Please help with 403b

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
rs3000
Posts: 1
Joined: Thu Feb 14, 2019 12:44 pm

Please help with 403b

Post by rs3000 »

Hi all! I've recently started a new job and I'm looking for advice on fund allocations for my 403b. My company uses Transamerica and unfortunately many of the funds seem to have high cost but I'm looking to make the best of it.

Emergency funds: Have 6 months in HYSA (2.35%)
Debt: $200k school loans at 4.5% (on track to be paid off in next 2-3 years)
Tax Filing Status: Single
Tax Rate: 35% Federal, 5.99% State
State of Residence: RI
Age: 30
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 10-20% of stocks

Currently, I am maxing out 403b contributions and a traditional IRA which will be rolled into a Roth. Most of the rest goes towards paying down student loans which I want to get rid of ASAP. Roth only has $10k which is fully invested in SWTSX with Schwab.

Here are the funds that are available: https://imgur.com/a/x72ETzN

My thoughts so far are as follows but any advice is greatly appreciated!

10% in either of these for bonds:
Pioneer Bond Y "PICYX" (ER 0.47)
JPMorgan Government Bond I "HLGAX" (ER 0.48)

50% in Large Cap:
Transamerica Stock Index R4 "TSTFX" (ER 0.30)

15% in Mid Cap:
Dreyfus Mid Cap Index Inv "PESPX" (ER 0.50)

15% in either of these small cap:
Wells Fargo Special Small Cap Value A "ESPAX" (ER 1.31)
AB Small Cap Growth A "QUASX" (ER 1.15)

10% in international:
American Funds Capital World Gr&Inc R3 "RWICX" (ER 1.09)
bloom2708
Posts: 8360
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Please help with 403b

Post by bloom2708 »

I would do:

Pre-tax max of $19k:

80% Transamerica Stock Index R4

20% Pioneer Bond Y

Put International in Roth IRA. You should be doing a back door Roth IRA each year. $5,500 for 2018. $6,000 for 2019. It sounds like you are doing this with your non-deductible Traditional IRA to Roth comments.

Bonds in 403b, balance in stocks. Stock index funds in Roth (International for now) and US + International index funds in Taxable if/when you start one.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
Rupert
Posts: 4122
Joined: Fri Aug 17, 2012 12:01 pm

Re: Please help with 403b

Post by Rupert »

Absolutely no on those three funds with ERs over 1. Hold international and an extended-market fund (which includes small+mid caps) elsewhere (Roth IRA and/or taxable). I too would make the Transamerica large-cap fund and the Pioneer bond fund my core holdings in this plan.
Thecallofduty
Posts: 90
Joined: Sat Jan 19, 2019 10:59 am

Re: Please help with 403b

Post by Thecallofduty »

bloom2708 wrote: Thu Feb 14, 2019 2:54 pm I would do:

Pre-tax max of $19k:

80% Transamerica Stock Index R4

20% Pioneer Bond Y

Put International in Roth IRA. You should be doing a back door Roth IRA each year. $5,500 for 2018. $6,000 for 2019. It sounds like you are doing this with your non-deductible Traditional IRA to Roth comments.

Bonds in 403b, balance in stocks. Stock index funds in Roth (International for now) and US + International index funds in Taxable if/when you start one.

+1
-thecallofduty
User avatar
ruralavalon
Posts: 20127
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

organ Re: Please help with 403b

Post by ruralavalon »

Welcome to the forum :) .

It's good to see that you are vigorously attacking the $200k 4.5% student debt, while making maximum contributions to your 403b and IRA.

In my opinion the better funds to consider using in your 403b plan are:
1) TransAmerica Stock Index Fund R4 (a S&P 500 index fund) (TSTFX) ER 0.30%
2) American Funds EuroPacific Growth R3 (both developed and emerging markets) (RERCX) 1.13%; and
3) JPMorgan Government Bond I (intermediate-term, very high credit quality) (HLGAX) ER 0.48%.


Bonds.
JPMorgan Government Bond Fund is an intermediate-term (average effective duration = 5.31 years) bond fund, with very high credit quality (average credit quality = AAA). The Pioneer fund (PICYX) is also intermediate-term (average effective duration = 5.89 years) but has a much lower credit quality (average credit quality = BBB).

Both funds have moderate expense ratios.

In my opinion the primary purpose of a bond allocation is safety, and the JPMorgan fund is the safer bond fund.


International stocks.
American Funds EuroPacific Growth Fund is a diversified international stock fund. American Funds Capital World Growth and Income is a world stock fund, about 50% in U.S. stocks. Your better choice for Investing in U.S. stocks is the TransAmerica Stock Index Fund, so the better choice for international stocks is American Funds EuroPacific Growth Fund.


U.S. stocks.
I prefer a total stock market index fund if available. Otherwise a S&P 500 index fund (like TransAmerica Stock Index Fund in your 403b plan) is good enough by itself for investing in 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 27 years,since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical.

I don't believe that it will be worthwhile to use the higher expense mid-cap or small-cap funds offered in your 403b plan.


Asset location, accounts.
In general (if the account sizes permit) I suggest preferably using the 403b for a bond fund and the U.S. stock index fund, and using the Roth IRA for an inexpensive, diversified international stock index fund.

You said that there is currently $10k in your Roth IRA. Is the Roth IRA with Schwab?

How much is currently in your 403b account?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Post Reply