Savings too much for Roth. Keep it in a savings account or invest it?

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Celarix
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Savings too much for Roth. Keep it in a savings account or invest it?

Post by Celarix »

Good evening! Glad to be here. I've been following the Bogleheads investing strategy (I think) for a little while now and love how simple it is.

Let me start with my asset allocation:

Emergency funds: Six months worth

Debt: Nothing, except my day-to-day spending on a credit card paid off at the end of each month, though.

Tax Filing Status: Single

Tax Rate: 12% Federal, 5% State

State of Residence: Kentucky

Age: 26

Desired Asset Allocation: 85% stocks / 15% bonds
Desired International Allocation: 0% of stocks (yeah, I know, but most US companies have pretty big international presences these days, anyway. Open to being convinced, though).

Retirement Assets:

Taxable: Nothing

401k
100% T. Rowe Price Target Date 2055 (PAROX) (0.96%)
Company match? Yes, every dollar is matched by $0.50 up to 4% of my contributions.

Roth IRA at Vanguard
85.3% Total Stock Market (VTSAX) (0.04%)
14.6% Total Bond Market (BND) (0.035%)

Traditional IRA at Vanguard
83% Total Stock Market (VTI) (0.03%)
13.1% Total Bond Market (BND) (0.035%)

Portfolio Size: Low five figures, just starting out.

I'm very lucky. I don't tend to spend a lot of money, and I've been pretty good at avoiding debt. I'm holding onto a normal savings account at a bank with a 0.05% APY. Much of it is earmarked as emergency/lose-my-job money, but the remainder will be rolled into the Roth over time, as there's too much to go at once.

My question for you is: Should I keep all the money in the savings account while I roll it into the Roth over time, or should I put some portion of it into a Vanguard taxable account (same funds at same allocations) so that it doesn't just sit there making $5 per $10,000 per year? If permissible, I would roll the taxable into the Roth each year, so that the taxable would eventually hit $0 and I don't get hit with taxes on many decades of growth down the road.

It seems like it should be obvious; stock market returns, volatile though they may be, can usually beat 0.05% growth per year, even taking taxes from rolling over into the Roth into account. However, I ran the numbers twice in Excel and found the opposite - holding in the savings account + what I had in Roth seemed to beat investing, even at 7% stock market returns. (A third run showed stocks as better, though.)

New for 2021-04-19

Goodness! Quite a lot of questions to go through. Thank you all for your input!
If you have plenty of spare cash to fund the Roth IRA, I'd do it right away...
That is my goal over time, yes, but I have more to contribute than the annual limit allows.
It's typically more tax efficient to hold your bond funds in a tax deferred account...
News to me! I was not aware of that. Would the desired allocation for the Traditional be 70/30 stocks/bonds, then?
Many 401k questions
I'm not a big fan of my company's 401k. The expenses are high, the funds aren't that great, and I'm only funding up to the employer match at the moment (annual contribution $1,600). I wouldn't be against funding the 401k more, though, but I didn't look into it much because I was more focused on what to do with my savings. It would be tough, income-wise, to do the full $19,500 match - like serious QoL reduction tough, so I probably won't yet be able to achieve that.

The other funds available to me in the 401k:
  • T. Rowe Price 2010 through 2060 (PARAX, PARHX, PARBX, PARJX, PARCX, PARKX, PARDX, PARLX, PARFX)
  • American Funds EuroPacific Gr R3 (RERCX)
  • American Funds New Perspective R3 (RNPCX)
  • Invesco Developing Markets A (ODMAX)
  • Virtus Duff & Phelps Real Estate Sec A (PHRAX)
  • Delaware Small Cap Value A (DEVLX)
  • AB Small Cap Growth A (QUASX)
  • JHancock Disciplined Value Mid Cap R2 (JVMSX)
  • Ivy Mid Cap Growth A (WMGAX)
  • T. Rowe Price Equity Income Adv (PAFDX)
  • JPMorgan Large Cap Growth A (OLGAX)
  • State Street S&P 500 Index N (SVSPX)
  • PGIM Total Return Bond R6 (PTRQX)
  • Pioneer Strategic Income A (PSRAX)
  • Key Guaranteed Portfolio Fund (KGPF)
About 4.5% of my investments are in the 401(k) - I really procrastinated on starting one. Traditional IRA is 7.0% (~$900), Roth is 88.4% (~$17,000). I'm really overweighted in my Roth because the Traditional was a 401(k) rollover from a previous job and I think that taxes will be higher in my future, so I'd rather pay them now than later. I only fund the 401(k) and the Roth, and the only reason I hold onto the Traditional IRA is because moving it to the Roth would give me a tax bill.

