Portfolio Review Requested

[EbriCelKai]

Hello! We have always been set it and forget it investors using target date funds. Recently I have been lurking on websites and reading personal finance books. I feel that we may be able to handle a three-fund type portfolio vs the target date funds, but some of the target date funds have low ER's so I'm not sure if it is necessary to change. Other ER's are higher so I feel more inclined to do something. But it is also feels really daunting to me to move nearly $1MM around when I'm not really sure I know that I'm doing.

Emergency funds: $91k in a HYSA @ 4.5% - a bit much but planning to replace an old car soon

Debt: Mortgage - $68k at 2.375%, will be paid off in 11 years

Tax Filing Status: Married filing jointly, two children

Tax Rate: 22% Federal

Age: Both 45

Desired Asset allocation: I am still figuring this out but in general I feel comfortable with the glide path in the target date funds. Right now, we're at about 88/12 overall, with international being about 30%.

Desired International allocation: I've read a lot of the different opinions on this and I'm still not sure what to think. I might want to shoot for something a little lower, like 20%.

Approximate size of your total portfolio: 970k in retirement accts (all tax deferred). We also have the cash above and 529 accounts not counted here.

Current retirement assets

Her 401k (3.5% employer match)
51% T. Rowe Price Retirement 2045 Trust F fund name (0.37%) - plus an additional 0.1% in annual administrative fees

Her Roth IRA at Vanguard
11% Target Fund 2045 (VTIVX) (0.08%)

Her HSA at Fidelity (Just transferred from Schwab/HSA Bank)
3% Schwab Target 2045 Index (SWYHX) (0.08%)

His 403b at Fidelity (prior employer so no match)
20% Target Fund 2045 (VTIVX) (0.08%)

His 403b at Empower (5% employer match)
4% JP Morgan Smart Retirement Blend 2045 (JMYAX) (0.19%)

His Roth IRA at Vanguard
11% Target Fund 2045 (VTIVX) (0.08%)

Funds available in her 401(k)

Fidelity Small Cap Index (FSSNX) (0.03%)
Vanguard Mid Cap Index I (VMCIX) (0.04%)
Vanguard Developed Markets Index Fund Admiral Shares (VTMGX) (0.08%)
Fidelity 500 Index (FXAIX) (0.02%)
Vanguard Equity-Income Adm (VEIRX) (0.18%)
Vanguard US Growth Adm (VWUAX) (0.20%)
BlackRock High Yield Bond Portfolio K (BRHYX) (0.49%)
Dodge & Cox International Stock X (DOXFX) (0.57%)
American Funds New World Fund (RNWGX)(0.57%)
Cohen & Steers Real Estate Securities Fund (CSZIX)(0.75%)
PGIM Total Return Bond R6 (PTRQX)(0.40%)

Funds available in his current 403(b)

Vanguard Total Int Stock Index Instl (VTSNX) (0.09%)
Vanguard Total Stock Mkt Idx Instl Pls (VSMPX) (0.02%)
Vanguard Total Bond Market Index Inst (VBTIX) (0.04%)
Vanguard Federal Money Market Inv (VMFXX) (0.11%)

Funds available in his prior 403(b)

FID 500 INDEX (FXAIX) (0.015%)
VANG GRTH INDEX INST (VIGIX) (0.04%)
VANG VAL INDEX INST (VIVIX) (0.04%)
VANG MDCPGR IDX ADM (VMGMX) (0.07%)
VANG MDCPVAL IDX ADM (VMVAX) (0.07%)
VANG SM CAP IDX INST (VSCIX) (0.04%)
VANG SM GR IDX INST (VSGIX) (0.06%)
VANG SM VAL IDX INST (VSIIX) (0.06%)
FID INTL INDEX (FSPSX) (0.035%)
VAN EM MKT ST IDX IS (VEMIX) (0.10%)
FID US BOND IDX (FXNAX) (0.025%)
VG TL INTL BD IDX IS (VTIFX) (0.07%)
VANG MD CP IDX IS PL (VMCPX) (0.03%)
VANG INFL PROT INST (VIPIX) (0.07%)
VANG ST BOND IDX IS (VBITX) (0.05%)

Questions:

1. My biggest question is about what to do with her 401k account. This holds the most money and the fees feel too high between the ER and the additional management fees, at 0.47% combined. There do not appear to be any reasonable bond options with lower ER's. Any recommendations on how you would reallocate these funds based on what is available? Maybe sell a portion for FXAIX, which would help lower the international allocation and help somewhat with the overall fees? Or just do new contributions to FXAIX?

