New 401k confusion with market

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Heatpr
Posts: 5
Joined: Sun Feb 23, 2014 7:16 pm

New 401k confusion with market

Post by Heatpr » Thu Oct 11, 2018 11:05 pm

Good day,

I opened a roth 401k with vanguard this year and since I am not sure what I am doing I read Allan Roth 2nd grader beats wallstreet and other articles on index funds with Vanguard as well as videos and ebooks.

I was wondering if someone can clarify my confusion.

If the market has been doin so well "bull market", why am I losing money?


This is my purchase breakdown:

1/23/18 $10,000
3/21/18 $8,000
6/1/18 $2,000
8/16/18 $2,000
9/10/18 $2,000
9/26 $4,000

$28,000 invested and currently worth $26,762.95

VGPMX VANGUARD GLOBAL CAPITAL CYCLES 94.67 SHARES $753.64
VGSIX VANGUARD REIT 117.795 SHARES $2,976.68
VBMFX VANGUARD TOTAL BOD MARKET 428.691 SHARES $4,415.52
VGTSX VANGUARD TOTAL INTERNATIONAL 451.799 SHARES $7,296.55
VTSMX VANGUARD TOTAL STOCK MARKET 166.675 SHARES $11,320.57




Should one buy more bonds when the market is good? and more stock when the market is bad? As i see I have most of my money in stocks high risk.

I am feeling overwhelmed and confused and would like to know if someone can help shine some knowledge/light/ books to read/ anything that may benefit me.

Thanks Bogleheads

MotoTrojan
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Joined: Wed Feb 01, 2017 8:39 pm

Re: New 401k confusion with market

Post by MotoTrojan » Thu Oct 11, 2018 11:11 pm

I’d simplify to just the bottom 3 funds and hold at an allocation based on your timeline to retirement. Age?

Market took a big hit this week but in the long run it’s a blip in the path to happiness. Much bigger losses can and will happen. Don’t change your allocation based on people’s opinions.

Also what’s your income? Curious why you chose Roth. If you can afford to max a 401k Roth you may be better off making a traditional 401k and a Roth IRA. It’ll cost you about the same amount if after tax pay and give you some tax-diversification. Any extra savings could go to taxable.

MotoTrojan
Posts: 2296
Joined: Wed Feb 01, 2017 8:39 pm

Re: New 401k confusion with market

Post by MotoTrojan » Thu Oct 11, 2018 11:13 pm

Woah mega red flag. Neither a Roth 401k or IRA can have $28K contributed to in one calendar year. You have some explaining to do.

rakish_weasel
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Joined: Thu May 21, 2015 1:02 pm

Re: New 401k confusion with market

Post by rakish_weasel » Fri Oct 12, 2018 12:17 am

Many company 401K plans allow a person to contribute for the previous tax year up until April 15th. It's possible that OP's $28,000 contribution since January 23rd is being spread across the 2017 and 2018 tax years (eg, the Jan & Mar contribs going towards 2017 tax year, while the Jun/Aug/Sep contribs are going towards 2018).

-RW

stocknoob4111
Posts: 302
Joined: Sun Jan 07, 2018 12:52 pm

Re: New 401k confusion with market

Post by stocknoob4111 » Fri Oct 12, 2018 1:20 am

Heatpr wrote:
Thu Oct 11, 2018 11:05 pm
If the market has been doin so well "bull market", why am I losing money?
VGTSX (Total Intl) is down big time since Feb. and VBMFX is down a bit which explains why. VGSIX is almost zero for the year. And this week domestic equities also took a huge hit.

VGPMX is down -21% for the year, it has literally crashed and burned. It deals with "precious metals and mining" which I think is really volatile and risky right now.

Heatpr
Posts: 5
Joined: Sun Feb 23, 2014 7:16 pm

Re: New 401k confusion with market

Post by Heatpr » Sat Oct 13, 2018 7:01 pm

Hey everyone,

I would like to thank everyone for taking time out of their schedules to educate me and include their input.

Age 32. main income $105,000 I got a second job for professional services that gives me $50,000 second stream and basically started throwing money into the new 401k which I have never had access to in my main job.

I was worried because I feel like I have thrown so much money at it and I am negative. (hearing how everyone has been making money is what brought the confusion)

I really appreciate the explanations of why I have the blip, etc.

I began a roth ira in 2012 and currently have $46,568.22. Also did a few years target retirement, fund but now have 3 fund portfolio there.

For simplicity purposes should I just let both accounts ride with a 3 stock porfolio aggressive?

From what I've learned and understood so far (I am a rookie) can someone give me an opinion on this logic?

Should one adjust for maximum gains?

in a bull market (not to go aggressive on stocks)

and in a bear market to go aggressive on stocks?

Or just max both retirement accounts and not even worry about trying to time or maximize?