I have about $18k or so over my emergency fund/lost job contingency to invest. I have made my full 2020 Roth contribution, but not my 2021 contribution yet - I need to find out if the new tax due date means I can't invest yet. The investment is one lump sum each year.
...and draw from your extra cash in savings to pay living expenses you would have otherwise have covered from your paycheck...
I hadn't thought of this, and it's quite clever!
You are saying when you compared investing the money in a savings account to investing it in the stock market, you came out with an answer that keeping it in the savings account yielded a higher return? I’d question what assumptions you are using, because that doesn’t make sense.
The most likely explanation is that I made a math error somewhere. Sadly, I tend to make a lot of throwaway spreadsheets to calculate something out, which I then just close without saving. The only explanation I had at the time was that, were I to move all the investing money from savings to a brokerage account, then transfer that brokerage account to my Roth over time, the balance (and therefore, returns) would similarly decrease. It was a surprising result, which makes it probably wrong.
At your tax rate, the 401(k) isn’t going to save a lot of taxes but over the next 30 years it will.
My tax rate is rather low right now, but won't be in the future, assuming good wage growth. Plus, I expect taxes themselves to be higher in the future, which is why I'm so gung-ho on the Roth.
alternatively, you may choose to look into ibonds...
IBonds, eh? Wasn't aware that those were a good emergency fund vehicle. I'll need to look into that!
you can occasionally find higher yield bank accounts if you jump through a few hoops
I've been a bit cautious about those, but maybe unnecessarily. They'd trigger my "too good to be true" alarms, since their rates were so much higher than brick-and-mortar banks. But I may need to take another look.
At your tax rate, the 401(k) isn’t going to save a lot of taxes but over the next 30 years it will...
Hmm. I think my tax rate now is a lower than it will be when I retire. Doesn't 401(k) money get taxed at whatever your tax rate at withdrawal is?
Have you considered converting your traditional IRA to a Roth?
The IRA, as noted above, is worth less than $1,000, so I didn't really think much about converting it. I might in the future, likely all at once since it's not too big.
Are you eligible for a HSA with your health insurance?
Yes, and I think I already have that plan. I don't know the specifics, though - I have the cost deducted from my paycheck, and then I use the insurance when I need to.
But if I were you, I'd have my retirement accounts be 100% equities.
I thought that at first, too, but the general direction of these forums shied away from 100% equities, so I'd figure I'd have some bonds. But a lot of people had said 100% equities on this thread, so I should probably change that.
That expense ratio is way too high.
If I recall correctly, the company through which we do our retirement has one flat, really high fee for every fund.
If you can't handle the volatility of a 100% stock portfolio to the point where you make bad behavioral decisions (selling low, buying high)
I mean, it's easy for me to say that I'll never ever ever make stupid investing decisions, but when push comes to shove, I just don't know. My investing strategy is buy and hold forever, selling only for retirement income (which I won't need for a long time), but I also know that I can't always count on myself not to make stupid decisions in the future.

