401K - stay with current fund?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
JRae
Posts: 5
Joined: Sun Aug 11, 2019 10:15 pm

401K - stay with current fund?

Post by JRae » Sun Aug 11, 2019 10:21 pm

New to posting here but I have been reading for awhile. I'm wondering if the 401K I am in would be fine to keep or if I should move out of the fund based on expense ratio? I currently have my 401K in T Rowe Price Retirement 2050 C with an expense ratio of 0.38.

These are the Vanguard funds I have available and are the only ones that would be cheaper than what I currently hold with T Rowe:

Vanguard Institutional Index (Large) e.r. 0.02
Vanguard Extended Marked Index Fund (Mid-Cap) e.r. 0.06
Vanguard Developed Markets (Foreign Large Blend) e.r. 0.05
Vanguard Total Bond Market Index e.r. 0.035

(If I went this route, I'm not sure which percentages would be needed to combine these correctly)

Other info: I am 37, looking for around 85% stock 15% bonds (possibly 80/20). I have a Roth IRA with Vanguard (Target date 2045) and my spouse is opening a Roth IRA this year - we were thinking of putting only VTSAX and VBTLK in that ROTH vs.a target date (?)

Thanks for any tips!

lakpr
Posts: 2118
Joined: Fri Mar 18, 2011 9:59 am

Re: 401K - stay with current fund?

Post by lakpr » Mon Aug 12, 2019 1:04 am

If I were you, I would definitely switch to the 3-fund portfolio.

The composition of the T Rowe Price Retirement 2050 fund is

57% domestic stocks
30% international equities
13% fixed income

https://www.morningstar.com/funds/xnas/trrmx/portfolio

It is not very clear the exact break down of international equities between Developed markets and Emerging markets. But given that the EM has a market cap of 5%, I think you can safely omit them altogether without any noticeable loss of returns on your investments.

So in order to duplicate the TRRMX portfolio, you can

45% to Institutional Index fund
12% to Extended Market Index fund
30% to Developed Markets Index fund
13% to Bond Market Index fund.

(The first two are split approximately 4:1 ratio to simulate total domestic stock market index fund).

The weighted expense ratio of this portfolio boosts your return at least 0.3%

Topic Author
JRae
Posts: 5
Joined: Sun Aug 11, 2019 10:15 pm

Re: 401K - stay with current fund?

Post by JRae » Mon Aug 12, 2019 1:29 am

Thank you, that is very helpful! Is it of any concern that there would be no small cap fund involved?

lakpr
Posts: 2118
Joined: Fri Mar 18, 2011 9:59 am

Re: 401K - stay with current fund?

Post by lakpr » Mon Aug 12, 2019 1:34 am

The extended market index does include Small Cap in their market weighted ratio. It is basically the complement of the Institutional Index fund

Lou354
Posts: 614
Joined: Sun Apr 03, 2016 10:51 pm

Re: 401K - stay with current fund?

Post by Lou354 » Mon Aug 12, 2019 1:38 am

JRae wrote:
Mon Aug 12, 2019 1:29 am
Thank you, that is very helpful! Is it of any concern that there would be no small cap fund involved?
No concern because the Extended Market Fund includes mid-cap and small-cap.

User avatar
Stinky
Posts: 1499
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: 401K - stay with current fund?

Post by Stinky » Mon Aug 12, 2019 8:08 am

JRae wrote:
Sun Aug 11, 2019 10:21 pm
New to posting here but I have been reading for awhile. I'm wondering if the 401K I am in would be fine to keep or if I should move out of the fund based on expense ratio? I currently have my 401K in T Rowe Price Retirement 2050 C with an expense ratio of 0.38.

These are the Vanguard funds I have available and are the only ones that would be cheaper than what I currently hold with T Rowe:

Vanguard Institutional Index (Large) e.r. 0.02
Vanguard Extended Marked Index Fund (Mid-Cap) e.r. 0.06
Vanguard Developed Markets (Foreign Large Blend) e.r. 0.05
Vanguard Total Bond Market Index e.r. 0.035

(If I went this route, I'm not sure which percentages would be needed to combine these correctly)

Other info: I am 37, looking for around 85% stock 15% bonds (possibly 80/20). I have a Roth IRA with Vanguard (Target date 2045) and my spouse is opening a Roth IRA this year - we were thinking of putting only VTSAX and VBTLK in that ROTH vs.a target date (?)

Thanks for any tips!
Welcome to the Forum! Glad that you found us.

As others have mentioned, you can shift into other funds within your lineup and save about 0.30% in expenses. That expense savings will really add up over your investment horizon.

Congratulations to you for recognizing this situation within your plan, and bringing it to the attention of the Forum.
It's a GREAT day to be alive - Travis Tritt

Topic Author
JRae
Posts: 5
Joined: Sun Aug 11, 2019 10:15 pm

Re: 401K - stay with current fund?