Once again thank you so much

rgs92
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Joined: Mon Mar 02, 2009 8:00 pm

Re: New 401k confusion with market

Post by rgs92 » Sat Oct 13, 2018 7:24 pm

The markets have been basically lousy this year (both US and foreign -- foreign more so).
That is why your portfolio has gone down.
It's no big deal, just par for the course, to be expected as perfectly normal.
Just stay the course and maintain your current asset allocation and you will be fine.
You have done the right thing, so just continue doing that.
Good luck.

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whodidntante
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Joined: Thu Jan 21, 2016 11:11 pm

Re: New 401k confusion with market

Post by whodidntante » Sat Oct 13, 2018 9:12 pm

Heatpr wrote:
Sat Oct 13, 2018 7:01 pm

For simplicity purposes should I just let both accounts ride with a 3 stock porfolio aggressive?

From what I've learned and understood so far (I am a rookie) can someone give me an opinion on this logic?

Should one adjust for maximum gains?

in a bull market (not to go aggressive on stocks)

and in a bear market to go aggressive on stocks?

Or just max both retirement accounts and not even worry about trying to time or maximize?

Once again thank you so much
I don't recommend that you attempt tactical allocation. Most professional managers are really bad at it. You are probably worse at it. Invest according to your willingness, need, and ability to take risk. For some people this means 100% stock, for some it means 0% stock, but most of us fall somewhere in between. I think it's reasonable to use a low cost target date index fund or low cost asset allocation index fund (e.g. VG Lifestrategy) until you have a bit more understanding of your desired asset allocation, to avoid tinkering and to avoid unnecessary complication.

The market has been rough lately. Sometimes you lose money. It's risk of gain and risk of loss. You cannot have large gains without the risk.

z3r0c00l
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Location: NYC
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Re: New 401k confusion with market

Post by z3r0c00l » Sat Oct 13, 2018 10:11 pm

Not many people making money this year and if they are, they are probably taking on risks that will cost them more in future years. It feels crummy, but one must get used to this feeling. You surely knew that stocks and bonds can go down sometimes, I presume. Well this year, they have gone down a bit.

Flyer24
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Re: New 401k confusion with market

Post by Flyer24 » Sat Oct 13, 2018 11:58 pm

You don’t change your allocation percentage based on market conditions. That is market timing and is not a good way to invest. Set your allocation. Contribute regularly according to your allocation (not market conditions). Rebalance periodically.

Flyer24
Posts: 300
Joined: Sun Apr 08, 2018 4:21 pm

Re: New 401k confusion with market

Post by Flyer24 » Sun Oct 14, 2018 12:11 am

rakish_weasel wrote:
Fri Oct 12, 2018 12:17 am
Many company 401K plans allow a person to contribute for the previous tax year up until April 15th. It's possible that OP's $28,000 contribution since January 23rd is being spread across the 2017 and 2018 tax years (eg, the Jan & Mar contribs going towards 2017 tax year, while the Jun/Aug/Sep contribs are going towards 2018).

-RW
The OP would have had to open the new 401K by December 31, 2017 in order to contribute for the 2017 year. Since he opened it this year, then it appears he over contributed.

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BeBH65
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Re: New 401k confusion with market

Post by BeBH65 » Sun Oct 14, 2018 2:46 am

Have a look at our wiki.
Starting with /Bogleheads investing start-up kit. Read some of the Books. Create the plan.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

retiredjg
Posts: 33912
Joined: Thu Jan 10, 2008 12:56 pm

Re: New 401k confusion with market

Post by retiredjg » Sun Oct 14, 2018 8:09 am

Heatpr, from what you've said, it appears you may have over-contributed to your 401k. Or maybe not.

It appears to be a solo-401k (individual 401k). Is that correct? If yes, I too think if you opened it in 2018, you could not make contributions for 2017. Your employee contributions for this year could not be more than $18.5k (more if over age 50).

Are some of your contributions employer contributions?

Rudedog
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Joined: Wed Aug 01, 2018 3:15 pm

Re: New 401k confusion with market

Post by Rudedog » Sun Oct 14, 2018 9:00 am

Disregard "blips" like this week, don't watch the financial shows. You are playing a long game. You may want to seriously consider the three-fund portfolio.

Heatpr
Posts: 5
Joined: Sun Feb 23, 2014 7:16 pm

Re: New 401k confusion with market

Post by Heatpr » Sun Oct 14, 2018 11:39 am

retiredjg wrote:
Sun Oct 14, 2018 8:09 am
Heatpr, from what you've said, it appears you may have over-contributed to your 401k. Or maybe not.

It appears to be a solo-401k (individual 401k). Is that correct? If yes, I too think if you opened it in 2018, you could not make contributions for 2017. Your employee contributions for this year could not be more than $18.5k (more if over age 50).

Are some of your contributions employer contributions?

Hi,



I opened a personal ROTH 401k with smallbiz.vanguard.com. I have a personal consulting business which is where I opened the account with the business tax ID.

Vanguard for both my 401k and my roth sets a yearly limit. I put the $18,00 for 2017, I then continued throwing money into the $18,500 limit for 2018.


