Does Asset Allocation include 401k?

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alexfoo39
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Does Asset Allocation include 401k?

Post by alexfoo39 » Sat Feb 09, 2019 11:25 pm

I'm sorry for asking a dumb question :shock: :shock:

I understand that typical 401k plan can only be withdrawn penalty free after 59.5 age.
I also understand that 401k allows individual tweaking as in how many % in stocks fund, bond etc....

The complication arises when my country 401k-equivalent (we call it EPF - employee provident fund) doesn't allow modification on our money. What's in will be locked until the first withdrawal opportunity in age 50.

Let's say a hypothetical example

401k-equivalent 50k
SP500 50k
Cash and Bond 50k

So, do I include all three for AA purpose? What would be my AA then?

Thank you =)

bluquark
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Re: Does Asset Allocation include 401k?

Post by bluquark » Sun Feb 10, 2019 12:01 am

Yes, we typically include it in AA. Many people (in the US at least) have most or all or their retirement savings in 401k/IRA, so AA would be pretty meaningless if we did not include it.

Do you have an option for a balanced or all-in-one fund in your EPF? That might be the best way to handle the locked-in nature of it.

stocknoob4111
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Re: Does Asset Allocation include 401k?

Post by stocknoob4111 » Sun Feb 10, 2019 5:48 am

I compute my AA across all accounts including 401k

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Rob54keep
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Re: Does Asset Allocation include 401k?

Post by Rob54keep » Sun Feb 10, 2019 6:34 am

Your AA in this case? It depends on what is in your 401k. Are there stocks? bonds? other?

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Duckie
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Re: Does Asset Allocation include 401k?

Post by Duckie » Sun Feb 10, 2019 7:14 pm

alexfoo39 wrote:The complication arises when my country 401k-equivalent (we call it EPF - employee provident fund) doesn't allow modification on our money. What's in will be locked until the first withdrawal opportunity in age 50.

Let's say a hypothetical example

401k-equivalent 50k
SP500 50k
Cash and Bond 50k

So, do I include all three for AA purpose? What would be my AA then?
When I looked up Employee Provident Fund it appears to me to be like a forced employee savings account. You and your employer contribute but you have no control over it. For purposes of figuring your portfolio AA I would consider it cash/fixed income unless you want to ignore it because of the lack of control.

So given the above example you have 33% stocks and 67% cash/bonds.

J295
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Re: Does Asset Allocation include 401k?

Post by J295 » Sun Feb 10, 2019 8:49 pm

Yes ...

Topic Author
alexfoo39
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Re: Does Asset Allocation include 401k?

Post by alexfoo39 » Fri Feb 15, 2019 7:25 am

bluquark wrote:
Sun Feb 10, 2019 12:01 am
Yes, we typically include it in AA. Many people (in the US at least) have most or all or their retirement savings in 401k/IRA, so AA would be pretty meaningless if we did not include it.

Do you have an option for a balanced or all-in-one fund in your EPF? That might be the best way to handle the locked-in nature of it.
I need to check with EPF. I think they allow a minor portion of my forced saving into some 'funds'. You know those funds, typical high sales charge, and annual charge D=

Topic Author
alexfoo39
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Re: Does Asset Allocation include 401k?

Post by alexfoo39 » Fri Feb 15, 2019 7:32 am

Rob54keep wrote:
Sun Feb 10, 2019 6:34 am
Your AA in this case? It depends on what is in your 401k. Are there stocks? bonds? other?
now i have a big problem....my actual AA looks like follows:

epf 85k
liquid cash ready to be deployed 105k

if EPF is categorized under fixed income, and my AA is 50/50, that means I need to dump almost >90% liquid cash into SP500.

Is that even wise?

When recession comes, I can't withdraw money from my EPF.....i'm only 30 years old this year.

FederalFIRE
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Re: Does Asset Allocation include 401k?

Post by FederalFIRE » Fri Feb 15, 2019 7:52 am

alexfoo39 wrote:
Fri Feb 15, 2019 7:32 am
Rob54keep wrote:
Sun Feb 10, 2019 6:34 am
Your AA in this case? It depends on what is in your 401k. Are there stocks? bonds? other?
now i have a big problem....my actual AA looks like follows:

epf 85k
liquid cash ready to be deployed 105k

if EPF is categorized under fixed income, and my AA is 50/50, that means I need to dump almost >90% liquid cash into SP500.

Is that even wise?

When recession comes, I can't withdraw money from my EPF.....i'm only 30 years old this year.
First - I would do a bit more work to sort out what your assets really are in the EPF. It sounds like this is not an annuity plan, but rather a company-sponsored plan that you have access to after you're vested and a certain age. So... if the EPF is investing in equities, those should be considered as equities within your total portfolio AA.

That said, being 30 years old, a 90/10 allocation wouldn't be crazy. I'm 32 and have about 95/5 split.

*However* before putting 90% of your liquid cash into equities, be sure that you have an adequately funded emergency fund. As long as you plan to leave it for the long-term (5+ years at least) it isn't crazy to have that amount in equities at this stage in your life.

If you expect that you would use some of that 105K for something like a home down payment, car, etc., then you should reconsider such a heavy allocation toward equities and keep the funds you may require in the 5 year horizon in a more liquid asset.

Topic Author
alexfoo39
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Re: Does Asset Allocation include 401k?

Post by alexfoo39 » Fri Feb 15, 2019 8:57 am

FederalFIRE wrote:
Fri Feb 15, 2019 7:52 am
alexfoo39 wrote:
Fri Feb 15, 2019 7:32 am
Rob54keep wrote:
Sun Feb 10, 2019 6:34 am
Your AA in this case? It depends on what is in your 401k. Are there stocks? bonds? other?
now i have a big problem....my actual AA looks like follows:

epf 85k
liquid cash ready to be deployed 105k

if EPF is categorized under fixed income, and my AA is 50/50, that means I need to dump almost >90% liquid cash into SP500.

Is that even wise?

When recession comes, I can't withdraw money from my EPF.....i'm only 30 years old this year.
First - I would do a bit more work to sort out what your assets really are in the EPF. It sounds like this is not an annuity plan, but rather a company-sponsored plan that you have access to after you're vested and a certain age. So... if the EPF is investing in equities, those should be considered as equities within your total portfolio AA.

That said, being 30 years old, a 90/10 allocation wouldn't be crazy. I'm 32 and have about 95/5 split.

*However* before putting 90% of your liquid cash into equities, be sure that you have an adequately funded emergency fund. As long as you plan to leave it for the long-term (5+ years at least) it isn't crazy to have that amount in equities at this stage in your life.

If you expect that you would use some of that 105K for something like a home down payment, car, etc., then you should reconsider such a heavy allocation toward equities and keep the funds you may require in the 5 year horizon in a more liquid asset.
thank you. You're right. I looked upon what EPF invested in, and the composition is 50% equity, 45% bond, 5% cash. I can use that to help me with my AA.

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Re: Does Asset Allocation include 401k?

Post by LadyGeek » Fri Feb 15, 2019 9:58 am

This thread is now in the Investing - Theory, News & General forum (general question).
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