I can't tell you about March 2020 much because I invested right in the middle of the decline. I did NOT time the market on purpose, though, that was just the date I decided to throw some cash in on.
Consider using your extra cash to convert your Traditional IRA to a Roth IRA.
Yes, likely best to do it now rather than later.
If you have a Roth 401k option...
I do not. Like I said, I don't like my 401k much.
You didn't mention if you are contributing the max to your 401k or not.
Sadly, I don't really have this option - contributing the full $19,500 would cut into my living expenses quite a lot. I could do it for a year or two using the strategy suggested above, but not for any longer than that.
Last edited by Celarix on Mon Apr 19, 2021 7:53 pm, edited 1 time in total.
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retired@50
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Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by retired@50 »

Celarix wrote: Fri Apr 16, 2021 5:35 pm Good evening! Glad to be here.

401k
100% T. Rowe Price Target Date 2055 (PAROX) (0.96%)
Company match? Yes, every dollar is matched by $0.50 up to 4% of my contributions.

Roth IRA at Vanguard
85.3% Total Stock Market (VTSAX) (0.04%)
14.6% Total Bond Market (BND) (0.035%) <- Sell this, then buy VTSAX with the proceeds.

Traditional IRA at Vanguard
83% Total Stock Market (VTI) (0.03%) <- Sell some of this, and use the proceeds to buy back the bonds from above.
13.1% Total Bond Market (BND) (0.035%)
Welcome to the forum. :happy

If you have plenty of spare cash to fund the Roth IRA, I'd do it right away, or the first month of each year. Then you can just focus on filling your 401k account.

You didn't ask this but...
I'd suggest you switch the current holdings in your Roth IRA to all stock (VTSAX) and to compensate for the loss of bond holdings, sell some stock in the traditional IRA at Vanguard and buy the bonds back in that account. It's typically more tax efficient to hold your bond funds in a tax deferred account like a traditional IRA or 401k.

A second observation has to do with the expense ratio (.96%) of the target date fund 2055.
Do you have other options that are available in that plan that have a lower expense ratio?

Regards,
This is one person's opinion. Nothing more.
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ruralavalon
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Location: Illinois

Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by ruralavalon »

Welcome to the forum :) .

It's great to see that you are debt free, living frugally, good at saving, and starting young at investing using tax-advantaged accounts.

The most important investing decision you can make is to establish a high rate of contributions to investing. Forum discussion link.

How much extra cash do you have in savings beyond what you want for your emergency fund?

Please simply add any additional information to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.


Celarix wrote: Fri Apr 16, 2021 5:35 pm Good evening! Glad to be here. I've been following the Bogleheads investing strategy (I think) for a little while now and love how simple it is.

Let me start with my asset allocation:

Emergency funds: Six months worth

Debt: Nothing, except my day-to-day spending on a credit card paid off at the end of each month, though.

Tax Filing Status: Single

Tax Rate: 12% Federal, 5% State

State of Residence: Kentucky

Age: 26

Desired Asset Allocation: 85% stocks / 15% bonds
Desired International Allocation: 0% of stocks (yeah, I know, but most US companies have pretty big international presences these days, anyway. Open to being convinced, though).
International stocks have historically had a high correlation with U.S. stocks. There has historically been a modest diversification benefit to adding some international stocks to a portfolio. I usually suggest around 20-30% of stocks in international stocks.



Celarix wrote: Fri Apr 16, 2021 5:35 pmRetirement Assets:

Taxable: Nothing

401k
100% T. Rowe Price Target Date 2055 (PAROX) (0.96%)
Company match? Yes, every dollar is matched by $0.50 up to 4% of my contributions.
How much (in dollars) do you contribute annually to your 401k account? Do you make the maximum annual employee contribution of $19.5k? The employer match does not count toward the employee maximum, it's extra.

As mentioned already, the most important investing decision you can make is to establish a high rate of contributions to investing. Forum discussion link.

How much (in dollars) is the maximum annual employer match?

That expense ratio of 0.96% is pretty high.

What other funds are offered in your employer's 401k plan? Please give fund names, tickers and expense ratios. There may be a better fund or funds to use.

Celarix wrote: Fri Apr 16, 2021 5:35 pmRoth IRA at Vanguard
85.3% Total Stock Market (VTSAX) (0.04%)
14.6% Total Bond Market (BND) (0.035%)

Traditional IRA at Vanguard
83% Total Stock Market (VTI) (0.03%)
13.1% Total Bond Market (BND) (0.035%)
It's better if your Roth IRA is entirely in stock index funds, not bond funds.

