate someone's opinion on the options I've selected.

Background: I'm a 26 single male earning roughly 70K annually.

Here are my current options:

STOCKS:
TRBCX
DODGX
VTMNX
VINIX

BONDS:
PTTRX
VBTIX

MONEY MARKET:
SVF-N

TARGET FUNDS:
TRRFX

Here's what I've chosen:

VINIX - 70%
VTMNX - 20%
VBTIX- 10%

Thanks in advance!

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JamesSFO
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Joined: Thu Apr 26, 2012 10:16 pm

Re: Help choosing 401k options

Post by JamesSFO » Sun Feb 11, 2018 3:05 pm

You should spell out the fund names + provide expense ratios to get better responses.

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The529guy
Posts: 565
Joined: Fri May 23, 2014 1:08 am

Re: Help choosing 401k options

Post by The529guy » Sun Feb 11, 2018 3:16 pm

Welcome! To echo JamesSFO, spell them out, please.

With that said, you've built a decent 3-fund portfolio with your options. Could you tell us how much the SVF-N yields?

chrisal23
Posts: 9
Joined: Thu Jan 04, 2018 10:07 pm

Re: Help choosing 401k options

Post by chrisal23 » Tue Feb 13, 2018 6:07 am

Hi,

Here are more details:

Stocks:

BLUE CHIP GROWTH FUND -
TRBCX
Expense Ratio-.72%

DODGE AND COX STOCK FUND
DODGX
Expense Ratio-.52%

MFS INST'L INT'L EQUITY
MIEIX
Expense Ratio-.71%

VANGUARD DVLPD MRKTS IND INST
VTMNX
Expense Ratio-.06%

VANGUARD INST INDEX
VINIX
Expense Ratio-.04%

Bonds:

PIMCO TOTAL RETURN INSTL
PTTRX 1 2
Expense Ratio-.51%

VANGUARD TTL BND MRK INDX INST
VBTIX
Expense Ratio-.04%

Money Market:

TRP STABLE VALUE FUND - N
SVF-N 1 3
Expense Ratio-.20%
Yield YTD: 1.96%
10-year yield: 2.89%

Target Funds:

RETIREMENT 2055 FUND
TRRNX + 1 t
Expense Ratio-.74%


I appreciate everyone's help.

-Chris

josh1130
Posts: 28
Joined: Mon Feb 01, 2016 5:52 am

Re: Help choosing 401k options

Post by josh1130 » Tue Feb 13, 2018 8:06 am

I like the choices you have made here. You can use your Roth space to fill out extended markets and emerging markets.

chrisal23
Posts: 9
Joined: Thu Jan 04, 2018 10:07 pm

Re: Help choosing 401k options

Post by chrisal23 » Wed Feb 14, 2018 8:27 am

Hey Josh1130,

Thanks for your feedback. When you say Roth are you referring you to the Roth option in my 401k plan or my separate Roth IRA?

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ruralavalon
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Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Help choosing 401k options

Post by ruralavalon » Wed Feb 14, 2018 9:18 am

Welcome to the forum :) .

You have some excellent funds offered in your 401k, you are fortunate.

In my opinion you have chosen the right funds to use in your 401k. At age 26 I suggest a little higher bond allocation, like this:
60% Vanguard Institutional Index Fund (VINIX) ER 0.04%;
20%, Vanguard Developed Markets Index Fund Institutional (VTMNX) ER 0.06%; and
20%, Vanguard Total Bond Market Index Fund Institutional (VBTIX) ER 0.04%

josh1130 wrote:
Tue Feb 13, 2018 8:06 am
I like the choices you have made here. You can use your Roth space to fill out extended markets and emerging markets.
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
Hey Josh1130,

Thanks for your feedback. When you say Roth are you referring you to the Roth option in my 401k plan or my separate Roth IRA?
I think the Roth IRA was meant.

It's often better to coordinate investments among all your accounts. First select funds to use in your 401k where the choices are limited, then use the nearly unlimited choices in the IRA to fill in any gaps in what is offered in your 401k.

