Allocation Questions

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Eagle618
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Allocation Questions

Post by Eagle618 » Sun Mar 13, 2016 1:33 pm

Hello - I'd be interested in some feedback on our investments to date.

Married, late 30's with one child under 4.

403B. $55,000
We have $55,000 invested in a Pacific Life 403B - all of the money is invested in Franklin Founding Funds. Not currently contributing to this, but unsure if this is a quality fund and/or what options would be to move the money into something better.

403B. $15,000
We also have $7,000 in American Funds Capital Income Builder-A & $8,000 in American Funds Capital Income Builder-B.

401K - $193,000
$130,000 - VOYA Solutions 2045 - ER ".95 Gross ER, .89 Net ER, .21 Mgmt Fee, .01 Other Fee, .73 Misc Fee"
$5,000 - VOYA Stable Value Fund 50 - ER "Mgmt Fee .13, Trustee .07, voya .3, Total Annualized Gross Fund .50, TA Net Fund .50"
$1,000 - Prudential Total Return Bond Fd Q - ER ".49, Net ER .46, Mgmt .46, Msc .03"
$12,000 - Vanguard 500 Index Fund Adm - "ER .05, Net .05, Mgmt .04, Misc .01"
$17,000 - MFS Value Fund R4 "ER .65, Net ER .62, Mgmt .52, Misc .13
$2,000 - BlackRock Capital Appreciation Fund - ER ".79, Net ER .79, Mgmt .62, Misc .17"
$10,000 - Vanguard Mid-Cap Index Fund Adm - "ER .09, Net ER .09, Mgmt .08, Msc .01"
$1,000 - Vanguard Small-Cap Index Fund - "ER .09, Net ER .09, Mgmt .07, Msc .02"
$2,000 - JPMorgan Mid Cap Value Fund - ER ".94, Net ER .75, Mgmt .65, Other .01, Msc .28"
$8,000 - VY Clarion Real Estate Port Svc - ER "1.09%, Net Prosp ER .96%, Mgmt Fee .81%, 12B-1 Fee .25%, Misc Fee .03%"
$2,000 - Eagle Small Cap Growth Fund - ER "1.10, Mgmt .52, 12b-1 .25, other .02, misc .31"
$1,000 - Prudential Jennison Md Cp Grw Fd - ER ".75, Mgmt .55, Misc .20"
$2,000 - American Funds EuroPacific - ER "Gros Prosp ER .49, Net ER .49, Mgmt .42, Misc .07"

Within the above 401K - The following funds are available in which I could reallocate.

STABILITY OF PRINCIPAL
1317 Voya Stable Value Fund 50

BONDS
6591 Prudential Total Return Bond Fd Q

ASSET ALLOCATION
0761 Voya Solution 2035 Portfolio I
0764 Voya Solution 2045 Portfolio I
0767 Voya Solution Income Prt I
0790 Voya Solution 2025 Portfolio I
1166 Voya Solution 2055 Portfolio I
3290 Voya Solution 2060 Portfolio I
6750 Voya Solution 2020 Portfolio I
6753 Voya Solution 2030 Portfolio I
6756 Voya Solution 2040 Portfolio I
6759 Voya Solution 2050 Portfolio I

LARGE CAP VALUE
0899 Vanguard 500 Index Fund Adm
1840 MFS Value Fund R4

LARGE CAP GROWTH
2997 BlackRock Capital Apprec Fnd Inst

SMALL/MID/SPECIALITY
0756 Vanguard Mid-Cap Index Fund Adm
0757 Vanguard Small-Cap Index Fund Adm
0816 JPMorgan Mid Cap Value Fund I
1019 VY Clarion Real Estate Port Srv
1182 Eagle Small Cap Growth Fund A
9052 RidgeWorth Sm Cp Value Equity Fnd I
9570 Prudential Jennison Md Cp Grw Fd Z

GLOBAL/INTERNATIONAL
1723 American Funds EuroPacific R6
2674 Harbor International Fund Adm


Taxable Accounts -
$23,500 Individual Stock Assortment

IRA -
$2000 - SWPPX

Roth -
$2,000 - AVEGX
$1,700 - SWPPX
$4,900 - Individual Stock Assortment

Savings -
$40,000 Cash

Mortgage - $140,000 Balance on property valued around $225,000

No other debts.
Last edited by Eagle618 on Sat Mar 26, 2016 10:32 am, edited 3 times in total.

