change 401K investments?

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Topic Author
donutlover11
Posts: 30
Joined: Thu Nov 21, 2019 1:06 pm

change 401K investments?

Post by donutlover11 » Fri Jul 31, 2020 9:32 am

Hello all,
I was analyzing his old 401K invested at Fidelity. It is invested in Vanguard Target Retirement 2045 which has an ER of 0.08%. I saw that we could also choose Vanguard Inst 500 Index Trust which has an ER of 0.014%. The Target fund is blended with stocks and bonds whereas the latter index is purely US large cap stocks.
My question is should I move to the 500 index fund? They both have had similar performance since inception which is ~10%. So the only reason I'd switch is the ER.
What do you all think?
Our information about asset allocation and all that other stuff is in my first ever post here in 11/2019. I would have linked to that post but don't know how to - apologies for that.
Thank you!

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David Jay
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Location: Michigan

Re: change 401K investments?

Post by David Jay » Fri Jul 31, 2020 10:34 am

I would not switch for the ER. If there is another reason, you are free to switch at any time without any cost or penalty.

Here is a link to the original portfolio post: viewtopic.php?f=1&t=295744&p=4852137#p4852137
Last edited by David Jay on Fri Jul 31, 2020 10:37 am, edited 1 time in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

lakpr
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Re: change 401K investments?

Post by lakpr » Fri Jul 31, 2020 10:34 am

You can choose the pencil icon to the top right hand corner of this post, and copy-paste the contents of your first post in Nov-2019 here. I suggest a copy-paste rather than just link to your previous post, because I doubt any respondent would flip back and forth between this post and the older one.

That said, 0.08% for a target date fund is nearly half-the-price of the same fund you can get in an IRA in retail. That's really just $80 for every $100k investment in the fund. Compared to the S&P500 which would cost you $13 per $100k, you are essentially paying $67 extra, or $5 per month extra. In return, you get DAILY REBALANCING, your assets are always guaranteed to be that 90:10 to start with and stick to the glide-path, you never need to bother about how your stocks or bonds are doing, and be forever assured that as you age, the fund you selected gradually grows conservative and reduces risk.

That peace of mind is invaluable, and definitely worth $5 a month.

I would NOT change a thing.

N.Y.Cab
Posts: 55
Joined: Wed Feb 07, 2018 8:46 pm

Re: change 401K investments?

Post by N.Y.Cab » Fri Jul 31, 2020 11:07 am

To maintain the 90:10 allocation and minimize cost, you could reallocate 20% to Target Retirement 2020 (with the 50:50 allocation) and 80% to 500 index or Total stock market if available.

Topic Author
donutlover11
Posts: 30
Joined: Thu Nov 21, 2019 1:06 pm

Re: change 401K investments?

Post by donutlover11 » Fri Jul 31, 2020 11:15 am

David Jay wrote:
Fri Jul 31, 2020 10:34 am
I would not switch for the ER. If there is another reason, you are free to switch at any time without any cost or penalty.

Here is a link to the original portfolio post: viewtopic.php?f=1&t=295744&p=4852137#p4852137
Thank you! I was about to hit the submit button on changing it today but decided to ask you all first and I'm so glad I did!

Topic Author
donutlover11
Posts: 30
Joined: Thu Nov 21, 2019 1:06 pm

Re: change 401K investments?

Post by donutlover11 » Fri Jul 31, 2020 11:15 am

lakpr wrote:
Fri Jul 31, 2020 10:34 am
You can choose the pencil icon to the top right hand corner of this post, and copy-paste the contents of your first post in Nov-2019 here. I suggest a copy-paste rather than just link to your previous post, because I doubt any respondent would flip back and forth between this post and the older one.

That said, 0.08% for a target date fund is nearly half-the-price of the same fund you can get in an IRA in retail. That's really just $80 for every $100k investment in the fund. Compared to the S&P500 which would cost you $13 per $100k, you are essentially paying $67 extra, or $5 per month extra. In return, you get DAILY REBALANCING, your assets are always guaranteed to be that 90:10 to start with and stick to the glide-path, you never need to bother about how your stocks or bonds are doing, and be forever assured that as you age, the fund you selected gradually grows conservative and reduces risk.

That peace of mind is invaluable, and definitely worth $5 a month.

I would NOT change a thing.
Thank you again lakpr for your help! Now I can rest easy:)

Topic Author
donutlover11
Posts: 30
Joined: Thu Nov 21, 2019 1:06 pm

Re: change 401K investments?

Post by donutlover11 » Fri Jul 31, 2020 11:17 am

N.Y.Cab wrote:
Fri Jul 31, 2020 11:07 am
To maintain the 90:10 allocation and minimize cost, you could reallocate 20% to Target Retirement 2020 (with the 50:50 allocation) and 80% to 500 index or Total stock market if available.
Thank you N.Y.Cab!

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ruralavalon
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Location: Illinois

Re: change 401K investments?

Post by ruralavalon » Fri Jul 31, 2020 4:01 pm

donutlover11 wrote:
Fri Jul 31, 2020 11:15 am
David Jay wrote:
Fri Jul 31, 2020 10:34 am
I would not switch for the ER. If there is another reason, you are free to switch at any time without any cost or penalty.

Here is a link to the original portfolio post: viewtopic.php?f=1&t=295744&p=4852137#p4852137
Thank you! I was about to hit the submit button on changing it today but decided to ask you all first and I'm so glad I did!
Wise choice in my opinion :D .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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