It's better if your bond allocation is in a tax-deferred account like a traditional IRA, or traditional 401k account.

There is no need to have all components of your desired asset allocation in each account.

What percentage of your total investing portfolio is in each of your three accounts? Like this:
401k, aa%
Roth IRA, bb%
traditional IRA, cc%
Total = 100%


Celarix wrote: Fri Apr 16, 2021 5:35 pmPortfolio Size: Low five figures, just starting out.

I'm very lucky. I don't tend to spend a lot of money, and I've been pretty good at avoiding debt. I'm holding onto a normal savings account at a bank with a 0.05% APY. Much of it is earmarked as emergency/lose-my-job money, but the remainder will be rolled into the Roth over time, as there's too much to go at once.

My question for you is: Should I keep all the money in the savings account while I roll it into the Roth over time, or should I put some portion of it into a Vanguard taxable account (same funds at same allocations) so that it doesn't just sit there making $5 per $10,000 per year? If permissible, I would roll the taxable into the Roth each year, so that the taxable would eventually hit $0 and I don't get hit with taxes on many decades of growth down the road.

It seems like it should be obvious; stock market returns, volatile though they may be, can usually beat 0.05% growth per year, even taking taxes from rolling over into the Roth into account. However, I ran the numbers twice in Excel and found the opposite - holding in the savings account + what I had in Roth seemed to beat investing, even at 7% stock market returns. (A third run showed stocks as better, though.)
It's important to make maximum possible use of all available tax-advantaged accounts as a priority ahead of investing in a taxable brokerage account.Wiki article "Prioritizing Investments", link.

So it's probably better to make maximum annual contributions to both your 401k and your IRA a priority ahead of contributions to a taxable brokerage account.

In my opinion it's better to use a taxable brokerage account to invest in stock index funds, rather than hold an excess amount of cash in a low interest savings account.

How much extra cash do you have in savings beyond what you want for your emergency fund?

Have you made your maximum annual IRA contribution of $6k for tax year 2020?

Have you made your maximum annual IRA contribution of $6k for tax year 2021?

You might increase your contributions to the 401k to meet the annual employee maximum, and draw from your extra cash in savings to pay living expenses you would have otherwise have covered from your paycheck. This has the effect of moving money from savings into the 401k account.

Again, please simply add any additional information to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
JBTX
Posts: 8367
Joined: Wed Jul 26, 2017 12:46 pm

Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by JBTX »

Celarix wrote: Fri Apr 16, 2021 5:35 pm Good evening! Glad to be here. I've been following the Bogleheads investing strategy (I think) for a little while now and love how simple it is.

Let me start with my asset allocation:

Emergency funds: Six months worth

Debt: Nothing, except my day-to-day spending on a credit card paid off at the end of each month, though.

Tax Filing Status: Single

Tax Rate: 12% Federal, 5% State

State of Residence: Kentucky

Age: 26

Desired Asset Allocation: 85% stocks / 15% bonds
Desired International Allocation: 0% of stocks (yeah, I know, but most US companies have pretty big international presences these days, anyway. Open to being convinced, though).

Retirement Assets:

Taxable: Nothing

401k
100% T. Rowe Price Target Date 2055 (PAROX) (0.96%)
Company match? Yes, every dollar is matched by $0.50 up to 4% of my contributions.

Roth IRA at Vanguard
85.3% Total Stock Market (VTSAX) (0.04%)
14.6% Total Bond Market (BND) (0.035%)

Traditional IRA at Vanguard
83% Total Stock Market (VTI) (0.03%)
13.1% Total Bond Market (BND) (0.035%)

Portfolio Size: Low five figures, just starting out.

I'm very lucky. I don't tend to spend a lot of money, and I've been pretty good at avoiding debt. I'm holding onto a normal savings account at a bank with a 0.05% APY. Much of it is earmarked as emergency/lose-my-job money, but the remainder will be rolled into the Roth over time, as there's too much to go at once.