Do you have any accounts in addition to your current 401k and a Roth IRA?

What is the size of each account?

About how much (in dollars) do you believe you might be able to contribute annually to investing (total, all accounts)?

What is your tax bracket, both federal and state?

What is your tax filing status?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

chrisal23
Posts: 9
Joined: Thu Jan 04, 2018 10:07 pm

Re: Help choosing 401k options

Post by chrisal23 » Wed Feb 14, 2018 8:03 pm

Thanks for the warm welcome. :) I was initially debating the same allocation for bonds (20%) but figured I had time to recover from bad markets. I'll take your advice on this.
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
Do you have any accounts in addition to your current 401k and a Roth IRA?
Savings account: 7K yielding 1.25% (emergency money)
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
What is the size of each account?
401k: 14K (transferring IRA from old job)
Roth IRA: 3K
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
About how much (in dollars) do you believe you might be able to contribute annually to investing (total, all accounts)?
401k: $750 monthly
Roth: $220 monthly
Saving: $800 (trying to fund my first rental property)
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
What is your tax bracket, both federal and state?
Federal: 22%
NJ State: 6.370%

(I'm actually burned on this realization)
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
What is your tax filing status?
Single

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ruralavalon
Posts: 12400
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Location: Illinois

Re: Help choosing 401k options

Post by ruralavalon » Thu Feb 15, 2018 8:20 am

chrisal23 wrote:
Wed Feb 14, 2018 8:03 pm
Thanks for the warm welcome. :) I was initially debating the same allocation for bonds (20%) but figured I had time to recover from bad markets. I'll take your advice on this.
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
Do you have any accounts in addition to your current 401k and a Roth IRA?
Savings account: 7K yielding 1.25% (emergency money)
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
What is the size of each account?
401k: 14K (transferring IRA from old job)
Roth IRA: 3K
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
About how much (in dollars) do you believe you might be able to contribute annually to investing (total, all accounts)?
401k: $750 monthly
Roth: $220 monthly
Saving: $800 (trying to fund my first rental property)
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
What is your tax bracket, both federal and state?
Federal: 22%
NJ State: 6.370%

(I'm actually burned on this realization)
chrisal23 wrote:
Wed Feb 14, 2018 8:27 am
What is your tax filing status?
Single

Example portfolio.
Here is an example portfolio that you could consider. This is a three-fund type portfolio. The total portfolio = $17k. New annual contributions = $11.6k. The asset allocation is 20% bonds, 20% international stocks, and 60% domestic stocks. The idea is to switch both the current balances and new contributions to the funds listed. The percentages are percentages of the total portfolio, not percentages of any particular account.

401k (82% of total; $14k; adds $9k/yr = 78% of new annual contributions)
60%, $10.2k, Vanguard Institutional Index Fund (a S& P 500 index fund) (VINIX) ER 0.04%
02%, $0.3k, Vanguard Developed Markets Index Fund Institutional (VTMNX) ER 0.06%
20%, $3.4k, Vanguard Total Bond Market Index Fund Institutional (VBTIX) ER 0.04%

Roth IRA @ Vanguard (18% of total; $3k; adds $2.6k/yr = 22% of new annual contributions)
18%, $3k, Vanguard Total International Stock Index Fund Investor Shares (VGTSX) ER 0.17%


Fund selection.
In selecting funds strive for a combination of broad diversification (to decrease your risk) and low expense ratios (to increase your net return). To simply and easily achieve both I suggest using a three-fund type portfolio. Please see the wiki article "Three-fund Portfolio", and the forum discussion "The Three-fund Portfolio".

The idea is to use the Roth IRA to fill gaps in the funds offered in your 401k.

Vanguard Total International Stock Index Fund covers both developed and emerging markets, so is more diversified than the developed market fund offered in your 401k.

