401k Allocation help.

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Topic Author
Jester19
Posts: 3
Joined: Fri Nov 08, 2019 10:06 am

401k Allocation help.

Post by Jester19 » Fri Nov 08, 2019 10:26 am

I'm 43. I've been with my employer for 19years and my current 401k balance is 80k.
Income 55k
Savings 65k
Checking 5k
Contributing 8%
Is the target date in my 401k the best option?
I'm 100% in target date 2040.
The current fee is 1.02% and most are around 1% fees.
I opened a Vanguard Roth IRA in July and maxed it out in Target date 2045 fund. My current plan is to try and max out the Roth every year.




My options are:

Large Cap U.S. Stock
PIMCO StocksPLUS A (0.98%)
JPMorgan Equity Income A (1.01%)
Harbor Capital Appreciation Admin (0.96%)

Mid Cap U.S. Stock
AB Discovery Growth A (0.96%)
Nuveen Mid Cap Value Fund A (1.31%)

Small Cap U.S. Stock
PIMCO StocksPLUS Small A (1.23%)
Federated MDT Small Cap Core A (1.31%)

Balanced
American Funds American Balanced (0.63%)

Target Date
JPMorgan SmartRetirement 2020 A (0.98%)
JPMorgan SmartRetirement 2025 A (0.99%)
JPMorgan SmartRetirement 2030 A (1.00%)
JPMorgan SmartRetirement 2035 A (1.01%)
JPMorgan SmartRetirement 2040 A (1.02%)
JPMorgan SmartRetirement 2045 A (1.03%)
JPMorgan SmartRetirement 2050 A (1.03%)
JPMorgan SmartRetirement 2055 A (1.05%)
JPMorgan SmartRetirement Income A (0.97%)
(CL) JPMorgan SmartRetirement 2060 A (1.76%)

International Stock
PIMCO StocksPLUS Intl US Dol Hed A (1.27%)
Columbia Overseas Value A (1.29%)
Victory Sophus Emerging Markets A (1.61%)
Goldman Sachs Intl Sm Cap Insights A (1.32%)
ClearBridge International Growth FI (1.23%)
Nuveen Winslow Intl Small Cap A (4.49%)

Government Bond
Voya GNMA Income A (0.97%)

Diversified Bond
PIMCO Income A (1.45%)
Loomis Sayles Invmt Grade Bond A (0.82%)
T. Rowe Price Global Multi-Sect Adv (1.07%)

High Yield Income

Diamond Hill Corporate Credit Fund A (0.93%)

Capital Preservation

Metlife GAC-25053 Class 35 (0.98%)
Last edited by Jester19 on Fri Nov 08, 2019 11:37 am, edited 1 time in total.

lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: 401k Allocation help.

Post by lakpr » Fri Nov 08, 2019 11:18 am

Can you please edit the original post and add expense ratios for each and every option at the end of the fund name, like this?

JP Morgan Equity Income A (0.88%)
{ I pulled the 0.88% out of my hat }

The first look on the available choices in your plan is not very favorable. Given this, we may want to make the best use of most decent choices in the plan, without the ER we cannot
Last edited by lakpr on Fri Nov 08, 2019 11:56 am, edited 1 time in total.

Topic Author
Jester19
Posts: 3
Joined: Fri Nov 08, 2019 10:06 am

Re: 401k Allocation help.

Post by Jester19 » Fri Nov 08, 2019 11:38 am

I updated the expenses, Thanks

lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: 401k Allocation help.

Post by lakpr » Fri Nov 08, 2019 11:53 am

The best fund with lowest expense ratio seems to be the Loomis Sayles Diversified bond fund.

Given the crappy plan choices, I agree with the strategy of first contributing up to the employer match, the maximize Roth IRA. Contribute to Spousal Roth IRA too, if you are married.

Given that you will be moving all your funds to a bond fund within the 401k plan, I suggest you compensate by putting the Roth IRA funds for you (and spouse, if you are married and will be contributing to Spousal IRA), into 100% Total Stock Market fund. VTSAX or FSKAX depending on whether your Roth IRA is with Vanguard or Fidelity

Bottom line is: no, the Target Date fund is not the right choice for you
Last edited by lakpr on Fri Nov 08, 2019 11:54 am, edited 1 time in total.

retired@50
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Re: 401k Allocation help.

Post by retired@50 » Fri Nov 08, 2019 11:54 am

The expense ratios you've provided are both informative and horrible. You and your fellow 401k plan participants (your co-workers) are paying about 10x what you should be paying to invest in stock and bond mutual funds. I'd urge you to request that your employer (or the plan custodian) include a choice of low-cost, diversified index funds for the three most important parts of the markets. This would include a U.S. Stock index fund, an International Stock index fund, and a U.S. Bond index fund. Each of these should be available for an expense ratio of .25% or less.

Given the predicament your currently in, I suppose I'd just choose the target date fund that is most aligned with your year of retirement, and contribute 100% into that fund.

If your employer provides a matching contribution, I'd make certain I was contributing just enough to the plan to take full advantage of the match. With any additional funds devoted to retirement, I'd use the Roth IRA and/or a taxable investment account at Vanguard.

