401K Rebalancing Advice - Need to get this 6% bond allocation up!

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PlayingLife
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401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by PlayingLife » Sun Nov 18, 2018 3:34 pm

Hi BH's,

Would love your suggestions on how best to rebalance as I urgently need to do this due to low dollars in bonds. Here are some key points:

1. Needing a rebalance since I only have 6.1% in bonds. Desired allocation is 80% equity / 20% bond. Out of the equity I don't have hard opinions on US equity versus international. Maybe 80/20 or 90/10, but I'm open for thoughts here.
2. We do not contribute further to the Vanguard rollover IRA at this point in time and we do not utilize back door roth
3. I have a new job but I'm not sure if it's going to work out...this is another topic in it's own but with this info and nice options in my previous employer's plan, I'm considering retaining the old place rather than roll it all over into new plan.
4. 35 years old and 31 years old. Wife may likely retire early and I am planning on ~62
5. We are now maxing both of our 401k contributions annually

I would like your suggestions and also "how" to specifically rebalance via selling current equities in lieu of bonds. Once I consider advice and make up my mind, I can implement as soon as possible correct? Thank you.

Current Allocation Including Funds of Interest with no Current Allocation (I only included the available index fund options):


Total = $402K
*82.3% US Equity
*6.1% Bond
*11.6% Intl


His old 401K (Mass Mutual):

Vanguard 500 Index Admiral $296K
Vanguard Mid Cap Index
Vanguard Small Cap Index
Vanguard Developed Markets Index Fund (0.07% ER)

His new 401K (Charles S)
SSgA S&P 500 Index Fund $3K
Vanguard Extended Market Index Fund
Vanguard Total International Stock Index Fund $0.5K
Vanguard Intermediate-Term Bond Index Fund -- $0.5K


Her 401K (Fidelity)

Fidelity 500 Index Fund $32K

Vanguard Rollover IRA from Previous 401K
Vanguard Intermediate Term Bond Index Fund Admiral Shares $24K
Vanguard Total International Stock Index Fund Admiral Shares $46K
***Additional access to all Vanguard investment types if needed


-----------------------------

Update Nov 19th....here are the Fixed Income / Bond Funds in my Mass Mutual "His old 401K" account:

MassMutual SAGIC Core II
Expense Ratio: 0.32%
*I have little experience with these sorts of funds but understand they operate similarly to bond-type investments.
3 month book value performance = 1.1% vs 0.5% 91-day Treasury Bills
1 Year = 3.5% versus 1.6
5 Year = 3.2% versus 0.5
10 year = 4.5% versus 0.3

Select MetWest Total Return Bond (SIA-QZ)
Expense Ratio = 0.35%
Last edited by PlayingLife on Mon Nov 19, 2018 3:31 pm, edited 2 times in total.

averagedude
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Re: 401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by averagedude » Sun Nov 18, 2018 3:41 pm

Determine your asset allocation, and do it from his old 401k since this is where most of the money is. I am assuming this is traditional. Its better to have your bonds in traditional instead of roth due to future projected growth.

PlayingLife
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Re: 401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by PlayingLife » Sun Nov 18, 2018 8:00 pm

Yes all 401k's and the Vanguard IRA are traditional, thank you for the note on where bonds should be.

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BL
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Re: 401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by BL » Sun Nov 18, 2018 8:57 pm

Since everything is traditional (tax-deferred), it doesn't really matter where you change to bonds.
I would do it wherever you think is simplest, which may be old 401k if they allow it.

Whichever one of you does not own the Rollover IRA could do a backdoor Roth if you want to.
Whenever you roll the rollover back to a 401k, that person could also do backdoor.

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ruralavalon
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Re: 401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by ruralavalon » Mon Nov 19, 2018 11:59 am

What bond funds are offered in his old 401k (Mass Mutual)? Please give fund names, tickers and expense ratios. If a stable value fund is offered there, what interest rate is paid? (That looks like the obvious place to add to your bond allocation, if a decent actively managed intermediate-term bond fund is offered.)

