Which funds and allocations for accounts?

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maybethisone
Posts: 5
Joined: Sat May 23, 2020 1:04 pm

Which funds and allocations for accounts?

Post by maybethisone » Sat May 23, 2020 2:24 pm

Hi. I am relatively new to managing my own portfolio. In the past, I just used the target dated funds that were available. I could really use some help with deciding how which retirement accounts to fund and which investments to choose. I think the ERs for the choices in my 401k are high.

Emergency funds: 2 Months

Debt:
Credit Card - $7300 @ 0% for 15 months
Mortgage: $209,090 @ 3.5%

Tax Filing Status: Single

Tax Rate: 24% Federal, 5% State

State of Residence: MD

Age:35

Desired Asset allocation: 100% stocks /0% bonds
Desired International allocation: 40% of stocks

Total portfolio: 101k

Current retirement assets

Taxable
0.64% cash

401k at Fidelity
3.04 T. Rowe Price Retirement 2050 Fund Class R (RRTFX) 1.21%
Company match? None

Rollover IRA at Schwab
58.98% VANGUARD TOTAL STOCK MARKET ETF (VTI) 0.03%
25.97% VANGUARD TOTAL INTERNTL STOCK ETF IV (VXUS) 0.08%

Roth IRA at Schwab
11.37% VANGUARD TOTAL INTERNTL STOCK ETF IV (VXUS) 0.08%

New annual Contributions
$6k 401k
$6k IRA/Roth IRA

Available funds

Funds available in his 401(k)
FA LARGE CAP M (FALGX) 1.17%
INVS EQ-WGT S&P500 R (VADRX) 0.77%
MFS VALUE R2 (MVRRX) 1.07%
MM S&P MIDCAP IDX R3 (MDKTX) 0.93%
PNR SEL MD CP GR R (PGRRX) 1.40%
FKLN SM CAP GRTH R (FSSRX) 1.33%
JPM SM CAP VALUE R2 (JSVZX) 1.59%
PIF SMCP S&P 600 R3 (PSSMX) 0.73%
CB INTL GRTH R (LMGRX) 1.47%
FA EMERG MARKETS M (FTMKX) 1.70%
I O GLOBAL OPP R (OGINX) 1.34%
MFS INTL NEW DISC R3 (MIDHX) 1.29%
TEMPLETON FOREIGN R (TEFRX) 1.40%
BLKRK HLTH SCI OPP R (BHSRX) 1.46%
C&S REAL ESTATE R (CIRRX) 1.27%
FKLN CNVRTBL SEC A (FISCX) 0.86%
AF NEW ECONOMY R2E (RNNEX) 1.24%
WF SPL MID CAP VAL R (WFHHX) 1.40%
FIRST EAGLE GLOBAL A (SGENX) 1.11%
FA BALANCED M (FAIGX) 1.11%
FRANKLIN INCOME R (FISRX) 0.97%
TRP RETIRE 2005 R (RRTLX) 1.02%
TRP RETIRE 2010 R (RRTAX) 1.02%
TRP RETIRE 2015 R (RRTMX) 1.05%
TRP RETIRE 2020 R (RRTBX) 1.08%
TRP RETIRE 2025 R (RRTNX) 1.12%
TRP RETIRE 2030 R (RRTCX) 1.15%
TRP RETIRE 2035 R (RRTPX) 1.18%
TRP RETIRE 2040 R (RRTDX) 1.20%
TRP RETIRE 2045 R (RRTRX) 1.21%
TRP RETIRE 2050 R (RRTFX) 1.21%
TRP RETIRE 2055 R (RRTVX) 1.21%
TRP RETIRE 2060 R (TRRZX) 1.21%
FA STABLE VALUE II 0.97%
BLKRK HIGH YLD BD R (BHYRX) 1.24%
DL CORE FIXED INC N (DLFNX) 0.73%
I O SR FLTG RT R (OOSNX) 1.38%
LD ABT SH DTN INC R3 (LDLRX) 0.90%
LOOMIS INV GRD BD A (LIGRX) 0.81%
TCW EMRG MKTS INC N (TGINX) 1.14%
DWS ENH CMDTY STR A (SKNRX) 1.48%
TMPL GLOBAL BOND R (FGBRX) 1.24%


Questions:
1. Which fund(s) should I be using for my 401k? Does it make sense to max out the account?

2. In which order should I fund my accounts?

3. I am think about selling my current place and buying a larger house. Should this even be on radar at this time?

4. Is there anything I am forgetting that I should ask? :)

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FiveK
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Joined: Sun Mar 16, 2014 2:43 pm

Re: Which funds and allocations for accounts?

Post by FiveK » Sat May 23, 2020 3:08 pm

maybethisone, welcome to the forum.