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abuss368
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Re: Allocation Questions

Post by abuss368 » Sun Mar 13, 2016 1:44 pm

Hi Eagle618,

Welcome to the Bogleheads forum. This is the best stop on the internet for financial and investing advice inspired by Jack Bogle!

I do have a couple of points in mind that may help your investment portfolio:

1) Vanguard - consider moving what accounts you can to Vanguard such as the IRAs. Vanguard is the lowest cost provider available.

2) Individual Stocks - I would consider selling these holdings (perhaps offsetting gains and losses if possible) and opening a taxable account at Vanguard. Once the account is established, you can invest in Total Stock Index and Total International Index. Jack Bogle has noted many times that individual investors should not own stocks. The risks are to great and the investor is not compensated for the additional risk.

3) 401(k) Plan - I would try to lower the number of funds to perhaps 1 -3 funds or an all in one Target fund if available. An investment portfolio overall only needs a few mutual funds.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

Eagle618
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Re: Allocation Questions

Post by Eagle618 » Sun Mar 13, 2016 1:53 pm

Thanks Abuss368.

Re: individual stocks, I have read in many different places and I tend to agree. My reasoning behind doing it is purely educational and recreational if you will. I have what I'd consider a small portion (less than $30K) of our overall investments held in individual stocks. Not excusing it as bad strategy, just providing background on why I've done that.

One area i am trying to key in on is what to do with the 403B - my sense is there may be a more logical place than Pac Life and American Funds, but I am concerned about the process and implications involved in that. Any insight there would be great.

Thanks for your feedback!

dbr
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Re: Allocation Questions

Post by dbr » Sun Mar 13, 2016 1:59 pm

Is the 403b at a previous employer? If so rolling over to an IRA with a low cost broker in low cost funds, such as Vanguard, would be a good idea:

http://www.403bwise.org/wisemoves/irarollover_vt.html

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abuss368
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Re: Allocation Questions

Post by abuss368 » Sun Mar 13, 2016 2:02 pm

Eagle618 wrote:Thanks Abuss368.

Re: individual stocks, I have read in many different places and I tend to agree. My reasoning behind doing it is purely educational and recreational if you will. I have what I'd consider a small portion (less than $30K) of our overall investments held in individual stocks. Not excusing it as bad strategy, just providing background on why I've done that.

One area i am trying to key in on is what to do with the 403B - my sense is there may be a more logical place than Pac Life and American Funds, but I am concerned about the process and implications involved in that. Any insight there would be great.

Thanks for your feedback!


Hi Eagle618,

Once you move your IRA to Vanguard, if your 403B is with a previous employer, you should be able to combine with the Vanguard IRA. Vanguard can assist with this if you contact them.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

Eagle618
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Re: Allocation Questions

Post by Eagle618 » Sat Mar 19, 2016 5:10 pm

The 403B is with current employer. Believe that means that I cannot roll it over.

We've stopped contributing as I wasn't confident in the options that we were putting the money in.

That said, would like to start contributing again through this 403B if that is logical. The employer provides a list of providers available to use for TSA's. There are 17 choices that include among others, AXA Equitable LIfe Insurance, AIG American General, Variable Annuity Life Insurance .... as well as 4 approved brokers which appear to be local Edward Jones branches.

So my question is given these sources to choose from, what should I be looking for and avoiding? Or - is there a more appropriate alternative for putting up to $18,000/year?

Thanks!

krow36
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Re: Allocation Questions

Post by krow36 » Mon Mar 21, 2016 11:05 pm

Eagle618 wrote:The 403B is with current employer. Believe that means that I cannot roll it over.

We've stopped contributing as I wasn't confident in the options that we were putting the money in.

That said, would like to start contributing again through this 403B if that is logical. The employer provides a list of providers available to use for TSA's. There are 17 choices that include among others, AXA Equitable LIfe Insurance, AIG American General, Variable Annuity Life Insurance .... as well as 4 approved brokers which appear to be local Edward Jones branches.

