Playing catch up

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Topic Author
Youngbuck21
Posts: 8
Joined: Tue Nov 17, 2020 8:57 am

Playing catch up

Post by Youngbuck21 »

Hey everyone my first post here (Recently edited to put into better format for you guys). Looking for some good advice. I didn't have much help from parents teaching me about investing. I got off to a later start than i would have liked. I was supposed to receive a pension from work when i retired however about 8 years ago they froze our pension (I was 27 years old). So instead of receiving over 2k/month when i retire it is now worth about $435/month when i retire. So that's when i got serious about investing. Our personal goals would be to retire around 55-57 years old if possible. So here's my situation.

Emergency funds: 3 months saved
Debt: 112k remaining on 350k home. 2.75 fixed 15 year loan. (5 years remaining)
Tax Filing Status: Married filling jointly
Tax Rate: 22% Federal, xx% State
State of Residence: PA
Age: HIM 35 HER 35

Desired Asset allocation: ????
Desired International allocation:????????

ME 401k max plus 5% MATCH -75K
American Fnds 2050 Trgt Dt Ret Fd

Options for 401k (Working on expense Ratios)
-------------------------------
MFS VALUE FUND
VANGUARD 500 INDEX FUND
ALGER SPECTRA FUND
VANGUARD MID CAP INDEX FUND
MASSMUTUAL SELECT MID CAP GROWTH FUND
AMERICAN BEACON SMALL CAP VALUE FUND
VANGUARD SMALL CAP INDEX FUND
VANGUARD DEVELOPED MARKETS INDEX FUND
MFS INTERNATIONAL GROWTH FUND
DFA EMERGING MARKETS CORE EQUITY PORTFOLIO FUND
VANGUARD RAL ESTATE INDEX FUND
GUARANTEED
METROPOLITAN WEST TOTAL RETURN BOND FUND
PIMCO INCOME FUND
AND THE REST OF THE TARGET DATE 2010-2060 FUNDS

HER 401K max plus 6% MATCH-100k
Working on getting this info

ME Roth IRA max-~50k
Growth Fnd of America Class A American Funds AGTHX 25K
New Perspective Fnds Class A American Funds ANWPX 9K
New World Fund Class A American Funds NEWFX 15k

Her Roth IRA just recently maxed ~15K
Fundamental Investors Fund Class A American Fnds ANCFX 9K
New World Fund Class A American Funds NEWFX 6K

Taxable account BGC PARTNERS (BGCP)- 3K Just bought last year
_____________________________________
Total 243k invested

I have HSA: Currently about 40/month shy of maxing (yes i know i need to do that) balance ~9k
2 BOYS (8 & 2)- We put some money back into their 529. One account has 9k the other has about 2k

I feel a bit upset with myself after seeing how i relied too much on receiving that pension. I missed out on investing from 18-27 years old
I started my roth IRA at 27 years old and started my 401k at 32 years old.
Mortgage will be paid off by 40 years old. That will free up 2k per month
What would you suggest that I do to attempt to make up for the early years i missed out on investing?
After seeing what most of you have posted I feel that i'm on track but way behind where most of you guys are. Yes i know everyone says to just worry about yourself and not compare to others but I just feel like i'm playing catch up.
Thanks for any advice you could give.
Last edited by Youngbuck21 on Fri Nov 20, 2020 2:43 pm, edited 2 times in total.
pkcrafter
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Re: Playing catch up

Post by pkcrafter »

Welcome to the forum,

We need more information--follow this suggested format

viewtopic.php?f=1&t=6212

You can edit your original post by clicking on the pencil icon (upper right) in the post.



Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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ruralavalon
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Location: Illinois

Re: Playing catch up

Post by ruralavalon »

Welcome to the forum :) .