I prefer a total stock market index fund for domestic stocks if available. If not, then a S&P 500 index fund (like Vanguard Institutional Index Fund in your 401k) is good enough for domestic stocks. A S&P 500 index fund covers 81% of the U.S. stock market, investing in stocks of selected large-cap and mid-cap U.S. companies. In the 25 years since the creation of the first total stock market index fund the two types of fund have had almost identical performance. So historically adding stocks of small-cap companies and more mid-cap companies has added little benefit.

So I think the better use of the Roth IRA is to improve diversification in the international investments by using Vanguard Total Stock Market Index Fund.

. . . . .

I suggest that you read one or two books on general investing. Please see the wiki article "Books: Recommendations and Reviews".

If you have any questions just ask.

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

chrisal23
Posts: 9
Joined: Thu Jan 04, 2018 10:07 pm

Re: Help choosing 401k options

Post by chrisal23 » Fri Feb 16, 2018 12:26 pm

I appreciate your thorough response. This is what I understand:

401K: 20% bonds, 20% international stocks, 60 domestic stocks
Roth 401K: Invest all money in total market international stock index funds for diversification.
ruralavalon wrote:
Thu Feb 15, 2018 8:20 am
Example portfolio.
Here is an example portfolio that you could consider. This is a three-fund type portfolio. The total portfolio = $17k. New annual contributions = $11.6k. The asset allocation is 20% bonds, 20% international stocks, and 60% domestic stocks. The idea is to switch both the current balances and new contributions to the funds listed. The percentages are percentages of the total portfolio, not percentages of any particular account.

401k (82% of total; $14k; adds $9k/yr = 78% of new annual contributions)
60%, $10.2k, Vanguard Institutional Index Fund (a S& P 500 index fund) (VINIX) ER 0.04%
02%, $0.3k, Vanguard Developed Markets Index Fund Institutional (VTMNX) ER 0.06%
20%, $3.4k, Vanguard Total Bond Market Index Fund Institutional (VBTIX) ER 0.04%

Roth IRA @ Vanguard (18% of total; $3k; adds $2.6k/yr = 22% of new annual contributions)
18%, $3k, Vanguard Total International Stock Index Fund Investor Shares (VGTSX) ER 0.17%


Fund selection.
In selecting funds strive for a combination of broad diversification (to decrease your risk) and low expense ratios (to increase your net return). To simply and easily achieve both I suggest using a three-fund type portfolio. Please see the wiki article "Three-fund Portfolio", and the forum discussion "The Three-fund Portfolio".

The idea is to use the Roth IRA to fill gaps in the funds offered in your 401k.

Vanguard Total International Stock Index Fund covers both developed and emerging markets, so is more diversified than the developed market fund offered in your 401k.

I prefer a total stock market index fund for domestic stocks if available. If not, then a S&P 500 index fund (like Vanguard Institutional Index Fund in your 401k) is good enough for domestic stocks. A S&P 500 index fund covers 81% of the U.S. stock market, investing in stocks of selected large-cap and mid-cap U.S. companies. In the 25 years since the creation of the first total stock market index fund the two types of fund have had almost identical performance. So historically adding stocks of small-cap companies and more mid-cap companies has added little benefit.

So I think the better use of the Roth IRA is to improve diversification in the international investments by using Vanguard Total Stock Market Index Fund.

. . . . .

I suggest that you read one or two books on general investing. Please see the wiki article "Books: Recommendations and Reviews".

If you have any questions just ask.

I hope that this helps.
Question: Are you stating that investing in the Vanguard Total Stock Market Index Fund (US) is a good option to hedge or diversify against the international market? or vice versa. Just want to be clear.

Overall, I love your approach. Currently, I invested my 3K into a target fund that mimics the 3-fund portfolio. I wasn't sure if it was effecient to essentially have 2 identical portfolios, but it now makes sense to leverage my Roth with the options not offered in my 401K.