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

PlayingLife
Posts: 327
Joined: Sun Dec 29, 2013 3:10 pm

Re: 401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by PlayingLife » Mon Nov 19, 2018 3:29 pm

ruralavalon wrote:
Mon Nov 19, 2018 11:59 am
What bond funds are offered in his old 401k (Mass Mutual)? Please give fund names, tickers and expense ratios. If a stable value fund is offered there, what interest rate is paid? (That looks like the obvious place to add to your bond allocation, if a decent actively managed intermediate-term bond fund is offered.)

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
Thanks for the clear direction here, I added the Mass Mutual Bond Fund info to my original post above.

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ruralavalon
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Re: 401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by ruralavalon » Mon Nov 19, 2018 6:05 pm

PlayingLife wrote:
Mon Nov 19, 2018 3:29 pm
ruralavalon wrote:
Mon Nov 19, 2018 11:59 am
What bond funds are offered in his old 401k (Mass Mutual)? Please give fund names, tickers and expense ratios. If a stable value fund is offered there, what interest rate is paid? (That looks like the obvious place to add to your bond allocation, if a decent actively managed intermediate-term bond fund is offered.)

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
Thanks for the clear direction here, I added the Mass Mutual Bond Fund info to my original post above.
PlayingLife wrote:
Sun Nov 18, 2018 3:34 pm
Update Nov 19th....here are the Fixed Income / Bond Funds in my Mass Mutual "His old 401K" account:

MassMutual SAGIC Core II
Expense Ratio: 0.32%
*I have little experience with these sorts of funds but understand they operate similarly to bond-type investments.
3 month book value performance = 1.1% vs 0.5% 91-day Treasury Bills
1 Year = 3.5% versus 1.6
5 Year = 3.2% versus 0.5
10 year = 4.5% versus 0.3

Select MetWest Total Return Bond (SIA-QZ)
Expense Ratio = 0.35%
I appears that these two funds are Separate Accounts or Commingled Investment Trusts (CITs), rather than ordinary mutual funds. It looks like that "MassMutual SAGIC Core II" is a stable value fund, that " Select MetWest Total Return Bond (SIA-QZ)" is an intermediate-term bond fund, and I believe that both may be acceptable for a fixed income (bond) investment in your 401k. In your 401k materials there will be a short fact sheet (perhaps just 1 or 2 pages) which gives details about the each fund.

Can you please post a link to the fact sheet for each of those funds?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

PlayingLife
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Re: 401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by PlayingLife » Mon Nov 19, 2018 10:02 pm

ruralavalon wrote:
Mon Nov 19, 2018 6:05 pm
PlayingLife wrote:
Mon Nov 19, 2018 3:29 pm
ruralavalon wrote:
Mon Nov 19, 2018 11:59 am
What bond funds are offered in his old 401k (Mass Mutual)? Please give fund names, tickers and expense ratios. If a stable value fund is offered there, what interest rate is paid? (That looks like the obvious place to add to your bond allocation, if a decent actively managed intermediate-term bond fund is offered.)

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
Thanks for the clear direction here, I added the Mass Mutual Bond Fund info to my original post above.
PlayingLife wrote:
Sun Nov 18, 2018 3:34 pm
Update Nov 19th....here are the Fixed Income / Bond Funds in my Mass Mutual "His old 401K" account:

MassMutual SAGIC Core II
Expense Ratio: 0.32%
*I have little experience with these sorts of funds but understand they operate similarly to bond-type investments.
3 month book value performance = 1.1% vs 0.5% 91-day Treasury Bills
1 Year = 3.5% versus 1.6
5 Year = 3.2% versus 0.5
10 year = 4.5% versus 0.3

Select MetWest Total Return Bond (SIA-QZ)
Expense Ratio = 0.35%
I appears that these two funds are Separate Accounts or Commingled Investment Trusts (CITs), rather than ordinary mutual funds. It looks like that "MassMutual SAGIC Core II" is a stable value fund, that " Select MetWest Total Return Bond (SIA-QZ)" is an intermediate-term bond fund, and I believe that both may be acceptable for a fixed income (bond) investment in your 401k. In your 401k materials there will be a short fact sheet (perhaps just 1 or 2 pages) which gives details about the each fund.