Youngbuck21 wrote: Tue Nov 17, 2020 10:45 am Hey everyone my first post here. Looking for some good advice. I didn't have much help from parents teaching me about investing. I got off to a later start than i would have liked. I was supposed to receive a pension from work when i retired however about 8 years ago they froze our pension (I was 27 years old). So instead of receiving over 2k/month when i retire it is now worth about $435/month when i retire. So that's when i got serious about investing. So here's my situation.
Wife and I both 35 years old
ME 401k max plus about 4k matching -75K
HER 401K max plus about 7k matching-100k
ME Roth IRA max-~50k
HER ROTH IRA max (started late)-15k
Taxable account(BGCP)-3K Just bought last year
_____________________________________
Total 243k invested

I have HSA: Currently about 40/month shy of maxing (yes i know i need to do that) balance ~9k
2 BOYS (8 & 2)- We put some money back into their 529. One account has 9k the other has about 2k
I feel a bit upset with myself after seeing how i relied too much on receiving that pension. I missed out on investing from 18-27 years old
I started my roth IRA at 27 years old and started my 401k at 32 years old.
Mortgage will be paid off by 40 years old. That will free up 2k per month
What would you suggest that I do to attempt to make up for the early years i missed out on investing?
After seeing what most of you have posted I feel that i'm on track but way behind where most of you guys are. Yes i know everyone says to just worry about yourself and not compare to others but I just feel like i'm playing catch up.
Thanks for any advice you could give.
You are no doing so bad, and are not too late in starting.

It's good to see that you are making maximum annual employee contributions to two 401ks, and maximum annual contributions two Roth IRAs.

Establishing a high rate of contributions is the most important investing decision you can make.

pkcrafter wrote: Tue Nov 17, 2020 11:08 am Welcome to the forum,

We need more information--follow this suggested format

viewtopic.php?f=1&t=6212

You can edit your original post by clicking on the pencil icon (upper right) in the post.



Paul
+ 1 . More information in that format will be necessary in order for us to make specific suggestions for your consideration.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Onlineid3089
Posts: 89
Joined: Thu Jan 02, 2020 3:47 pm

Re: Playing catch up

Post by Onlineid3089 »

Without the additional information I'd say you're doing just fine and far better than most. You may or may not have had a slightly later start, but your contributions listed are way bigger than the average couple will ever be able to make. With maxing those tax advantaged accounts plus the listed match you're looking at almost 70,000 in new tax advantaged contributions each year.

Unless you have super high expenses and/or want to retire really early I'd say you're doing great.
Topic Author
Youngbuck21
Posts: 8
Joined: Tue Nov 17, 2020 8:57 am

Re: Playing catch up

Post by Youngbuck21 »

Thanks for the responses. I will work on updating my info as you have suggested. The question was asked if I have high expenses. I do not. However I would like to set a goal for myself to retire 55-57 years old.
Topic Author
Youngbuck21
Posts: 8
Joined: Tue Nov 17, 2020 8:57 am

Re: Playing catch up

Post by Youngbuck21 »

I'm having trouble finding my expense ratio for my 401k account through Mass Mutual. Any tips where to look?
tashnewbie
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Joined: Thu Apr 23, 2020 12:44 pm

Re: Playing catch up

Post by tashnewbie »

Youngbuck21 wrote: Fri Nov 20, 2020 2:20 pm I'm having trouble finding my expense ratio for my 401k account through Mass Mutual. Any tips where to look?
Go into your online account with your employer's custodian. There should be investment fund information there. Also look for the Summary Plan Description or some type of annual statement. The information about ER should be there.

What other options are available in his 401k?
Topic Author
Youngbuck21
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Joined: Tue Nov 17, 2020 8:57 am

Re: Playing catch up

Post by Youngbuck21 »

.39% annual operating expenses. Is that what i'm after
tashnewbie
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Re: Playing catch up

Post by tashnewbie »

I think you're doing well. High savings rate. You're well on your way to financial independence!

Where are the 2 Roth IRAs located? What company holds these accounts?

It looks like you're using high expense funds in the Roth IRAs. Does the company have any low-cost index funds that you can use? If not, I would move them to a low-cost brokerage like Schwab, Fidelity, Vanguard. Then invest in low-cost index funds like a total stock market fund (US and/or international).

If you decide to change brokerages, you may want to liquidate the Roth IRAs before transferring to a new brokerage. Some brokerages (most?) charge a fee to sell an outside fund.