Post by JRae » Mon Aug 12, 2019 8:28 pm

lakpr wrote:
Mon Aug 12, 2019 1:34 am
The extended market index does include Small Cap in their market weighted ratio. It is basically the complement of the Institutional Index fund
Perfect - that's what I was assuming but wanted to be sure. Thanks again!

Topic Author
JRae
Posts: 5
Joined: Sun Aug 11, 2019 10:15 pm

Re: 401K - stay with current fund?

Post by JRae » Mon Aug 12, 2019 8:32 pm

Stinky wrote:
Mon Aug 12, 2019 8:08 am

Welcome to the Forum! Glad that you found us.

As others have mentioned, you can shift into other funds within your lineup and save about 0.30% in expenses. That expense savings will really add up over your investment horizon.

Congratulations to you for recognizing this situation within your plan, and bringing it to the attention of the Forum.
Appreciate the welcome and the advice!!

User avatar
ruralavalon
Posts: 16173
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 401K - stay with current fund?

Post by ruralavalon » Tue Aug 13, 2019 1:18 pm

Welcome to the forum :) .

I would switch to the individual index funds.

In your 401k my suggestion is:
60%, Vanguard Institutional Index (a S&P 500 index fund, 82% of U.S.stock market) e.r. 0.02;
00%, Vanguard Extended Marked Index Fund (Mid-Cap, and Small-cap) e.r. 0.06;(optional at about 10-15%, with 45-50% Institutional index fund);
20%, Vanguard Developed Markets (Foreign Large Blend) e.r. 0.05; and
20%, Vanguard Total Bond Market Index e.r. 0.035.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
JRae
Posts: 5
Joined: Sun Aug 11, 2019 10:15 pm

Re: 401K - stay with current fund?

Post by JRae » Tue Aug 13, 2019 10:13 pm

ruralavalon wrote:
Tue Aug 13, 2019 1:18 pm
Welcome to the forum :) .

I would switch to the individual index funds.

In your 401k my suggestion is:
60%, Vanguard Institutional Index (a S&P 500 index fund, 82% of U.S.stock market) e.r. 0.02;
00%, Vanguard Extended Marked Index Fund (Mid-Cap, and Small-cap) e.r. 0.06;(optional at about 10-15%, with 45-50% Institutional index fund);
20%, Vanguard Developed Markets (Foreign Large Blend) e.r. 0.05; and
20%, Vanguard Total Bond Market Index e.r. 0.035.
Thanks for the feedback! Curious about the international fund, why 20% instead of 30%?

If it's helpful, the Roth IRA I have (VINIX) is:

Vanguard Total Stock Market Index Fund - 54.4%
Vanguard Total International Stock Index Fund - 35.5%
Vanguard Total Bond Market II Index Fund - 7.1%
Vanguard Total International Bond Index Fund - 3%

User avatar
ruralavalon
Posts: 16173
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 401K - stay with current fund?

Post by ruralavalon » Wed Aug 14, 2019 8:53 am

JRae wrote:
Tue Aug 13, 2019 10:13 pm
ruralavalon wrote:
Tue Aug 13, 2019 1:18 pm
Welcome to the forum :) .

I would switch to the individual index funds.

In your 401k my suggestion is:
60%, Vanguard Institutional Index (a S&P 500 index fund, 82% of U.S.stock market) e.r. 0.02;
00%, Vanguard Extended Marked Index Fund (Mid-Cap, and Small-cap) e.r. 0.06;(optional at about 10-15%, with 45-50% Institutional index fund);
20%, Vanguard Developed Markets (Foreign Large Blend) e.r. 0.05; and
20%, Vanguard Total Bond Market Index e.r. 0.035.
Thanks for the feedback! Curious about the international fund, why 20% instead of 30%?
I suggest being in the range of 20-30% of stocks in international stocks. The mid point is 25% of stocks in international stocks, which works out to 20% of portfolio.

In my opinion 33% of stocks in international stocks, being 30% of portfolio, is within the range of what is reasonable.
If it's helpful, the Roth IRA I have (VINIX) is:

Vanguard Total Stock Market Index Fund - 54.4%
Vanguard Total International Stock Index Fund - 35.5%
Vanguard Total Bond Market II Index Fund - 7.1%
Vanguard Total International Bond Index Fund - 3%
I don't understand what you are saying about your IRA.
Last edited by ruralavalon on Thu Aug 15, 2019 7:54 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

lakpr
Posts: 2118
Joined: Fri Mar 18, 2011 9:59 am

Re: 401K - stay with current fund?

Post by lakpr » Wed Aug 14, 2019 11:32 pm

JRae,

Why bonds in a Roth IRA? Growth in Roth accounts is tax free, so you want to stick your Roth accounts strictly with those asset classes that gave highest expected growth. In other words, only stocks.

You should get your bonds into tax deferred accounts. 401k or Traditional IRAs.

Post Reply