Vanguard fund advice for a novice, trying to make "right" decision

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Topic Author
BlackwaterPark10
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Joined: Mon May 13, 2019 10:43 am

Vanguard fund advice for a novice, trying to make "right" decision

Post by BlackwaterPark10 » Mon May 13, 2019 11:01 am

My wife and I are 33 years old, debt free minus the house, and have a 4 month emergency fund we are slowly chipping in some money to increase to 6-8 month range. Our mortgage is on year 11/15 @ 2.7% interest, and payment is around 22% of our take home.

We have Roth IRA's with Vanguard, and been working towards maxing them in VFIFX Target 2050 Index Fund, we have approx $3500 each from last year, and just started auto deposits to max for this year.

My wife and I opened a 403b through our employer a few years ago, and have been putting $50 a paycheck into it, and just forgetting about it. We met a few providers through work, and chose one. They solely focus on 403/457b's investing in American Funds. Everything seemed good, so off we went.

Going by the 15% into retirement advice, we should allocate roughly $14,000 a year. This meant to me, we needed to fund roughly another $2,000 into something else such as our 403B through work we have.

As a side note, our employer is also doing a side State of Florida retirement investment account for me, to the amount of 6% of my salary each month, and that is around $81,000, also in a Target Date fund. My wife is in the State of Florida pension plan so we are diversified.

Ok, now to the main questions:

Wife and I both have just short of $15,000 a piece in the 403b we opened investing in RCITX, American Fund 2050 Target Fund. I noticed the fund has 1.04% expense fee with it, and according to my statement, it looks like I am paying the guy to "manage" the fund for me, $5 a month in fee's to do essentially what I could have done myself.

https://www.morningstar.com/funds/XNAS/RCITX/quote.html

My employer has a new option to invest in Vanguard 403b Mutual Funds, and I was thinking it may be better if I moved all my money to them. This would consolidate most of my retirement money into one company, and also I believe, greatly reduce my fee's. If its a good idea, I was eyeing VTI, VIGAX and VFIAX to move the money into. They have much lower fees, and seem to me, to be out-earning RCITX, so it would be a win win!

https://investor.vanguard.com/etf/profile/VTI
https://investor.vanguard.com/mutual.../profile/VFIAX
https://investor.vanguard.com/mutual.../profile/VIGAX

So the question....

Should I make the switch, and transfer our 403b funds from American Funds, into Vanguard? If so, do those I listed above seem like good choices to those with more experience? Is there anything I'm missing, or is any part of this foolish?

Should I leave our Roth IRAs in the Target Date Fund, or switch to the three fund method? If three fund, which three? Sorry if questions are basic, I just have been trying to read, and analyze, and make the most sense out of all of this as possible. I feel like I have somewhat of a grasp on the basics, but also worry I'm going to make some foolish mistake.

Should I invest with our 403b in different funds than our Roths? I have read a few people say to just do 403/457/401ks into Target Date funds and leave them be.

Thank you so much, and feel free to inquire if something is unclear or you need more info.
Last edited by BlackwaterPark10 on Mon May 13, 2019 3:05 pm, edited 1 time in total.

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southerndoc
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Re: Vanguard fund advice for a novice, trying to make "right" decision

Post by southerndoc » Mon May 13, 2019 11:41 am

Yes, I would switch to Vanguard. 1% ER is expensive.

You choose the allocation of your 3-fund approach. It's all in your risk tolerance. There is a separate thread here that is very long but worth reading. viewtopic.php?t=88005

You can also look on Vanguard's website and look at what percentage various retirement funds hold. VFIFX has 54.2% total stock market, 35.8% total international stock market, 7% total bond index, and 2.8% total international bond index. You could approximate this with a 55%/35%/10% split between total stock, total international stock, and total bond index. This would require you to rebalance things and increase your bond holding as you get closer to your retirement age. For most people, it's just as good to stay with the target retirement fund and follow the set it and forget it philosophy.

Vanguard Fan 1367
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Re: Vanguard fund advice for a novice, trying to make "right" decision

Post by Vanguard Fan 1367 » Mon May 13, 2019 11:47 am

I really appreciate Vanguard and their fee structure. I sure do like the almost free fees that Vanguard has. I support you in your move.