Any light shined or better explained on this over contribution would be appreciated. I thought I had until April to deposit for 2017 since I began the business in 2016 and had yet to contribute to anything.


This is a copy paste from the vanguard page.

2 Contributions Date submitted Contributions Employer Funding method Tax Year Employee Salary Deferral Employer Total

03/21/2018 $8,000.00 $0.00 $8,000.00 Complete Electronic Bank Transfer 2017
01/23/2018 $10,000.00 $0.00 $10,000.00 Complete Electronic Bank Transfer 2017


2018 tax year completed contributions to date $10,000.00
2017 tax year completed contributions to date $18,000.00


Date submitted Contributions Status Funding method Tax Year
Employee Salary Deferral Employer Total
09/26/2018 $2,000.00 $0.00 $2,000.00 Complete Electronic Bank Transfer 2018
09/25/2018 $2,000.00 $0.00 $2,000.00 Complete Electronic Bank Transfer 2018
09/10/2018 $2,000.00 $0.00 $2,000.00 Complete Electronic Bank Transfer 2018
08/16/2018 $2,000.00 $0.00 $2,000.00 Complete Electronic Bank Transfer 2018
06/01/2018 $2,000.00 $0.00 $2,000.00 Complete Electronic Bank Transfer 2018
03/21/2018 $8,000.00 $0.00 $8,000.00 Complete Electronic Bank Transfer 2017
01/23/2018 $10,000.00 $0.00 $10,000.00 Complete Electronic Bank Transfer 2017

retiredjg
Posts: 33912
Joined: Thu Jan 10, 2008 12:56 pm

Re: New 401k confusion with market

Post by retiredjg » Sun Oct 14, 2018 12:22 pm

Heatpr wrote:
Sun Oct 14, 2018 11:39 am
Any light shined or better explained on this over contribution would be appreciated. I thought I had until April to deposit for 2017 since I began the business in 2016 and had yet to contribute to anything.
My understanding is that the documents for a 2017 Solo 401k must be signed before the end of 2017. You are then allowed until April 2018 to make your 2017 contributions.

Your original post said you opened it "this year" which is 2018. That made it sound like you set up the plan and signed the documents in 2018.

However, since Vanguard obviously recorded your first two 2018 contributions as being FOR 2017 it seems likely you must have actually signed the 401k documents in 2017.

Or I could be wrong. Or there could be some kind of exception.

cherijoh
Posts: 4946
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: New 401k confusion with market

Post by cherijoh » Sun Oct 14, 2018 12:31 pm

rakish_weasel wrote:
Fri Oct 12, 2018 12:17 am
Many company 401K plans allow a person to contribute for the previous tax year up until April 15th. It's possible that OP's $28,000 contribution since January 23rd is being spread across the 2017 and 2018 tax years (eg, the Jan & Mar contribs going towards 2017 tax year, while the Jun/Aug/Sep contribs are going towards 2018).

-RW

Who told you that? If you are employed by a company, your employee contributions are limited to the calendar year. Your employer can make matching or voluntary contributions (those not based on amount of employee contribution) past the end of the calendar year up to tax filing deadline.

Similarly, self-employed individuals who set up a an i-401k can make the employer contributions up to tax-filing deadline, but that's it.

MotoTrojan
Posts: 2296
Joined: Wed Feb 01, 2017 8:39 pm

Re: New 401k confusion with market

Post by MotoTrojan » Sun Oct 14, 2018 12:33 pm

Forget the three fund. I think you should be in a target retirement fund until you learn more. Yes it can lose money. No that shouldn’t change your plan.

retiredjg
Posts: 33912
Joined: Thu Jan 10, 2008 12:56 pm

Re: New 401k confusion with market

Post by retiredjg » Sun Oct 14, 2018 12:50 pm

cherijoh wrote:
Sun Oct 14, 2018 12:31 pm
Similarly, self-employed individuals who set up a an i-401k can make the employer contributions up to tax-filing deadline, but that's it.
I found one internet source that seems to agree with you, but several that said employee contributions (elective deferrals) can be made into the next year. A couple of those said April and 1 said either March or April (plus extensions) depending on the type business set up you have (sole proprietor, LLC, etc.)

Not sure what to think.

cherijoh
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Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: New 401k confusion with market

Post by cherijoh » Sun Oct 14, 2018 1:57 pm

retiredjg wrote:
Sun Oct 14, 2018 12:50 pm
cherijoh wrote:
Sun Oct 14, 2018 12:31 pm
Similarly, self-employed individuals who set up a an i-401k can make the employer contributions up to tax-filing deadline, but that's it.
I found one internet source that seems to agree with you, but several that said employee contributions (elective deferrals) can be made into the next year. A couple of those said April and 1 said either March or April (plus extensions) depending on the type business set up you have (sole proprietor, LLC, etc.)

Not sure what to think.
Interesting. It may also depend on your custodian. Lots more stuff is permitted but NOT required for 401ks than for IRAs (where the rules tend to be spelled out so every participant has an even playing field).

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