My question for you is: Should I keep all the money in the savings account while I roll it into the Roth over time, or should I put some portion of it into a Vanguard taxable account (same funds at same allocations) so that it doesn't just sit there making $5 per $10,000 per year? If permissible, I would roll the taxable into the Roth each year, so that the taxable would eventually hit $0 and I don't get hit with taxes on many decades of growth down the road.

It seems like it should be obvious; stock market returns, volatile though they may be, can usually beat 0.05% growth per year, even taking taxes from rolling over into the Roth into account. However, I ran the numbers twice in Excel and found the opposite - holding in the savings account + what I had in Roth seemed to beat investing, even at 7% stock market returns. (A third run showed stocks as better, though.)
- at your age I wouldn't bother with bonds in your IRAS, I'd be 100% stocks.
- I like having international exposure and diversification, but there are probably 1,234,567 threads on that subject.
- having some taxable stock funds at your age may make sense and situation.
- alternatively, you may choose to look into ibonds. They could serve both as your bond allocation and emergency fund.
- you can occasionally find higher yield bank accounts if you jump through a few hoops. They usually don't last. I'm currently getting 3.0% on HM Bradley.


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Boatguy
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Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by Boatguy »

For what it’s worth, I’d suggest moving your cash to an online bank like Ally or Synchrony. They literally pay 10x the .05% you’re making now. It won’t change your life, but why not maximize with little effort?
lazynovice
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Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by lazynovice »

You are saying when you compared investing the money in a savings account to investing it in the stock market, you came out with an answer that keeping it in the savings account yielded a higher return? I’d question what assumptions you are using, because that doesn’t make sense. Can you explain what assumptions you used?

To answer your question directly-

Determine what your emergency fund should be and keep that in a savings account
Fund your Roth. I can’t tell if you are funding this a little at a time or in one lump sum per year but if you have extra cash, just fund the full 6k.
Decide if you want to put the remainder in the 401(k) or a taxable brokerage account.

At your tax rate, the 401(k) isn’t going to save a lot of taxes but over the next 30 years it will. But you are young and someday you will want a house and you will need money you can access for a down payment. I’d lean toward some taxable investing for that.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
little_star
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Joined: Tue Jun 16, 2020 5:08 pm

Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by little_star »

Have you considered converting your traditional IRA to a Roth? At your age, your future financial circumstances are not well determined. At some point in the future, your salary (or combined salary, should you choose to marry) may exceed the income limits for a direct Roth contribution. At that point, you would need to use the backdoor Roth process to continue to contribute to a Roth account. It will be cheaper (lower tax bracket) to convert the traditional IRA to Roth now. Plus, you will have all of those extra years of tax-free growth.

If you choose to do this, you should consider carefully whether to spread the conversion out over several years, so as to avoid moving into a higher tax bracket.
Mike Scott
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Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by Mike Scott »

Are you eligible for a HSA with your health insurance?
illumination
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Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by illumination »

I wouldn't have a single penny of bonds in a Roth IRA. You most likely have 40+ years ahead of you before this account gets drawn down.

In my opinion, your entire portfolio is too conservative for someone that's 26 years old, but I understand not everyone sees it that way. But if I were you, I'd have my retirement accounts be 100% equities.

I'd also find a different fund for your 401k if it's available, something like total market. That expense ratio is way too high.
humblecoder
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Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by humblecoder »

Celarix wrote: Fri Apr 16, 2021 5:35 pm Good evening! Glad to be here. I've been following the Bogleheads investing strategy (I think) for a little while now and love how simple it is.

Let me start with my asset allocation:

Emergency funds: Six months worth

Debt: Nothing, except my day-to-day spending on a credit card paid off at the end of each month, though.

Tax Filing Status: Single

Tax Rate: 12% Federal, 5% State

State of Residence: Kentucky

Age: 26

Desired Asset Allocation: 85% stocks / 15% bonds
Desired International Allocation: 0% of stocks (yeah, I know, but most US companies have pretty big international presences these days, anyway. Open to being convinced, though).