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Wiggums
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Re: Vanguard fund advice for a novice, trying to make "right" decision

Post by Wiggums » Mon May 13, 2019 11:48 am

Vanguard Fan 1367 wrote:
Mon May 13, 2019 11:47 am
I really appreciate Vanguard and their fee structure. I sure do like the almost free fees that Vanguard has. I support you in your move.
+1

Topic Author
BlackwaterPark10
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Joined: Mon May 13, 2019 10:43 am

Re: Vanguard fund advice for a novice, trying to make "right" decision

Post by BlackwaterPark10 » Mon May 13, 2019 2:28 pm

southerndoc wrote:
Mon May 13, 2019 11:41 am
Yes, I would switch to Vanguard. 1% ER is expensive.

You choose the allocation of your 3-fund approach. It's all in your risk tolerance. There is a separate thread here that is very long but worth reading. viewtopic.php?t=88005

You can also look on Vanguard's website and look at what percentage various retirement funds hold. VFIFX has 54.2% total stock market, 35.8% total international stock market, 7% total bond index, and 2.8% total international bond index. You could approximate this with a 55%/35%/10% split between total stock, total international stock, and total bond index. This would require you to rebalance things and increase your bond holding as you get closer to your retirement age. For most people, it's just as good to stay with the target retirement fund and follow the set it and forget it philosophy.
Oh ok I understand. I assumed when people wanted to do, say a 90/10 split, they put 90% of their money into VFIFX for example, and 10% into a bond index fund, and that was the split. I am pretty content with the target date, but if its better to split up, and will possibly earn more, then im all for doing the research to understand and do that.

I have went to your link, and am reading the articles towards the bottom of it now.

Amadis_of_Gaul
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Re: Vanguard fund advice for a novice, trying to make "right" decision

Post by Amadis_of_Gaul » Mon May 13, 2019 4:59 pm

Something else to consider is tax-efficiency. You mentioned that you have Vanguard TDF's in your Roth account. If you adopt a three-fund portfolio across your various accounts, it makes sense to load up the Roth accounts with nothing but equities. Over time, equities ought to grow more than bond funds, and whatever comes out of the Roth won't be taxed. if you keep all your fixed holdings in your employer plans, they will grow less and you will be taxed less.

Topic Author
BlackwaterPark10
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Re: Vanguard fund advice for a novice, trying to make "right" decision

Post by BlackwaterPark10 » Wed May 15, 2019 10:47 am

Amadis_of_Gaul wrote:
Mon May 13, 2019 4:59 pm
Something else to consider is tax-efficiency. You mentioned that you have Vanguard TDF's in your Roth account. If you adopt a three-fund portfolio across your various accounts, it makes sense to load up the Roth accounts with nothing but equities. Over time, equities ought to grow more than bond funds, and whatever comes out of the Roth won't be taxed. if you keep all your fixed holdings in your employer plans, they will grow less and you will be taxed less.
This is great thank you!!! So to make sure I understood you, I would put all my Roth investments in VTSAX, and my 403B would be VBTLX? This is due to the fact the bonds will grow less, so will have to pay taxes only on their growth, and not the possible large amount of growth from VTSAX ?

Amadis_of_Gaul
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Re: Vanguard fund advice for a novice, trying to make "right" decision

Post by Amadis_of_Gaul » Wed May 15, 2019 1:21 pm

BlackwaterPark10 wrote:
Wed May 15, 2019 10:47 am

This is great thank you!!! So to make sure I understood you, I would put all my Roth investments in VTSAX, and my 403B would be VBTLX? This is due to the fact the bonds will grow less, so will have to pay taxes only on their growth, and not the possible large amount of growth from VTSAX ?
Close! The key is to think of all of your investment accounts as one Great Big Portfolio and assign asset classes accordingly. Here's a link to the Bogleheads wiki: https://www.bogleheads.org/wiki/Tax-eff ... _placement

Generally, Rule Number One is to get bond funds into tax-advantaged. To the extent possible, I would put bond funds in a traditional retirement plan/IRA and equity funds in a Roth. However, if that's not possible, it's still better to put bonds in a Roth than in taxable.

HOWEVER, make sure that the tail isn't wagging the dog. You do not want to devise an asset allocation according to what is most tax-advantageous. Instead, you come up with your asset allocation first, then make that work among your various accounts in the most tax-advantageous manner.

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