ETA: I probably would not put a lot of $$$ into single stocks. Keep an eye out on that in your taxable account.
Topic Author
Youngbuck21
Posts: 8
Joined: Tue Nov 17, 2020 8:57 am

Re: Playing catch up

Post by Youngbuck21 »

MFS VALUE FUND
VANGUARD 500 INDEX FUND
ALGER SPECTRA FUND
VANGUARD MID CAP INDEX FUND
MASSMUTUAL SELECT MID CAP GROWTH FUND
AMERICAN BEACON SMALL CAP VALUE FUND
VANGUARD SMALL CAP INDEX FUND
VANGUARD DEVELOPED MARKETS INDEX FUND
MFS INTERNATIONAL GROWTH FUND
DFA EMERGING MARKETS CORE EQUITY PORTFOLIO FUND
VANGUARD RAL ESTATE INDEX FUND
GUARANTEED
METROPOLITAN WEST TOTAL RETURN BOND FUND
PIMCO INCOME FUND
AND THE REST OF THE TARGET DATE 2010-2060 FUNDS
Topic Author
Youngbuck21
Posts: 8
Joined: Tue Nov 17, 2020 8:57 am

Re: Playing catch up

Post by Youngbuck21 »

ROTH IRA Accounts are through Raymond James
tashnewbie
Posts: 929
Joined: Thu Apr 23, 2020 12:44 pm

Re: Playing catch up

Post by tashnewbie »

Youngbuck21 wrote: Fri Nov 20, 2020 2:36 pm MFS VALUE FUND
VANGUARD 500 INDEX FUND
ALGER SPECTRA FUND
VANGUARD MID CAP INDEX FUND
MASSMUTUAL SELECT MID CAP GROWTH FUND
AMERICAN BEACON SMALL CAP VALUE FUND
VANGUARD SMALL CAP INDEX FUND
VANGUARD DEVELOPED MARKETS INDEX FUND
MFS INTERNATIONAL GROWTH FUND
DFA EMERGING MARKETS CORE EQUITY PORTFOLIO FUND
VANGUARD RAL ESTATE INDEX FUND
GUARANTEED
METROPOLITAN WEST TOTAL RETURN BOND FUND
PIMCO INCOME FUND
AND THE REST OF THE TARGET DATE 2010-2060 FUNDS
I'm assuming these are the options in his 401k. Edit your original post (pencil icon in upper right corner of the post) to add this information there. It's really helpful for everyone when all of the relevant information is in one place.

Do you have expense ratios for these funds?

Without knowing the ERs, I assume the index funds are the cheapest. I would use these (or maybe a target date fund, if the ER is low):

VANGUARD 500 INDEX FUND
VANGUARD DEVELOPED MARKETS INDEX FUND
METROPOLITAN WEST TOTAL RETURN BOND FUND -- (maybe, depending on ER)
Silverado
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Re: Playing catch up

Post by Silverado »

Youngbuck21 wrote: Fri Nov 20, 2020 2:36 pm MFS VALUE FUND
VANGUARD 500 INDEX FUND
ALGER SPECTRA FUND
VANGUARD MID CAP INDEX FUND
MASSMUTUAL SELECT MID CAP GROWTH FUND
AMERICAN BEACON SMALL CAP VALUE FUND
VANGUARD SMALL CAP INDEX FUND
VANGUARD DEVELOPED MARKETS INDEX FUND
MFS INTERNATIONAL GROWTH FUND
DFA EMERGING MARKETS CORE EQUITY PORTFOLIO FUND
VANGUARD RAL ESTATE INDEX FUND
GUARANTEED
METROPOLITAN WEST TOTAL RETURN BOND FUND
PIMCO INCOME FUND
AND THE REST OF THE TARGET DATE 2010-2060 FUNDS

There should be expense ratios for each of those, and I would hope a couple would be quite low. Like 0.05% or less low.
pseudoiterative
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Location: australia

Re: Playing catch up

Post by pseudoiterative »

I'm not impressed with the expense ratios on those "american funds"

ANCFX 0.62% expense ratio, holding 80% US equities
NEWFX 1.03% expense ratio, emerging markets exposure. 45% domiciled in emerging markets, 25% in US, ...
ANWPX 0.76% expense ratio, holding 54% US equities & a bunch of trendy tech names (5% TSLA, 3% AMZN, 3% FB, 3% MSFT, 3% TSMC, ...)
AGTHX 0.64% expense ratio, holding 86% US equities

Given the current relatively high price to value of US equities, the long term real return on holding US equities might be on the order of 3% / yr -- 4% / yr after subtracting inflation. Paying expense ratios of 0.6% / yr -- 1% / yr is a whopping 15% to 33% of that return. There are much lower expense ways to get exposure to US equities.
What would you suggest that I do to attempt to make up for the early years i missed out on investing?
After seeing what most of you have posted I feel that i'm on track but way behind where most of you guys are.
Be aware that the bogleheads forums are not a representative sample of people -- most people in the general population have zero wealth, but they're much less likely to show up here for investment advice as they've got nothing to invest, they've got other (harder) problems. People posting on this board are much more likely to have higher wealth and/or higher income than most people. E.g. on another forum I frequent someone much older than you was celebrating finally managing to pay off credit card debt that had gotten out of control and been burdening them for 20 years - a great achievement for them. In contrast your family is in a _much_ healthier financial position.

