401k Allocation Advice Needed

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Renton
Posts: 3
Joined: Wed Jan 10, 2018 5:21 pm

401k Allocation Advice Needed

Post by Renton » Wed Jan 10, 2018 8:02 pm

Hey all I am looking for some advice on how to approximate a three fund portfolio with the funds available to me through my 401k. I am 28 years old and married with no kids.

Proposed Allocations

Vanguard 500 (VFIAX) 53.14%

Vanguard small cap (VSMAX) 12.46%

Vanguard Developed Markets (VTMGX) 13.12%

Vanguard Emerging Markets (VEMAX) 3.28%

Vanguard Total Bond Market (VBTLX) 18.00%

Above are my intended allocations. Below is a full list of what my 401k offers by fund name, ticker, and expense ratio.


Sloy, Dahl & Holst Aggressive
SDHA1
.78%



361 Managed Futures Strategy I
AMFZX
1.85%



AB High Income Advisor
AGDYX
.58%



American Century Disciplined Growth I
ADCIX
0.82%



Ariel Discovery Institutional
ADYIX
1.08%



Baron Real Estate Retail
BREFX
1.33%



Brown Capital Mgmt Small Co Inv
BCSIX
1.29%



Columbia Contrarian Core R5
COFRX
0.72%



Deutsche Global Infrastructure Fund S
TOLSX
1.18%



Driehaus Micro Cap Growth
DMCRX
1.48%



Eaton Vance Floating Rate I
EIBLX
0.79%



Fidelity Overseas
FOSFX
1.03%



First Eagle Gold A
SGGDX
1.27%



Franklin Mutual European R6
FMEUX
0.89%



Hartford Equity Income R5
HQITX
0.76%



Hennessy Large Cap Financial Investor
HLFNX
1.68%



ICON Energy S
ICENX
1.44%



Keeley Small Cap Dividend Value I
KSDIX
1.20%



Lord Abbett Floating Rate I
LFRIX
0.60%



Lord Abbett Short Duration Inc
LLDYX
0.40%



Neuberger Berman Long Short Instl
NLSIX
1.35%



Nuveen Real Estate Securities
FARCX
1.05%



Oppenheimer Developing Markets
ODVYX
1.07%



Pioneer Bond Y
PICYX
0.58%



T. Rowe Price Global Technology
PRGTX
0.90%



T. Rowe Price Health Sciences
PRHSX
0.77%



Templeton Global Bond Advisor
TGBAX
0.68%



Vanguard 500 Index
VFIAX
0.04%



Vanguard Developed Markets Index Admiral
VTMGX
0.07%



Vanguard Emerging Markets
VEMAX
0.14%



Vanguard Financials Index Admiral
VFAIX
0.10%



Vanguard GNMA Adm
VFIJX
0.11%



Vanguard Small-Cap Index Admiral
VSMAX
0.06%



Vanguard Total Bond Market Ind
VBTLX
0.05%



Victory Established Value I
VEVIX
0.69%



Voya MidCap Opportunities Fund Class I
NMCIX
0.98%



William Blair Macro Allocation I
WMCIX
1.25%



Gartmore Morley Stable Value
MCSVF
0.80%


Thanks in advance. :sharebeer

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Duckie
Posts: 5952
Joined: Thu Mar 08, 2007 2:55 pm

Re: 401k Allocation Advice Needed

Post by Duckie » Wed Jan 10, 2018 8:54 pm

Renton, welcome to the forum.
Renton wrote: Hey all I am looking for some advice on how to approximate a three fund portfolio with the funds available to me through my 401k. I am 28 years old and married with no kids.
Well, you picked the best options. VFIAX is about 80% of US stocks and VSMAX about 14%. An 85/15 ratio would be good here. VTMGX is about 80% of international stocks and VEMAX about 20%, so an 80/20 ratio there.

You don't say what your AA is but at age 28 I'd go 80% stocks, 20% bonds, with 30% of stocks in international. That breaks down to 56% US stocks, 24% international stocks, and 20% bonds. If the 401k is your only retirement asset you could have:

401k -- 100%
48% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
8% (VSMAX) Vanguard Small-Cap Index Fund Admiral Shares (0.06%)
19% (VTMGX) Vanguard Developed Markets Index Fund Admiral Shares (0.07%)
5% (VEMAX) Vanguard Emerging Markets Stock Index Fund Admiral Shares (0.14%)
20% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)
Last edited by Duckie on Sat Jan 13, 2018 5:51 pm, edited 1 time in total.