2. Should we reallocate his current 403(b) since there appears to be a good variety of low cost Vanguard funds which could be used to build a 3 fund portfolio? The current ER for the JP Morgan TDF is 0.19%.

3. Is it fine to hold his old 403(b) at Fidelity for the time being vs rolling it over to the new Empower account? His fees at Empower are lower than her fees at Empower, but the fees at Fidelity are really low.

4. Now that the HSA funds have moved from Schwab/HSA bank to Fidelity, we can change this to invest in anything Fidelity offers. Better to change to a Fidelity fund vs a Schwab fund through Fidelity?

Any general advice is really appreciated, but either way, this has been a really eye opening exercise! I don't feel like we are ultra optimizer types and overall I'm proud of where we're at for our incomes, but would love to stop giving extra money away in fees. I know we have to decide for ourselves but I value the wealth of knowledge on this forum. Thank you!

[GarfieldBogle]

Hi OP,

for question 1, her 401k could "emulate" a 2045 target date fund by rebalancing to the following funds:

65 percent Fidelity 500 Index (FXAIX)
30 percent Vanguard Developed Markets Index Fund Admiral Shares (VTMGX)
5 percent PGIM Total Return Bond R6 (PTRQX)

I got these percentages by searching T rowe price 2045 target date fund and viewing a breakdown of the asset allocation on their fund page. The above breakdown should give a much lower expensive ratio than .37%.

Check the 401k plan documents to see if they allow you to exchange funds with no cost. Often they will let you do this at least once per quarter.

[retired@50]

...
Any general advice is really appreciated, ...

I wouldn't touch a thing.

By using target date funds you're completely skipping all the behavioral errors that come with tinkering and re-balancing.

I doubt the costs associated with the T. Rowe Price 2045 fund will keep you from enjoying anything about your retirement.

Regards,

[EbriCelKai]

...
Any general advice is really appreciated, ...

I wouldn't touch a thing.

By using target date funds you're completely skipping all the behavioral errors that come with tinkering and re-balancing.

I doubt the costs associated with the T. Rowe Price 2045 fund will keep you from enjoying anything about your retirement.

Regards,

Thank you, that is comforting to hear.

[EbriCelKai]

Hi OP,

for question 1, her 401k could "emulate" a 2045 target date fund by rebalancing to the following funds:

65 percent Fidelity 500 Index (FXAIX)
30 percent Vanguard Developed Markets Index Fund Admiral Shares (VTMGX)
5 percent PGIM Total Return Bond R6 (PTRQX)

I got these percentages by searching T rowe price 2045 target date fund and viewing a breakdown of the asset allocation on their fund page. The above breakdown should give a much lower expensive ratio than .37%.

Check the 401k plan documents to see if they allow you to exchange funds with no cost. Often they will let you do this at least once per quarter.

Thanks for looking into that. I wasn't considering that bond fund because it has a slightly higher ER than I'm already at, but I can see that holding such a small portion would make that inconsequential.

[Ferdinand2014]

Your current net overall ER is about 23 basis points. I would leave it alone. At some point the 401K will be rolled over to a better plan at retirement or job change. The set it and forget it approach and avoiding behavioral errors may exceed any ER improvement by splitting the one plan. You could petition the plan administrator to change to lower fee options. I did exactly that and was able to get several Vanguard funds added to my wife's 403b.

[EbriCelKai]

Your current net overall ER is about 23 basis points. I would leave it alone. At some point the 401K will be rolled over to a better plan at retirement or job change. The set it and forget it approach and avoiding behavioral errors may exceed any ER improvement by splitting the one plan. You could petition the plan administrator to change to lower fee options. I did exactly that and was able to get several Vanguard funds added to my wife's 403b.

Thanks for the suggestion. I have approached HR on this, and I know others in my company have too. I'm hopeful that some changes will be coming but also not holding my breath.

[retired@50]

Your current net overall ER is about 23 basis points. I would leave it alone. At some point the 401K will be rolled over to a better plan at retirement or job change. The set it and forget it approach and avoiding behavioral errors may exceed any ER improvement by splitting the one plan. You could petition the plan administrator to change to lower fee options. I did exactly that and was able to get several Vanguard funds added to my wife's 403b.

Thanks for the suggestion. I have approached HR on this, and I know others in my company have too. I'm hopeful that some changes will be coming but also not holding my breath.

If you're looking for some reading material on the topic of improving your 403b plan, see the wiki link below.
https://www.bogleheads.org/wiki/How_to_ ... 03(b)_plan

Regards,