Thanks!
Chris

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ruralavalon
Posts: 12400
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Help choosing 401k options

Post by ruralavalon » Fri Feb 16, 2018 2:42 pm

chrisal23 wrote:
Fri Feb 16, 2018 12:26 pm
I appreciate your thorough response. This is what I understand:

401K: 20% bonds, 20% international stocks, 60 domestic stocks
Roth 401K: Invest all money in total market international stock index funds for diversification.
Do you have a Roth IRA?

Or are you making Roth contributions to your 401k?

Those are different things. Often in a Roth 401k you must invest the same as in your traditional 401k, I think it depends on the plan documents for your 401k.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

chrisal23
Posts: 9
Joined: Thu Jan 04, 2018 10:07 pm

Re: Help choosing 401k options

Post by chrisal23 » Sat Feb 17, 2018 1:41 pm

ruralavalon wrote:
Fri Feb 16, 2018 2:42 pm
Do you have a Roth IRA?

Or are you making Roth contributions to your 401k?

Those are different things. Often in a Roth 401k, you must invest the same as in your traditional 401k, I think it depends on the plan documents for your 401k.
I have a Roth IRA, separate from my 401K. Here's something that recently came to mind:

I'm currently investing 15% of my income to my 401k, and 5% towards my Roth IRA. (total 20% of my income)

Here's the breakdown: (15% income contribution towards 401K)

9% - Vanguard Institutional Index Fund (a S& P 500 index fund) (VINIX) ER 0.04% (60% portfolio contribution)
3% - Vanguard Developed Markets Index Fund Institutional (VTMNX) ER 0.06% (20% portfolio contribution)
3% - Vanguard Total Bond Market Index Fund Institutional (VBTIX) ER 0.04% (20% portfolio contirbution)


Roth IRA (5% income contribution): (I plan to max it out at 5K annually)

Vanguard total international market index - 5% (proposed change)

So my total investments for international stocks would be 8% vs 9% domestic. To put it in a different perspective my overall portfolio would look like this:

45% domestic stocks
40% international stocks
15% bonds

Maybe I'm overthinking this, but would it be ideal to invest in the total market index vs international for my Roth?

Thanks!
Chris

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ruralavalon
Posts: 12400
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Help choosing 401k options

Post by ruralavalon » Sat Feb 17, 2018 5:44 pm

I am totally confused about your last two posts.

You currently invest $750/month x 12 = $9,000/year in your 401k.
You currently invest $220/month x 12 = $2,640/year in your Roth IRA.
Total = $11,640/year.

But you also say you plan to make the maximum contribution to the Roth IRA (which would be $5,500 /year).

. . . . .


Here is what I suggest that you consider for how to invest the $17,000 you currently have in the two accounts which make up your portfolio. The asset allocation is 20% bonds, 20% international stocks, and 60% domestic stocks. The idea is to switch both the current balances and new contributions to the funds listed. The percentages on the left are percentages of the current total portfolio, not percentages of any particular account. All percentages and dollar amounts are rounded off, so may not add up exactly.

Using your current contributions ($11,640/year) as a base, I have added a suggestion on how you might distribute the new annual contributions in blue, in a way which might tend to keep your asset allocation in balance. The funds will grow at different and unpredictable rates, so it is not possible to be exact.

401k (82% of total; $14k; adds $9,000/yr = 78% of new annual contributions)
60%, $10.2k, Vanguard Institutional Index Fund (a S& P 500 index fund) (VINIX) ER 0.04%, <- about 74% of new 401k contributions here, $6,672/year
02%, $0.3k, Vanguard Developed Markets Index Fund Institutional (VTMNX) ER 0.06%,
20%, $3.4k, Vanguard Total Bond Market Index Fund Institutional (VBTIX) ER 0.04%, <- about 26% of new 401k contributions here, $2,328/year

Roth IRA @ Vanguard (18% of total; $3k; adds $2,640k/yr = 22% of new annual contributions)
18%, $3k, Vanguard Total International Stock Index Fund Investor Shares (VGTSX) ER 0.17%, <- all new Roth IRA contributions here, $2,640/year
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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