So my question is given these sources to choose from, what should I be looking for and avoiding? Or - is there a more appropriate alternative for putting up to $18,000/year?
Thanks!

You should list all 17 choices. We may be able to find a reasonable provider. Your present provider Pacific Life is not a good one in my opinion. No one on this forum will advise you to use a variable annuity 403 from an insurance company as they are all very expensive. I'm glad to know that you are not making further contributions to the Pacific Life annuity 403b. There may very well be an "appropriate alternative".

What state are you in? Are you working in a public K-12 school? Some states have established 457b deferred compensation plans that are excellent.

Having 2 threads running on the topic of your retirement investments is a bit awkward. Let's use this thread to explore your 403b provider choices other than Pacific Life.

krow36
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Re: Allocation Questions

Post by krow36 » Tue Mar 22, 2016 12:03 pm

Eagle618 wrote:
401K - $193,000
$130,000 - VOYA Solutions 2045
$5,000 - VOYA Stable Value Fund 50
$1,000 - Prudential Total Return Bond Fd Q
$12,000 - Vanguard 500 Index Fund Adm
$17,000 - MFS Value Fund R4
$2,000 - BlackRock Capital Appreciation FUnd
$10,000 - Vanguard Mid-Cap Index Fund Adm
$1,000 - Vanguard Small-Cap Index Fund
$2,000 - JPMorgan Mid Cap Value Fund
$8,000 - VY Clarion Real Estate Port Svc
$2,000 - Eagle Small Cap Growth Fund
$1,000 - Prudential Jennison Md Cp Grw Fd
$2,000 - American Funds EuroPacific

Eagle618, you don't provide the expense ratio for all these funds, but I suspect that many of them are too expensive, especially the last 4? You need to look at your plan to find the ER's because they can be different from the publicly available fund's ER's. I agree with abuss368 that using only 1-3 low ER funds in your 401k is way to go. Please add the ER's in your OP using the edit pencil so that your information stays in one place.

How much is the VOYA Stable Value Fund 50 paying? Are you contributing 18k/yr to the 401k, and is there a match?

Eagle618
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Re: Allocation Questions

Post by Eagle618 » Fri Mar 25, 2016 8:06 pm

krow36-

To begin to answer your question ... a follow up question. As I go in and look at reports on each of these, I get much more than a flat clearly stated ER. For example, on your question below... what would the actual ER be based on what is said below? Thanks! I've put this info into the original post for each.

How much is the VOYA Stable Value Fund 50 paying

Here's what it says:

Voya Stable Value Fund 50 CIT
Important Information
Fees
Management fees:
0.13%
Trustee fees:
0.07%
Voya® fees:
0.30%
Total Annualized Gross Fund Fee:
0.50%
Total Annualized Net Fund Fee:
0.50%
In addition to the annual Fund Fee, the Fund is charged for
general operating expenses (such as audit, custody service, tax
form preparation, legal and other expenses) to a maximum of
0.03% of Fund assets per year.

krow36
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Location: WA

Re: Allocation Questions

Post by krow36 » Fri Mar 25, 2016 11:25 pm

Eagle618, the expense ratio you are interested in is the "net expense ratio" or "Total Annualized Net Fund Fee" as they call it. Sometimes a gross ER is more than the net ER, which means that the fund company is offering the fund at less than their cost.

The management fee is the ER attached to the fund by the fund provider.
The trustee fee and the Voya fee are charged by middlemen that are administrating the employer's 401k plan. Your employer chose to not pay most of those plan fees by buying a less expensive (for him) plan, that shifts those fees to his employees.

Looks like the 0.03% fee for general operating expenses is added to the net ER to get the total ER.