Can you please post a link to the fact sheet for each of those funds?
I couldn't find the fact sheet but did see that the Sel MetWest Total Return Bond is listed as an option under the "Intermediate Term Bond" category, and SAGIC is listed under fixed income.

Here is the summary on SAGIC:
Investment Summary
SAGIC (51752SPE5)
Objective: A fixed rate of return for a specified period of time.Portfolio: This investment option invests in a diversified portfolio of fixed income securities, including, corporate, mortgage-backed, and government and agency bonds. The portfolio is wrapped by a general account guarantee to pay both a stated credited rate and book value on participant-directed transfers and bona fide benefit payments.

...along with a link to an overview of it
https://wwwrs.massmutual.com/rsstaticfi ... RS4609.pdf

PlayingLife
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Re: 401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by PlayingLife » Tue Nov 20, 2018 6:51 am

Actually upon further thought would there be any major red flags against doing the following?

1. Put all of the Vanguard Rollover IRA into Van Intermediate Term Bond or another Vanguard bond fund of your preference ($70K)
2. Move all assets from "His new 401K" into Vanguard Intermediate-Term Bond Index Fund and contribute only to Bond until I catch up to 20% total in bond which will take a short while
3. Leave "Her 401K" as is
4. Shift a given percentage from His Old 401K (Mass Mutual) into Vanguard Developed Markets Index to cover my international equity

With the new job I had a 6 month window this year where I couldn't invest, so now I am playing catch-up putting about $2K per pay period into 401K. With the method above and assuming nothing crazy in the market (cough cough) I would get the 20% bond share in quickly.

Assuming you agree, there's nothing wrong with putting these changes through today, correct?

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ruralavalon
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Location: Illinois

Re: 401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by ruralavalon » Tue Nov 20, 2018 11:26 am

PlayingLife wrote:
Tue Nov 20, 2018 6:51 am
Actually upon further thought would there be any major red flags against doing the following?

1. Put all of the Vanguard Rollover IRA into Van Intermediate Term Bond or another Vanguard bond fund of your preference ($70K)
2. Move all assets from "His new 401K" into Vanguard Intermediate-Term Bond Index Fund and contribute only to Bond until I catch up to 20% total in bond which will take a short while
3. Leave "Her 401K" as is
4. Shift a given percentage from His Old 401K (Mass Mutual) into Vanguard Developed Markets Index to cover my international equity

With the new job I had a 6 month window this year where I couldn't invest, so now I am playing catch-up putting about $2K per pay period into 401K. With the method above and assuming nothing crazy in the market (cough cough) I would get the 20% bond share in quickly.

Assuming you agree, there's nothing wrong with putting these changes through today, correct?
That would give you 18.4% in bonds now, I don't see any major red flags in this. You could do this now.

Also I suggest that you consider consolidation of accounts. What are the expense ratios of the funds you are using in your new 401k? What are the expense ratios of the funds you are using in your old 401k? The expense ratios charged for funds in a 401k are not necessarily the same as the expense ratios charged ordinary retail customers for the same funds. If the usual low expense ratios are charged in your new 401k it would be a good idea to consolidate the 401ks.

Will your current 401k accept a rollover from your old 401k? If so you might consolidate by rolling over your old 401k into your new 401k.

There are three basic choices for an old 401k.

1) If the funds offered in the old 401k are good with low expense ratios, and there is no account maintenance fee charged for keeping the account there or only a small fee, then it may be best to leave the old 401k where it is.

2) If the new 401k offers better funds with lower expense ratios, and will accept a rollover from the old 401k, then it may be best to roll the old 401k over into the new 401k.