Renton
Posts: 3
Joined: Wed Jan 10, 2018 5:21 pm

Re: 401k Allocation Advice Needed

Post by Renton » Thu Jan 11, 2018 12:37 pm

Thank you for such a quick response. I was initially thinking 18% bond (28 years old - 10) for my bond allocation but 20% I am definitely still comfortable with. I was also planning on opening a solo 401k or IRA for my self-employed spouse. Would this allocation go well with the Vanguard Target Retirement 2055 Fund (VFFVX)?

In regards to additional information our MFJ tax bracket is 22% using 2018 rates (or 25% using 2017 rates) for Federal and 8% for California. I also own a rental property and plan to acquire a few more over the next couple of years for some extra cash flow. From what I have read it seems best not to include rental properties in my asset allocation but instead treat them as a side business of sorts.

Another question is whether to go roth or not. I am still on the fence about it. I know it is smart to go this route when I am younger and in a lower tax bracket but I sometimes feel like I would rather contribute the additional tax savings to grow my portfolio even more.

User avatar
Duckie
Posts: 5952
Joined: Thu Mar 08, 2007 2:55 pm

Re: 401k Allocation Advice Needed

Post by Duckie » Thu Jan 11, 2018 4:10 pm

Renton wrote:I was also planning on opening a solo 401k or IRA for my self-employed spouse.
You and your spouse can each contribute up to $5.5K to a personal IRA. (You can still contribute for 2017.) Your spouse can contribute to a solo 401k up to $18.5K as the employEE plus ~20% of net income as the employER.
Would this allocation go well with the Vanguard Target Retirement 2055 Fund (VFFVX)?
When deciding what funds to use in each account you need to consider all the accounts as one big retirement portfolio. You pick the best options available. For example, my tentative 401k proposal for you contained both developed markets and emerging markets. Your spouse could have a total international fund in the solo 401k and that would reduce or eliminate the two international funds in your 401k. You both could put a total stock market fund in your IRAs and that would reduce the two US funds in the 401k. You need to look at the big picture.
Another question is whether to go roth or not. I am still on the fence about it. I know it is smart to go this route when I am younger and in a lower tax bracket but I sometimes feel like I would rather contribute the additional tax savings to grow my portfolio even more.
For employer plans it's usually better to contribute pre-tax. When it comes to IRAs, since many people with employer plans can't deduct IRA contributions, Roth IRAs are often the best option. Here are two articles by tfb:

WhiteMaxima
Posts: 1385
Joined: Thu May 19, 2016 5:04 pm

Re: 401k Allocation Advice Needed

Post by WhiteMaxima » Thu Jan 11, 2018 4:13 pm

This is what I will do if I were you:
40% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
10% (VSMAX) Vanguard Small-Cap Index Fund Admiral Shares (0.06%)
30% (VTMGX) Vanguard Developed Markets Index Fund Admiral Shares (0.07%)
10% (VEMAX) Vanguard Emerging Markets Stock Index Fund Admiral Shares (0.14%)
10% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)

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ruralavalon
Posts: 13938
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 401k Allocation Advice Needed

Post by ruralavalon » Thu Jan 11, 2018 4:41 pm

Welcome to the forum :) .

Renton wrote:
Wed Jan 10, 2018 8:02 pm
Hey all I am looking for some advice on how to approximate a three fund portfolio with the funds available to me through my 401k. I am 28 years old and married with no kids.

Proposed Allocations

Vanguard 500 (VFIAX) 53.14%

Vanguard small cap (VSMAX) 12.46%

Vanguard Developed Markets (VTMGX) 13.12%

Vanguard Emerging Markets (VEMAX) 3.28%

Vanguard Total Bond Market (VBTLX) 18.00%

Above are my intended allocations. . . . .
That asset allocation is within the range of what is reasonable in my opinion.

The suggestion of 20% bonds is also reasonable in my opinion.


Renton wrote:
Thu Jan 11, 2018 12:37 pm
Thank you for such a quick response. I was initially thinking 18% bond (28 years old - 10) for my bond allocation but 20% I am definitely still comfortable with. I was also planning on opening a solo 401k or IRA for my self-employed spouse. Would this allocation go well with the Vanguard Target Retirement 2055 Fund (VFFVX)?
She could also possibly consider a SIMPLE IRA or a SEP IRA.