The only funds that I think you should use on this list of funds you already own are:
$12,000 - Vanguard 500 Index Fund Adm - "ER .05, Net .05, Mgmt .04, Misc .01"
$1,000 - Vanguard Small-Cap Index Fund - "ER .09, Net ER .09, Mgmt .07, Msc .02"

Have you found the list of ALL the funds available in your 401k? See if there are more Vanguard funds. The 2 funds above can be the equivalent of the VG Total Stock Mkt fund, which might be on the list. Also look for a VG Total Bond Fund and a VG Total Int'l Stock Mkt fund. With just 3 or 4 diversified index funds, you have all the markets covered, at a very low cost.
Last edited by krow36 on Sat Mar 26, 2016 9:19 am, edited 1 time in total.

krow36
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Re: Allocation Questions

Post by krow36 » Fri Mar 25, 2016 11:56 pm

Your biggest investment is VOYA Solutions 2045: .89 Net ER, .21 Mgmt Fee, .01 Other Fee, .73 Misc Fee

$130,000 X 1.84% =$ 2,392 1 year cost of VOYA Sol'n 2045
$130,000 X 0.10% = $130 1 year cost of VG 500 Index
The difference is $2,262, which can stay in your 401k account in the future! That difference in costs compound over the years.

krow36
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Re: Allocation Questions

Post by krow36 » Sat Mar 26, 2016 9:17 am

mistake

Eagle618
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Re: Allocation Questions

Post by Eagle618 » Sat Mar 26, 2016 10:33 am

krow36 - what did you mean by mistake?

Thanks for the ER explanation.

I updated the original post - showing all of the available fund options within the 401K.

dbr
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Re: Allocation Questions

Post by dbr » Sat Mar 26, 2016 10:39 am

Eagle618 wrote:krow36 - what did you mean by mistake?

Thanks for the ER explanation.

I updated the original post - showing all of the available fund options within the 401K.


He probably meant that he was deleting a mistaken comment he made. It is also possible to delete a post entirely if it has not already been quoted by someone else.

krow36
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Re: Allocation Questions

Post by krow36 » Sat Mar 26, 2016 12:05 pm

Thanks dbr--I posted something by mistake. Next time I'll try to delete it entirely.

Eagle618, OK on the list of funds in your 401k that is now in your OP. I don't see anything very promising. If I were you, I'd exchange the funds you now have for the Vanguard 500 Index and Small Cap Index funds. These 2 funds, in a ratio of 3 to 1 is close to covering the entire US stock market. 500 Index contains many mid cap stocks. I think your 401k choices for an int'l. stock fund and a bond fund are too expensive in your 401k. That part of your asset allocation can be held in your other accounts.

I don't think you've told us your preferred asset allocation. Have you decided on the ratio of stocks to bonds and on the ratio of US stocks to int'l stocks?

If you use the 401k to hold only the 2 US stock funds, you can use your other accounts to complete your AA.
Taxable account: US stock fund, Int'l stock fund (no bond fund here)
403b account: bond fund, US or Int'l stock funds
Roth IRA: US or Int'l stock funds (bond fund if needed)

Because you are now working on the 403b account to find a better provider, it's not possible to get very detailed about what goes where. In the meantime, you can save LOTS of money by using only 500 Index and Small Cap Index in your 401k. Shifting funds within your 401k account has no tax consequences.

I wonder about your Schwab Roth IRA account and the AVEGX fund? It's very expensive. The SWPPX is a good 500 Index fund. Again, no tax consequences for changing funds within your Roth account.

I wouldn't be investing in a taxable account for retirement purposes unless you are maxing out your 401k, 403b and IRA accounts. Do both you and your spouse have Roth or traditional IRA's?

Eagle618
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Re: Allocation Questions

Post by Eagle618 » Mon Mar 27, 2017 8:49 pm

Here's some additional information. I was able to get our list of 403B providers:

AIG American General
AXA Equitable Life Insurance
Great American
ING Life Insurance and Annuity
Metlife
Midwest Annuity
Security Benefit
Western National Life Insurance
Ameriprise Financial

I did meet with one of the providers that was based locally. He has provided me with the ability to invest in either/or VTSMX or VGTSX ... after a very lengthy period of questioning and following up on my end. The contract he's provided would allow for payroll deducted 403(b) with a fee range from 1.65 to 1.25 depending on the amount invested. For example if I moved a bunch of old 403B funds over, it would be on the lower end of that range. If I started out with no money coming in, it would be at the 1.65.