I think you are doing fine and are on track to realise your goals of retirement. I'm not familiar with the details of how US tax-advantaged retirement accounts work, but if I understand that you're each maximising contributions into your tax-advantaged retirement accounts - say making $25.5k / yr contributions (ignoring the match), then there's a good chance you will _each_ have accumulated enough stock investments over the next 20 years time to _each_ sustain monthly withdrawals of $2.5k / month .
Last edited by pseudoiterative on Fri Nov 20, 2020 3:37 pm, edited 1 time in total.
lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Playing catch up

Post by lakpr »

If you are maxing your 401k and your spouse is also maxing her 401k, *AND* you are in the 22% bracket, your combined income should have been more than $150k = $105k (top of 12% bracket) + $39k (two 401k maxed out) + $6k (assumed health care premiums per year).

Is that assumption true? If not, your marginal tax rate might be 12% instead of 22%. OR, can be 12% if you choose to max out the 401k with Traditional, not Roth, contributions.

I bring this point up because, far too often, people just look up the combined income of two spouses, and verify that against the tax brackets AGI published by the IRS. Ignoring the impact of making the 401k contributions and the healthcare premiums deducted pre-tax out of the paycheck.

That said, I will second @tashnewbie's recommendations for your portfolio.
tashnewbie wrote: Fri Nov 20, 2020 2:41 pm Without knowing the ERs, I assume the index funds are the cheapest. I would use these (or maybe a target date fund, if the ER is low):

VANGUARD 500 INDEX FUND
VANGUARD DEVELOPED MARKETS INDEX FUND
METROPOLITAN WEST TOTAL RETURN BOND FUND -- (maybe, depending on ER)
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ruralavalon
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Location: Illinois

Re: Playing catch up

Post by ruralavalon »

Tax bracket.
Here are methods you can use to estimate your federal tax bracket. First estimate your "taxable income". Moneychimp, "Tax Calculator". Or if your income etc. is fairly consistent from year to year, then look at your 1040 tax return for last year for your "taxable income". Then use your "taxable income" to estimate your "tax bracket". Moneychimp, "Federal Tax Brackets".



Asset allocation.
At age 35 I suggest about 20% in bonds or other fixed income investments (like CDs, savings accounts, money market fund). This is expected to substantially reduce portfolio volatility (risk), with only a relatively modest decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see:
1) Wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk";
2) Wiki article, "Asset allocation";
3) Morningstar (8/20/2019), "The Best Diversifiers for Your Equity Portfolio";
4) White Coat Investor (9/23/2016), "In Defense of Bonds"; and
5) Ben Carlson (8/2/2020), "Why Would Anyone Own Bonds Right Now?"

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities", available as an archived pdf. Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). The diversification benefit has varied over time. (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box, upper right, this page).

That works out to about 20% bonds, 20% international stocks, and 60% domestic stocks. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.



Roth IRAs.
Youngbuck21 wrote: Fri Nov 20, 2020 2:39 pm ROTH IRA Accounts are through Raymond James
I suggest rolling over both Roth IRAs at Raymond James to Roth IRAs at a low cost fund provider like Vanguard, Fidelity or Schwab. This choice is a largely a matter of personal preference. My personal preference is Vanguard. After the rollovers, invest the Roth IRAs in very diversified index funds with very low expense ratios such as Vanguard Total Stock Market Index (VTSAX) ER 0.04%.

Raymond James has you in actively managed funds with higher expense ratios and high front end sales charges (e.g. AGTHX has a front load of 5.75% and an expense ratio of 0.64%). Low expense ratios are critical to long-term investing performance. Seemingly small annual fees can have a large cumulative impact over time. Here is a "Mutual fund fees calculator" you could use to estimate the impact of investing expenses.