For her solo 401k or IRA use the same asset allocation. It's usually better to treat all accounts together as a single unified portfolio, rather than invest them independently.

For greater simplicity she could use Vanguard Total Stock Market Index Fund instead of the two domestic stocks funds you need to use in your 401k, and she could use Vanguard Total International Stock Index Fund instead of the two international funds you need to use in your 401k.


Renton wrote:In regards to additional information our MFJ tax bracket is 22% using 2018 rates (or 25% using 2017 rates) for Federal and 8% for California. I also own a rental property and plan to acquire a few more over the next couple of years for some extra cash flow. From what I have read it seems best not to include rental properties in my asset allocation but instead treat them as a side business of sorts.
That's what I suggest.


Renton wrote:Another question is whether to go roth or not. I am still on the fence about it. I know it is smart to go this route when I am younger and in a lower tax bracket but I sometimes feel like I would rather contribute the additional tax savings to grow my portfolio even more.
Unless you are eligible for a significant pension, traditional contributions to a 401k will likely be better than Roth contributions.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Renton
Posts: 3
Joined: Wed Jan 10, 2018 5:21 pm

Re: 401k Allocation Advice Needed

Post by Renton » Sat Jan 13, 2018 1:29 pm

Thanks for the advice I like the allocation suggested by Duckie of:
Duckie wrote:
Wed Jan 10, 2018 8:54 pm
401k -- 100%
48% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
8% (VSMAX) Vanguard Small-Cap Index Fund Admiral Shares (0.06%)
19% (VTMGX) Vanguard Developed Markets Index Fund Admiral Shares (0.07%)
5% (VEMAX) Vanguard Emerging Markets Stock Index Fund Admiral Shares (0.14%)
20% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)
I will probably go with the above allocation. For the sake of simplicity I like the idea of just of mirroring a similar allocation for my wife’s accounts. I was thinking of allocating any contributions the wife wants to make as follows:

Vanguard Total Stock Market VTSMX 56%
Vanguard Total International Stock VGTSX 24%
Vanguard Total Bond Market VBMFX 20%

Would this allocation approximate the one I have intended for my 401k?

Also in regards to solo 401k's I have read you can only get investor shares. Do you think it's worth sticking with Vanguard for the solo 401k? I have read some people have opted for Fidelity? If its a better option what allocation would you recommend for a comparable allocation?

User avatar
Duckie
Posts: 5952
Joined: Thu Mar 08, 2007 2:55 pm

Re: 401k Allocation Advice Needed

Post by Duckie » Sat Jan 13, 2018 6:00 pm

Renton wrote:For the sake of simplicity I like the idea of just of mirroring a similar allocation for my wife’s accounts.
The problem with that is you can get to the cheaper Admiral/Premium class of shares faster if you only have one fund in a small account. Picking the best/cheapest options in each account instead of mirroring can get you lower costs and often makes it easier to rebalance.
Would this allocation approximate the one I have intended for my 401k?
Yes.
Also in regards to solo 401k's I have read you can only get investor shares.
That's an issue if she has her solo 401k at Vanguard. There are other providers.
Do you think it's worth sticking with Vanguard for the solo 401k?
Unless she wants the Roth option in the solo 401k she can do better somewhere else.
I have read some people have opted for Fidelity? If its a better option what allocation would you recommend for a comparable allocation?
Although I prefer Vanguard for most things, when it comes to a solo 401k I prefer Fidelity. They offer the cheaper class of fund shares and allow incoming rollovers. Fidelity's best total market index funds are:
  • Funds with $2.5K minimums:
    • (FSTMX) Fidelity Total Market Index Fund Investor Class (0.09%)
    • (FTIGX) Fidelity Total International Index Fund Investor Class (0.17%)
    • (FBIDX) Fidelity U.S. Bond Index Fund Investor Class (0.14%)
    Funds with $10K minimums:
    • (FSTVX) Fidelity Total Market Index Fund Premium Class (0.035%)
    • (FTIPX) Fidelity Total International Index Fund Premium Class (0.10%)
    • (FSITX) Fidelity U.S. Bond Index Fund Premium Class (0.045%)

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