Retirement Assets:

Taxable: Nothing

401k
100% T. Rowe Price Target Date 2055 (PAROX) (0.96%)
Company match? Yes, every dollar is matched by $0.50 up to 4% of my contributions.

Roth IRA at Vanguard
85.3% Total Stock Market (VTSAX) (0.04%)
14.6% Total Bond Market (BND) (0.035%)

Traditional IRA at Vanguard
83% Total Stock Market (VTI) (0.03%)
13.1% Total Bond Market (BND) (0.035%)

Portfolio Size: Low five figures, just starting out.

I'm very lucky. I don't tend to spend a lot of money, and I've been pretty good at avoiding debt. I'm holding onto a normal savings account at a bank with a 0.05% APY. Much of it is earmarked as emergency/lose-my-job money, but the remainder will be rolled into the Roth over time, as there's too much to go at once.

My question for you is: Should I keep all the money in the savings account while I roll it into the Roth over time, or should I put some portion of it into a Vanguard taxable account (same funds at same allocations) so that it doesn't just sit there making $5 per $10,000 per year? If permissible, I would roll the taxable into the Roth each year, so that the taxable would eventually hit $0 and I don't get hit with taxes on many decades of growth down the road.

It seems like it should be obvious; stock market returns, volatile though they may be, can usually beat 0.05% growth per year, even taking taxes from rolling over into the Roth into account. However, I ran the numbers twice in Excel and found the opposite - holding in the savings account + what I had in Roth seemed to beat investing, even at 7% stock market returns. (A third run showed stocks as better, though.)
My thoughts (some of this has already been stated, but I figured I'd add my two cents:

1. Open up a high yield savings account at Ally Bank, Discover Bank, or similar large online savings bank. Use this for your emergency fund and savings. You'll earn a lot more interest on your money than your current savings account.

2. The target date fund in your 401k is very expensive. Consider moving it to a lower expense option, if one is available. You can edit your post to add your 401k investment options and you might get sone good advice on this.

3. Others have said that 15% in bonds in too conservative. Risk tolerance is a personal matter. If you can't handle the volatility of a 100% stock portfolio to the point where you make bad behavioral decisions (selling low, buying high), then 15% is fine. But consider if you think you can handle more risk. Think about your reaction to the market last March 2020 and that should give you a guide as to what you can tolerate.

4. Consider using your extra cash to convert your Traditional IRA to a Roth IRA. Your tax bracket at this point in your career is as low as it is likely to be, so you might consider taking advantage of that.

5. If you have a Roth 401k option, consider switching to that as well while you are in your current tax bracket.

6. If you have enough in savings for emergencies, putting any extra money into taxable makes sense. Stocks in taxable should beat a 0.05% interest savings account over the long run (not sure why your excel calculations told you otherwise). Over the short term, however, you will see more volatility. Just make sure you are maxing out your other tax advantaged accounts first. You didn't mention if you are contributing the max to your 401k or not. If not, I would consider increasing your contribution percentage instead.
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Celarix
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Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by Celarix »

Hi, everyone. As requested, I've updated my OP with the details everyone wanted. Thanks for all the great feedback!
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ruralavalon
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Re: Savings too much for Roth. Keep it in a savings account or invest it?

Post by ruralavalon »

Celarix wrote: Mon Apr 19, 2021 7:54 pm Hi, everyone. As requested, I've updated my OP with the details everyone wanted. Thanks for all the great feedback!
Celarix wrote: Fri Apr 16, 2021 5:35 pmI'm not a big fan of my company's 401k. The expenses are high, the funds aren't that great, and I'm only funding up to the employer match at the moment (annual contribution $1,600). I wouldn't be against funding the 401k more, though, but I didn't look into it much because I was more focused on what to do with my savings. It would be tough, income-wise, to do the full $19,500 match - like serious QoL reduction tough, so I probably won't yet be able to achieve that.
Sometimes a 401k plan will charge higher expense ratios than are charged the general public for the identical fund.