3) If neither 401k offers good funds with low expense ratios then it may be best to roll the old 401k over to an IRA at a low cost provider like Vanguard or Fidelity.

Wiki article, 401k, ”Rollover to IRA".

Additional considerations include:

1) the convenience of having one fewer account to keep track and manage, if you move the old 401k into the new plan or an IRA;

2) depending on your state, a 401k plan may have greater protection from creditors than does an IRA;

3) a rollover to an IRA may impede ability to do a Backdoor Roth IRA for higher income individuals, and

4) a 401k allows distributions penalty free starting at age 55 if no longer employed, and has other provisions for withdrawals earlier than age 59.5. Wiki article, 401k, "Move to new 401k".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

PlayingLife
Posts: 327
Joined: Sun Dec 29, 2013 3:10 pm

Re: 401K Rebalancing Advice - Need to get this 6% bond allocation up!

Post by PlayingLife » Tue Nov 20, 2018 7:59 pm

ruralavalon wrote:
Tue Nov 20, 2018 11:26 am
PlayingLife wrote:
Tue Nov 20, 2018 6:51 am
Actually upon further thought would there be any major red flags against doing the following?

1. Put all of the Vanguard Rollover IRA into Van Intermediate Term Bond or another Vanguard bond fund of your preference ($70K)
2. Move all assets from "His new 401K" into Vanguard Intermediate-Term Bond Index Fund and contribute only to Bond until I catch up to 20% total in bond which will take a short while
3. Leave "Her 401K" as is
4. Shift a given percentage from His Old 401K (Mass Mutual) into Vanguard Developed Markets Index to cover my international equity

With the new job I had a 6 month window this year where I couldn't invest, so now I am playing catch-up putting about $2K per pay period into 401K. With the method above and assuming nothing crazy in the market (cough cough) I would get the 20% bond share in quickly.

Assuming you agree, there's nothing wrong with putting these changes through today, correct?
That would give you 18.4% in bonds now, I don't see any major red flags in this. You could do this now.

Also I suggest that you consider consolidation of accounts. What are the expense ratios of the funds you are using in your new 401k? What are the expense ratios of the funds you are using in your old 401k? The expense ratios charged for funds in a 401k are not necessarily the same as the expense ratios charged ordinary retail customers for the same funds. If the usual low expense ratios are charged in your new 401k it would be a good idea to consolidate the 401ks.

Will your current 401k accept a rollover from your old 401k? If so you might consolidate by rolling over your old 401k into your new 401k.

There are three basic choices for an old 401k.

1) If the funds offered in the old 401k are good with low expense ratios, and there is no account maintenance fee charged for keeping the account there or only a small fee, then it may be best to leave the old 401k where it is.

2) If the new 401k offers better funds with lower expense ratios, and will accept a rollover from the old 401k, then it may be best to roll the old 401k over into the new 401k.

3) If neither 401k offers good funds with low expense ratios then it may be best to roll the old 401k over to an IRA at a low cost provider like Vanguard or Fidelity.

Wiki article, 401k, ”Rollover to IRA".

Additional considerations include:

1) the convenience of having one fewer account to keep track and manage, if you move the old 401k into the new plan or an IRA;

2) depending on your state, a 401k plan may have greater protection from creditors than does an IRA;

3) a rollover to an IRA may impede ability to do a Backdoor Roth IRA for higher income individuals, and

4) a 401k allows distributions penalty free starting at age 55 if no longer employed, and has other provisions for withdrawals earlier than age 59.5. Wiki article, 401k, "Move to new 401k".
Just for sake of getting the bond % up I am going to do the moves I highlighted now, but will indeed look to consolidate later. I wasn't even thinking about moving "His Old 401K" into my current Vanguard rollover IRA, but this would extremely simplify things. However, could you please remind me why this might stop us from eventually doing a backdoor roth (this subject always confused me)? We have joint income of $240 - 270k in a HCOL area.

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