Also, low expense ratios are the best predictor of future performance. Morningstar, 8/9/10 . “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”

"The expense ratio is the most proven predictor of future fund returns." "There are many other things to consider, but investors should make expense ratios their first or second screen." Morningstar, 5/5/18.

In general index funds have usually done better than actively managed funds. Please see:
(1) Morningstar (9/20/2019), "Active Funds vs. Passive Funds: Which Fund Types Had Increased Success Rates? ", link ; and
(2) Index Fund Advisors (11/25/2019), "SPIVA: Mid-Year 2019 Active vs. Passive Scorecard", link.




Your 401k.
I agree that these are the best funds to use in your employer's 401k plan:
Without knowing the ERs, I assume the index funds are the cheapest. I would use these (or maybe a target date fund, if the ER is low):

VANGUARD 500 INDEX FUND
VANGUARD DEVELOPED MARKETS INDEX FUND
METROPOLITAN WEST TOTAL RETURN BOND FUND -- (maybe, depending on ER)
In your employer's 401k plan what are the expense ratios charged on each of those funds?
Last edited by ruralavalon on Sat Nov 21, 2020 12:27 pm, edited 3 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
retired@50
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Re: Playing catch up

Post by retired@50 »

Youngbuck21 wrote: Tue Nov 17, 2020 10:45 am ...
Tax Rate: 22% Federal, xx% State
State of Residence: PA
...
Desired Asset allocation: ????
Desired International allocation:????????

Options for 401k (Working on expense Ratios)
-------------------------------
VANGUARD 500 INDEX FUND
VANGUARD DEVELOPED MARKETS INDEX FUND
METROPOLITAN WEST TOTAL RETURN BOND FUND <-- Might be okay... Depends on expense ratio

HER 401K max plus 6% MATCH-100k
Working on getting this info

ME Roth IRA max-~50k
Growth Fnd of America Class A American Funds AGTHX 25K
New Perspective Fnds Class A American Funds ANWPX 9K
New World Fund Class A American Funds NEWFX 15k

Her Roth IRA just recently maxed ~15K
Fundamental Investors Fund Class A American Fnds ANCFX 9K
New World Fund Class A American Funds NEWFX 6K

Taxable account BGC PARTNERS (BGCP)- 3K Just bought last year
_____________________________________
Total 243k invested

I feel a bit upset with myself after seeing how i relied too much on receiving that pension. I missed out on investing from 18-27 years old
I started my roth IRA at 27 years old and started my 401k at 32 years old.
Mortgage will be paid off by 40 years old. That will free up 2k per month
What would you suggest that I do to attempt to make up for the early years i missed out on investing?
After seeing what most of you have posted I feel that i'm on track but way behind where most of you guys are. Yes i know everyone says to just worry about yourself and not compare to others but I just feel like i'm playing catch up.
Thanks for any advice you could give.
Welcome to the forum.

After reading your post a few thoughts come to mind.

1. Stop beating yourself up about relying on the pension. Starting at 27 is fine, starting at 47 can create some trouble. :shock:
2. I'd suggest you don't "do" anything to "make up for the early years" you missed out on. This sort of attitude can lead to overly aggressive strategies that aren't really helpful in the long run. Relax.
3. It appears you have a 401k custodian (Mass Mutual) that is charging you a flat expense ratio of .39%. This fee is over and above the individual expense ratios of the particular mutual funds you choose in the 401k plan. Each fund choice should have a separate fact sheet or PDF of some kind that describes the investment. Read that sheet for each of the mutual fund choices you're considering. Those expense ratios (if you can dig them up) would be helpful to add to your original post.
4. As previously noted by other posters, it's likely that you should choose the lowest expense ratio funds you can find that cover the 3 major asset classes that you're interested in. U.S. Stock, International Stock, Bonds. Using low-cost, broadly diversified, stock and bond index funds is the recipe you're looking for. Contribute every two weeks, use low-expense ratio funds, and repeat this process for 20 years or more. You'll be amazed at the eventual balance and growth.
5. Depending on the expense ratio of the target date funds you have available, that might be the best way to go inside this particular 401k plan.
6. You should give some serious thought to the asset allocation decision, as noted above in red. Question marks aren't a real answer. Maybe take the investor questionnaire at Vanguard.
See link: https://personal.vanguard.com/us/FundsI ... unds/tools
7. Pennsylvania income tax rates link (3.07% flat rate, it appears): https://www.tax-brackets.org/pennsylvaniataxtable
8. Who is the custodian of the Roth accounts? Using American Funds might be more expensive than necessary, and could be re-considered. Maybe move the Roth IRA accounts to Vanguard and use low-expense ratio index funds like VTSAX & VTIAX.
9. Who is BGC Partners? Is this an adviser?

