Contributing to 403(b) target date fund - Should I change funds?

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fireseeker
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Contributing to 403(b) target date fund - Should I change funds?

Post by fireseeker »

[Moved into a new thread from: Changing up 403B fund selection --admin LadyGeek]

Hi

I found this thread while doing some research. I am 33 and currently contributing to a target date fund VFFVX in my 403b and was considering to changing/ rebalancing to a fund that follows the s&p 500. The return for VFFVX has not been impressive and the ER is higher. The only product available to me from my employer that mirrors the s&P is VIIIX. I have read a lot of conflicting information about target date funds and I am trying to find clarity/reading material if this is a change I should make.
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LadyGeek
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Re: Contributing to 403(b) target date fund - Should I change funds?

Post by LadyGeek »

Welcome! May I suggest you post your portfolio information in this thread using the Asking Portfolio Questions format? It will make you think about the "big picture" while giving us the information we need to point you in the right direction.

If you have any questions, ask them here.
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bonesly
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Re: Contributing to 403(b) target date fund - Should I change funds?

Post by bonesly »

fireseeker wrote: Mon Apr 01, 2024 7:13 pm The return for VFFVX has not been impressive and the ER is higher.
A good reason to get out of Target Date 2055 is because it's not the right Asset Allocation (AA) for your personal investing time-frame and Risk Tolerance. If you don't have an target AA, then you should determine one before changing anything as that's the blueprint for your portfolio (and should be captured in an Investor Policy Statement). The Vanguard Investor Questionnaire can help you determine an appropriate AA based on your personal responses to the quiz, nobody but you can know the right AA for you since the risk-tolerance part is very personal/unique.

A bad reason to get out of Target Date 2055 is because the performance has not been impressive or that you think the ER is too high. Chasing performance is generally a bad strategy as you end up jumping on the bandwagon just before it crashes. Any ER under 0.20% is low-cost. While there's always a difference in potential impact for a lower ER at some point it's good enough; in this case you get a single fund with complete diversification among US & Int'l as well as stocks and bonds, plus automatic rebalancing, all for an extra 4 basis points in expenses... that's cheap!

If you want more control over the US/Int'l proportions or you want to do manual rebalancing because you have other retirement accounts, that's also a good reason not to use a Target Date Fund, because the TDF assumes you hold that same (or similar) TDF across all accounts which is not often the case.

If you want advice specific to your particular situation, I'll reiterate LadyGeek's suggestion to post your bigger financial picture per the Asking Portfolio Questions template. Asking for advice about a 403b without knowledge of other retirement accounts could result in sub-optimal (or even bad) suggestions to you.
Doctor Rhythm
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Re: Contributing to 403(b) target date fund - Should I change funds?

Post by Doctor Rhythm »

Target date funds make sense as a default, simple one-size-fits-most portfolio. Vanguard’s TDF have low expenses, so it’s good that your 403b plan offers them as opposed to a high-expense, actively managed fund.

It’s difficult to judge a TDF’s performance against any other fund, including another TDF. Your TDF is mostly total US stock and total international stock (with a little bond). In recent years, international stocks have lagged behind US stock, so your more diversified TDF has underperformed a fund that only tracks the US stock market like an SP 500 fund. Switching to the latter can lead to better or worse performance in the future.
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