Changing 401(k) from target date to custom designed

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
sman09
Posts: 118
Joined: Fri Mar 23, 2018 12:02 am

Changing 401(k) from target date to custom designed

Post by sman09 » Wed Apr 25, 2018 11:48 pm

Dear Bogleheads fellow members

I just created an account at betterment and the software showed that my ER via the 401k plan i have at work is very high (around .68%).

If I were to opt out of the target-date fund and go with something like a 3-fund portfolio, does that mean i am essentially selling the funds in my current 401k and using the proceeds to purchase a 3-fund 401k portfolio?

I have been actively reading up a lot on finance recently and still feeling not confident to get off the ground and start investing. Greatly appreciate the community's help as i navigate through all this.

Thank you!

User avatar
Fudgie
Posts: 137
Joined: Sun Oct 11, 2015 12:01 pm

Re: Changing 401(k) from target date to custom designed

Post by Fudgie » Thu Apr 26, 2018 4:51 am

:oops:
Last edited by Fudgie on Fri Jun 08, 2018 6:11 pm, edited 1 time in total.

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: Changing 401(k) from target date to custom designed

Post by dbr » Thu Apr 26, 2018 8:51 am

Not essentially selling the TD fund, exactly selling the TD fund. It is quite reasonable to look over the array of funds available and find a reasonable asset allocation at a lower expense. At the same time you want to consider what other assets you, and a spouse if you have one, have. See link above.

sman09
Posts: 118
Joined: Fri Mar 23, 2018 12:02 am

Re: Changing 401(k) from target date to custom designed

Post by sman09 » Sat Apr 28, 2018 2:55 am

Fudgie wrote:
Thu Apr 26, 2018 4:51 am
Yeah, you can sell the target date fund and use the proceeds to build a three fund. Hopefully, you have other funds available in your 401K that will allow you to do this. Post the options here ( including expense ratio), and someone will chime in with advice. You can use this as a formatting guide:. viewtopic.php?t=6212
Thank you very much for the input, @Fudgie.

I will soon post the details as you have suggested and for pointing me to the formatting guide.

sman09
Posts: 118
Joined: Fri Mar 23, 2018 12:02 am

Re: Changing 401(k) from target date to custom designed

Post by sman09 » Sat Apr 28, 2018 2:57 am

dbr wrote:
Thu Apr 26, 2018 8:51 am
Not essentially selling the TD fund, exactly selling the TD fund. It is quite reasonable to look over the array of funds available and find a reasonable asset allocation at a lower expense. At the same time you want to consider what other assets you, and a spouse if you have one, have. See link above.
Thank you @dbr

So, when i sell off the target date fund, do i have to be careful as to what the price is on that day/that moment etc., so as not to undersell it?

Also, given that the target date fund is composed of index funds, what does it mean when i sell it - is someone else buying the individual index funds i earlier had?

PFInterest
Posts: 1460
Joined: Sun Jan 08, 2017 12:25 pm

Re: Changing 401(k) from target date to custom designed

Post by PFInterest » Sat Apr 28, 2018 3:07 am

SANSRN wrote:
Wed Apr 25, 2018 11:48 pm
Dear Bogleheads fellow members

I just created an account at betterment and the software showed that my ER via the 401k plan i have at work is very high (around .68%).

If I were to opt out of the target-date fund and go with something like a 3-fund portfolio, does that mean i am essentially selling the funds in my current 401k and using the proceeds to purchase a 3-fund 401k portfolio?

I have been actively reading up a lot on finance recently and still feeling not confident to get off the ground and start investing. Greatly appreciate the community's help as i navigate through all this.

Thank you!
Yes but what are your options? Are they actually better?

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: Changing 401(k) from target date to custom designed

Post by dbr » Sat Apr 28, 2018 7:44 am

SANSRN wrote:
Sat Apr 28, 2018 2:57 am
dbr wrote:
Thu Apr 26, 2018 8:51 am
Not essentially selling the TD fund, exactly selling the TD fund. It is quite reasonable to look over the array of funds available and find a reasonable asset allocation at a lower expense. At the same time you want to consider what other assets you, and a spouse if you have one, have. See link above.
Thank you @dbr

So, when i sell off the target date fund, do i have to be careful as to what the price is on that day/that moment etc., so as not to undersell it?

No, don't try to time buying selling. Anyway you are just buying back similar holdings in different funds so it doesn't matter.


Also, given that the target date fund is composed of index funds, what does it mean when i sell it - is someone else buying the individual index funds i earlier had?

Every day thousands of people are redeeming shares in funds and others are buying shares. I suppose technically you would say that you are selling to and buying from the funds as they hand back or take in money from sellers and buyers. Unlike stocks funds don't have to maintain a fixed number of shares. They do have cash reserves to redeem shares from sellers and they have to place new money that comes in from buyers.

sman09
Posts: 118
Joined: Fri Mar 23, 2018 12:02 am

Re: Changing 401(k) from target date to custom designed

Post by sman09 » Tue May 15, 2018 9:38 pm

dbr wrote:
Sat Apr 28, 2018 7:44 am
SANSRN wrote:
Sat Apr 28, 2018 2:57 am
dbr wrote:
Thu Apr 26, 2018 8:51 am
Not essentially selling the TD fund, exactly selling the TD fund. It is quite reasonable to look over the array of funds available and find a reasonable asset allocation at a lower expense. At the same time you want to consider what other assets you, and a spouse if you have one, have. See link above.
Thank you @dbr

So, when i sell off the target date fund, do i have to be careful as to what the price is on that day/that moment etc., so as not to undersell it?
No, don't try to time buying selling. Anyway you are just buying back similar holdings in different funds so it doesn't matter.
Also, given that the target date fund is composed of index funds, what does it mean when i sell it - is someone else buying the individual index funds i earlier had?

Every day thousands of people are redeeming shares in funds and others are buying shares. I suppose technically you would say that you are selling to and buying from the funds as they hand back or take in money from sellers and buyers. Unlike stocks funds don't have to maintain a fixed number of shares. They do have cash reserves to redeem shares from sellers and they have to place new money that comes in from buyers.
Thank you @dbr

I will keep this advice in mind:
No, don't try to time buying selling. Anyway you are just buying back similar holdings in different funds so it doesn't matter.[/color]

Post Reply