Regards,
Last edited by retired@50 on Sat Nov 21, 2020 12:50 pm, edited 1 time in total.
This is one person's opinion. Nothing more.
retired@50
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Re: Playing catch up

Post by retired@50 »

Youngbuck21 wrote: Fri Nov 20, 2020 2:39 pm ROTH IRA Accounts are through Raymond James
This has to stop...!!!

Transfer to Vanguard, Fidelity or Schwab and use low-expense ratio index funds.

Regards,
This is one person's opinion. Nothing more.
retired@50
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Location: Living in the U.S.A.

Re: Playing catch up

Post by retired@50 »

Youngbuck21 wrote: Fri Nov 20, 2020 2:31 pm .39% annual operating expenses. Is that what i'm after
Yes, and no.

It's one of the negative side affects of using a company like Mass Mutual as a 401k custodian. They are charging this expense ratio (.39%) to all plan participants for record keeping services. Some other plans or employers cover these costs for plan participants, but yours doesn't.

This fee is over and above the individual expense ratios for the mutual funds you happen to choose within the plan.

Regards,
Last edited by retired@50 on Sat Nov 21, 2020 12:43 pm, edited 1 time in total.
This is one person's opinion. Nothing more.
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ruralavalon
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Re: Playing catch up

Post by ruralavalon »

Youngbuck21 wrote: Fri Nov 20, 2020 2:31 pm .39% annual operating expenses. Is that what i'm after
Could be. That's a different term sometimes used for expense ratio. The expense ratio will be different on each fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
Youngbuck21
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Re: Playing catch up

Post by Youngbuck21 »

Hey everyone thank you so much for taking the time to pass on words of wisdom. I really do appreciate it. I will work on getting some replies back to the people that asked for more info today when i get a break. I was just reading down through the responses from friday. Some really good stuff. Thanks again
Topic Author
Youngbuck21
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Re: Playing catch up

Post by Youngbuck21 »

lakpr wrote: Fri Nov 20, 2020 3:34 pm If you are maxing your 401k and your spouse is also maxing her 401k, *AND* you are in the 22% bracket, your combined income should have been more than $150k = $105k (top of 12% bracket) + $39k (two 401k maxed out) + $6k (assumed health care premiums per year).

Is that assumption true? If not, your marginal tax rate might be 12% instead of 22%. OR, can be 12% if you choose to max out the 401k with Traditional, not Roth, contributions.

I bring this point up because, far too often, people just look up the combined income of two spouses, and verify that against the tax brackets AGI published by the IRS. Ignoring the impact of making the 401k contributions and the healthcare premiums deducted pre-tax out of the paycheck.

That said, I will second @tashnewbie's recommendations for your portfolio.
tashnewbie wrote: Fri Nov 20, 2020 2:41 pm Without knowing the ERs, I assume the index funds are the cheapest. I would use these (or maybe a target date fund, if the ER is low):

VANGUARD 500 INDEX FUND
VANGUARD DEVELOPED MARKETS INDEX FUND
METROPOLITAN WEST TOTAL RETURN BOND FUND -- (maybe, depending on ER)
Thanks for your reply. Our combined income is over 200k then i subtracted 19,500+19,500 (401k contributions) from our combined income then I looked up that tax brackets. Did I do that correctly? Also i could subtract the HSA contributions I believe but that shouldn't make a difference on tax bracket.
lakpr
Posts: 6184
Joined: Fri Mar 18, 2011 9:59 am

Re: Playing catch up

Post by lakpr »

Youngbuck21 wrote: Mon Nov 23, 2020 2:55 pm Thanks for your reply. Our combined income is over 200k then i subtracted 19,500+19,500 (401k contributions) from our combined income then I looked up that tax brackets. Did I do that correctly? Also i could subtract the HSA contributions I believe but that shouldn't make a difference on tax bracket.
Yes that you did correctly. I just wanted to make sure.
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