The suite of 3 funds from Vanguard that form the basis for the Bogleheads Three Fund Portfolio are VTSAX, VTIAX, VBTLX.

Best of luck,

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telemark
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Re: 401k Allocation help.

Post by telemark » Fri Nov 08, 2019 12:06 pm

There are no good choices here, alas. Personally, I would probably go with American Funds American Balanced at 0.63%. It may not have the ideal stock/bond ratio for you but the relatively lower cost outweighs that in my mind. Do you get a match on contributions?

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Wiggums
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Re: 401k Allocation help.

Post by Wiggums » Fri Nov 08, 2019 12:15 pm

I’m sorry that the fund expenses are so high, I’d invest up to the employer match. Next I would open Roth account(s).

Make sure you are earning a good rate on the savings account. Hopefully, 2 percent or more.

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ruralavalon
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Location: Illinois

Re: 401k Allocation help.

Post by ruralavalon » Fri Nov 08, 2019 12:30 pm

Welcome to the forum :) .

Keep your contribution rate as high as practical.

Jester19 wrote:
Fri Nov 08, 2019 10:26 am
I'm 43. I've been with my employer for 19years and my current 401k balance is 80k.
Income 55k
Savings 65k
Checking 5k
Contributing 8%
Is the target date in my 401k the best option?
I'm 100% in target date 2040.
The current fee is 1.02% and most are around 1% fees.
I opened a Vanguard Roth IRA in July and maxed it out in Target date 2045 fund. My current plan is to try and max out the Roth every year.
. . . . .
1) If there is an employer match in your 401k then contribute enough to your 401k to get the full employer match every year.
2) Contribute the annual maximum of $6k to your Roth IRA at Vanguard.
3) If you can afford to invest more than that annually, then contribute more to your 401k.
Wiki article, "Prioritizing Investments" .

In your 401k I suggest using American Funds American Balanced Fund (0.63%). The fund is diversified with 60% stocks and 40% fixed income, and has lowest expense ratio.
Last edited by ruralavalon on Fri Nov 08, 2019 12:43 pm, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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1789
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Re: 401k Allocation help.

Post by 1789 » Fri Nov 08, 2019 12:41 pm

I agree with others. There is really not a good option here. I am aware that when employees make noice to their HR , companies may re evaluate their 401k provider and fund choices. This happened to my wife. Coming back to topic, i would put minimum required to get employer match and then, max Roth iras, then save rest in taxable.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

Topic Author
Jester19
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Joined: Fri Nov 08, 2019 10:06 am

Re: 401k Allocation help.

Post by Jester19 » Fri Nov 08, 2019 12:52 pm

Great, thanks for the help. My employer matches 40% up to 6% and is discretionary. In my Vanguard account would I be better off in 3 funds vs target 2045 which I'm currently in. I talk to my employer about adding low cost funds, but don't have high hopes. I'm sure what ever is the cheapest for my employer is what's offered.

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ruralavalon
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Location: Illinois

Re: 401k Allocation help.

Post by ruralavalon » Fri Nov 08, 2019 1:36 pm

Jester19 wrote:
Fri Nov 08, 2019 12:52 pm
Great, thanks for the help. My employer matches 40% up to 6% and is discretionary. In my Vanguard account would I be better off in 3 funds vs target 2045 which I'm currently in. . . . .
In your Vanguard IRA I suggest staying with Vanguard Target Retirement 2045 Fund (VTIVX) ER 0.15%, it is diversified with about 90% stocks and 10% bonds.

With only one year of IRA contributions ($6k) so far, it's much easier to use just the single target date fund and it is not possible to split up your investment into three funds. The initial minimum investment is $3k per fund.

Jester19 wrote:
Fri Nov 08, 2019 12:52 pm
. . . . I talk to my employer about adding low cost funds, but don't have high hopes. I'm sure what ever is the cheapest for my employer is what's offered.
American Funds American Balanced Fund (0.63%) is a decent fund to use in your 401k, it is diversified and has a fairly moderate expense ratio.
Last edited by ruralavalon on Fri Nov 08, 2019 1:45 pm, edited 1 time in total.
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telemark
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Re: 401k Allocation help.

Post by telemark » Fri Nov 08, 2019 1:43 pm

How much the expense ratio costs you each year is approximately the E.R. times your average balance. If your discretionary match is more than that, you are still coming out ahead. Of course, your balance may eventually grow to the point where this is no longer true. That might not be entirely a bad thing, at least you would have a large balance.

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ruralavalon
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Re: 401k Allocation help.

Post by ruralavalon » Fri Nov 08, 2019 1:52 pm

American Funds American Balanced Fund (0.63%) is a decent fund to use in your 401k. That fund is diversified with 60% stocks and 40% fixed income, and has a fairly moderate expense ratio. The expense ratio is about average for a 401k.

An expense ratio of 0.63% is not as low as we all would prefer, but is not high enough that you should avoid contributions to your 401k. The tax deduction and tax deferral with the 401k are still very valuable, and you should not skip the tax benefits.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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