What are the expense ratios as charged in your employer's 401k plan for these two funds?
State Street S&P 500 Index N (covers over 80% of the U.S. stock market) (SVSPX) (ER 0.16%???)
PGIM Total Return Bond R6 (intermediate-term, investment-grade bonds) (PTRQX) (ER 0.39%???)

Both are diversified funds and ordinarily have low expense ratios, so are good funds to use. There is no reason to limit your contributions to the plan to just enough to get the employer match, unless much higher expense ratios are charged for those funds by your employer's plan.
Celarix wrote: Fri Apr 16, 2021 5:35 pmIf I recall correctly, the company through which we do our retirement has one flat, really high fee for every fund.
That is extremely unusual, I have never seen that before, so please double check the expense ratios for those two funds.

So if the expense ratios I stated above are correct for your employer's plan then I suggest increasing your contributions to the plan to meet the annual employee maximum of $19.5k by year end, and drawing from your extra savings to cover living expenses you would otherwise have paid from your paycheck.

Using a combination of those two funds is clearly better than using T. Rowe Price Target Date 2055 (PAROX) (0.96%). That expense ratio is pretty high. I suggest switching both the existing account balance and future contributions to those two funds.

A S&P 500 index fund covers over 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies. In the 29 years since the creation of the first total stock market index fund the two types of funds have had almost identical performance. Portfolio Visualizer, 1993-2021. I used the oldest share classes to get the longest period for comparison.

Although actively managed PGIM Total Return Bond R6 is a good intermediate-term (effective duration = 7.28 years), investment-grade (credit quality = BBB) bond fund. It is diversified (15% government bonds, 32% corporate bonds, 28% securitized) with a lower than average expense ratio. (The above fund information is from Morningstar.) That fund's returns have compared well to a total bond market index fund, although more volatile. Portfolio Visualizer, 1996-2021. I used the oldest share classes to get the longest period for comparison.

What interest rate is currently being paid on "Key Guaranteed Portfolio Fund (KGPF)"? What rate is guaranteed? This could also be a good fund to use for a fixed income investment, an alternative to a bond fund.

Celarix wrote: Fri Apr 16, 2021 5:35 pmI have about $18k or so over my emergency fund/lost job contingency to invest. I have made my full 2020 Roth contribution, but not my 2021 contribution yet - I need to find out if the new tax due date means I can't invest yet. The investment is one lump sum each year.
You can go ahead right now and make the $6k Roth IRA contribution for tax year 2021.

Celarix wrote: Fri Apr 16, 2021 5:35 pmHmm. I think my tax rate now is a lower than it will be when I retire. Doesn't 401(k) money get taxed at whatever your tax rate at withdrawal is?
Most people are in a lower tax bracket in retirement. The income tax code is progressive with higher tax rates for higher income. For most people retirement means the end of earned income, so most people are in a lower tax bracket after retirement. Also not all of your income is taxed at the rate specified by your tax bracket.

You get a tax deduction for contributions to the 401k account, and dividend earnings and capital gains are not taxed every year so everything compounds until withdrawn without any tax drag.

Celarix wrote: Fri Apr 16, 2021 5:35 pmAge: 26

Desired Asset Allocation: 85% stocks / 15% bonds
Desired International Allocation: 0% of stocks (yeah, I know, but most US companies have pretty big international presences these days, anyway. Open to being convinced, though).
. . . . .
But a lot of people had said 100% equities on this thread, so I should probably change that.
In my opinion your desired asset allocation of 85% equity and 15% fixed income income is within the range of what is reasonable. 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) Morningstar (4/8/2020), "What's the Best Diversifier for Stocks?"
5) White Coat Investor (9/23/2016), "In Defense of Bonds"; and
6) Ben Carlson (8/2/2020), "Why Would Anyone Own Bonds Right Now?"

In my opinion 100% stocks is unwise. I don't feel that 100% anything is a good idea.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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