Is there a "good" bond fund in my 401(k)?

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Topic Author
Euphonium
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Joined: Mon Dec 19, 2016 9:56 am
Location: Minnesota

Is there a "good" bond fund in my 401(k)?

Post by Euphonium » Tue Aug 13, 2019 11:30 am

I have a roll-over T-IRA that I've been using for my bond allocation, slowing converting my equities to bonds as I buy equities in my ROTH IRA, HSA, and 401(k). I'm running out of room to convert more to bonds, and would like to start buying in my 401(k).

List of funds in my 401(k) with expense ratios:

VANGUARD TARGET (11 funds 2015-2065) 0.07%
VANGUARD TARGET INC 0.07%
VANG WINDSOR II ADM (VWNAX) 0.25%
VANG INST 500 IDX TR 0.015%
HARBOR CAP APP INST (HACAX) 0.71%
SMALL/MID CAP CORE 0.74%
INTL EQUITY FUND 0.56%
STABLE VALUE FUND 0.346%
FIAM CORE PLUS CL K 0.32%
FID CONTRAFUND POOL 0.43%
FID HIGH INCOME (SPHIX) 0.70%
SS TIPS 0.0766%

Questions:
What bond fund would be best to start using in my 401(k)? Or, would it make more sense to switch to a less aggressive target date fund to take advantage of a cheaper expense ratio?

Thanks!

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: Is there a "good" bond fund in my 401(k)?

Post by livesoft » Tue Aug 13, 2019 11:32 am

What is the current yield of the stable value fund? How often does it change? What was it last year?

The Vanguard Target Retirement Income fund is 70% bonds which could be fine for your needs.
Last edited by livesoft on Tue Aug 13, 2019 11:33 am, edited 1 time in total.
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mhc
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Re: Is there a "good" bond fund in my 401(k)?

Post by mhc » Tue Aug 13, 2019 11:33 am

Using a TR fund to get your bonds makes a lot of sense, especially with its low ER.

Topic Author
Euphonium
Posts: 3
Joined: Mon Dec 19, 2016 9:56 am
Location: Minnesota

Re: Is there a "good" bond fund in my 401(k)?

Post by Euphonium » Tue Aug 13, 2019 11:38 am

livesoft wrote:
Tue Aug 13, 2019 11:32 am
What is the current yield of the stable value fund? How often does it change? What was it last year?

The Vanguard Target Retirement Income fund is 70% bonds which could be fine for your needs.
I think this is what you're looking for.

YTD (Daily)*
+1.54%

Average Annual Returns
1 Yr: +2.47%
3 Yrs:+2.14%
5 Yrs:+2.02%
10 Yrs:+2.48%

The Turnover rate is 28.99%

Thanks!

megabad
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Joined: Fri Jun 01, 2018 4:00 pm

Re: Is there a "good" bond fund in my 401(k)?

Post by megabad » Tue Aug 13, 2019 11:49 am

As long as stable value has 4 or 5 different good insurers, you could use that. Sometimes this goes well with the "barbell approach" to investing if that is your cup of tea.

The Target Retirement Income (or near term year) would also allow low cost holding of fixed income, but you would need to contend with the other holdings as well.

Either one would be fine with me.

b42
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Joined: Thu Apr 11, 2013 7:00 pm

Re: Is there a "good" bond fund in my 401(k)?

Post by b42 » Tue Aug 13, 2019 11:53 am

You mentioned that you are running out of room to convert to more bonds. Do you mean from your Traditional IRA, or your Traditional IRA, Roth IRA, and HSA? You could check the Roth IRA and HSA to see if there is a bond fund that would work.

Northern Flicker
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Joined: Fri Apr 10, 2015 12:29 am

Re: Is there a "good" bond fund in my 401(k)?

Post by Northern Flicker » Tue Aug 13, 2019 12:39 pm

Need also to get the current crediting rate for the stable value fund. Looks like it may be around 2.25%. Also how often does it change?

Some due diligence for the stable value fund would be to understand any liquidity/withdrawal restrictions and when they are in effect. Also to understand if there are triggering events like a mass layoff at the employer that would allow withdrawals to be processed at market value of underlying assets instead of at stable/par value.

And understanding what the fund holds is important, as articulated above. The stable value fund should have been vetted by the 401K plan administrator in some way as well, which is additional protection against a problematic fund, but I would not depend on that as the only vetting.

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

Re: Is there a "good" bond fund in my 401(k)?

Post by lakpr » Wed Aug 14, 2019 6:00 am

mhc above has given you the correct answer. You have the Vanguard Target Retirement Income fund available in your 401k, with a 0.07% expense ratio. This fund is known to have a 30:70 split between stocks and bonds.

So divide the amount you intend to have in bonds by 0.7, and contribute that to the Vanguard Target Retirement Income fund. If that is $1000, then contribute $1428 (= $1000/0.7)

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: Is there a "good" bond fund in my 401(k)?

Post by retiredjg » Wed Aug 14, 2019 6:11 am

Another solution is to use only a target fund in the 401k and adjust other accounts accordingly. In fact, all your accounts could be target funds if you want real simplicity.

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