From what I've gathered, most of these options are high fee and not the best fit.

From earlier in my thread, you can see that we have about $70,000 in American Funds and PacLife - that we are not contributing to, but that it likely makes sense to move - incurring a surrender charge of around $2,500.00.

Appreciate any feedback. Thanks

krow36
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Re: Allocation Questions

Post by krow36 » Mon Mar 27, 2017 9:40 pm

Eagle618, you do have one possibility on your 403b provider list. Security Benefit offers an NEA Direct Invest option. They include 8 Vanguard low cost index funds. All of Security Benefit’s other plans are very high fee and to be avoided at all costs!
http://www.nearetirementprogram.com/enrollment
Click on “Enrollment” and read the details. This plan is designed to be managed over the internet without the involvement of a local rep. Other posters have found their Direct Invest website easy to use.

krow36
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Re: Allocation Questions

Post by krow36 » Mon Mar 27, 2017 10:10 pm

I should have mentioned that the Direct Invest option has not been made available in CA because Security Benefit has not listed it in the 403bcompare.com website.
https://www.403bcompare.com/vendors/1022#/productlist

Eagle618
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Re: Allocation Questions

Post by Eagle618 » Tue Mar 28, 2017 7:21 pm

Thanks for the info. I will run through this opportunity and see what it ends up looking like.

On the 401K - I did take the recommendation to move from the VOYA 2045 fund to the 0899 Vanguard 500 Index Fund Adm.

401K - $193,000 (Now up to $217,000)
$130,000 - VOYA Solutions 2045 -> Moved this -> Now $153,000 in 0899 Vanguard 500 Index Fund Adm.
$5,000 - VOYA Stable Value Fund 50
$1,000 - Prudential Total Return Bond Fd Q

$21,000 - MFS Value Fund R4
$2,000 - BlackRock Capital Appreciation FUnd
$11,000 - Vanguard Mid-Cap Index Fund Adm
$1,500 - Vanguard Small-Cap Index Fund
$2,800 - JPMorgan Mid Cap Value Fund
$8,400 - VY Clarion Real Estate Port Svc
$3,000 - Eagle Small Cap Growth Fund
$1,000 - Prudential Jennison Md Cp Grw Fd
$2,000 - American Funds EuroPacific

Eagle618
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Re: Allocation Questions

Post by Eagle618 » Wed Oct 11, 2017 12:16 pm

On the 403B side of things, I am happy to report (I think), that we were able to get the 403B up and running through the NEA Direct Invest.

Received first statement recently, and only fee I see is $8.75 (which would be the quarterly portion of $35 annual).
The funds selected are:
Vanguard Total Stock Market Index
Vanguard 500 Index.

I will say that the process was very time consuming...but think that its in a much better 403B plan option going forward.

Now - moving the previously invested money...
403B. $55,000
We have $55,000 invested in a Pacific Life 403B - all of the money is invested in Franklin Founding Funds. Not currently contributing to this, but unsure if this is a quality fund and/or what options would be to move the money into something better.

403B. $15,000
We also have $7,000 in American Funds Capital Income Builder-A & $8,000 in American Funds Capital Income Builder-B.

Anyone had luck easily going through moving these types of funds into NEA Direct Invest?

Thanks


Eagle618, you do have one possibility on your 403b provider list. Security Benefit offers an NEA Direct Invest option. They include 8 Vanguard low cost index funds. All of Security Benefit’s other plans are very high fee and to be avoided at all costs!
http://www.nearetirementprogram.com/enrollment
Click on “Enrollment” and read the details. This plan is designed to be managed over the internet without the involvement of a local rep. Other posters have found their Direct Invest website easy to use.

krow36
Posts: 1320
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: Allocation Questions

Post by krow36 » Wed Oct 11, 2017 2:10 pm

Several posters have moved other 403b accounts to SB's Direct Invest. Step 3 on the link discusses the process. I would discuss it on the phone with Direct Invest, using the # they give you once you are signed up.

Is there a reason you selected both TSM Index and 500 Index? TSM includes the stocks that are in 500 Index (large caps) as well as mid and small cap stocks. So TSM is much more diversified, which is a worthy goal.

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