1. Ouch - those are terrible. But see Expensive or mediocre choices.

2. Prioritizing investments and Investment Order and Tax-efficient fund placement.

3. Up to you.

4. Is Getting started - Bogleheads all review?

pkcrafter
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Location: CA
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Re: Which funds and allocations for accounts?

Post by pkcrafter » Sat May 23, 2020 3:59 pm

maybethisone, your 401k is awful and probably does not comply with ERISA standards. Costs are very high, and you have no low cost index choices, not even the standard S&P 500. Also, the use of advisor class funds is ridiculous and totally unnecessary. FTMKX also has a load. I wonder if they are charging that too. :twisted:

This might help:

https://www.bogleheads.org/wiki/How_to_ ... 01(k)_plan

Companies have been sued for what's going on here.

https://www.google.com/search?client=fi ... +fee+401ks

Use one of the TRP target date funds, but be sure to always max your Roth.

If you are considering a new house, then you should be saving in a taxable account. House money is not part of your investable money.

Paul
Last edited by pkcrafter on Sat May 23, 2020 6:19 pm, edited 1 time in total.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Triple digit golfer
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Re: Which funds and allocations for accounts?

Post by Triple digit golfer » Sat May 23, 2020 4:10 pm

Use the S&P 500 index in your 401k. At 0.77% it is not cheap, but mine is worse.

Round out the rest of your portfolio with Total Stock or 500 Index for U.S. and Total International for international.

In the 24% tax bracket and only $209k mortgage, I think unless there's some information you left out, you should be able to save more.

Are you sure you're eligible for Roth contributions at your income level?

At only 2 months cash, I would bump the emergency fund significantly. What happens if you lose your job and can't find another for a year?

Have you only been at this income level a short time? Portfolio balance seems low for your income level and age, unless you recently paid off student loans and/or income was much lower before. Doctor, for example.

Until you have more cash for your emergency fund, I wouldnt buy a more expensive house. Build up your portfolio first.

If you are eligible for a Roth IRA, I think at your income you should be able to max 401k, Roth, and add to your emergency savings.

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Duckie
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Re: Which funds and allocations for accounts?

Post by Duckie » Sat May 23, 2020 6:42 pm

maybethisone wrote:Which fund(s) should I be using for my 401k?
Those are high costs. The least worst options are:
  • INVS EQ-WGT S&P500 R (VADRX) 0.77% -- Large caps, 80% of US stocks
  • PIF SMCP S&P 600 R3 (PSSMX) 0.73% -- Small caps, 14% of US stocks
  • DL CORE FIXED INC N (DLFNX) 0.73% -- US bonds
  • and possibly FA STABLE VALUE II 0.97% depending on its current interest rate
Continue to use your IRAs for international and the remainder of your US stocks.
Does it make sense to max out the account?
Yes. Although high, the above expense ratios are under 1.00% and they are not totally unreasonable (for an employer plan).
In which order should I fund my accounts?
If you can max your Roth IRA do that first. Then max your 401k. If you can't contribute to the Roth IRA because your income is too high either make non-deductible contributions to a TIRA (not the Rollover IRA) or contribute to a taxable account.

Topic Author
maybethisone
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Joined: Sat May 23, 2020 1:04 pm

Re: Which funds and allocations for accounts?

Post by maybethisone » Sat May 23, 2020 7:05 pm

pkcrafter wrote:
Sat May 23, 2020 3:59 pm
Use one of the TRP target date funds, but be sure to always max your Roth.
Thanks Paul. Should I consider the index funds as well? (PSSMX and PSSMX)

Topic Author
maybethisone
Posts: 5
Joined: Sat May 23, 2020 1:04 pm

Re: Which funds and allocations for accounts?

Post by maybethisone » Sat May 23, 2020 7:13 pm

Triple digit golfer wrote:
Sat May 23, 2020 4:10 pm
Use the S&P 500 index in your 401k. At 0.77% it is not cheap, but mine is worse.

Round out the rest of your portfolio with Total Stock or 500 Index for U.S. and Total International for international.

In the 24% tax bracket and only $209k mortgage, I think unless there's some information you left out, you should be able to save more.

Are you sure you're eligible for Roth contributions at your income level?

At only 2 months cash, I would bump the emergency fund significantly. What happens if you lose your job and can't find another for a year?

Have you only been at this income level a short time? Portfolio balance seems low for your income level and age, unless you recently paid off student loans and/or income was much lower before. Doctor, for example.

Until you have more cash for your emergency fund, I wouldnt buy a more expensive house. Build up your portfolio first.

If you are eligible for a Roth IRA, I think at your income you should be able to max 401k, Roth, and add to your emergency savings.
Thanks Triple Digital Golfer. Yes, I have only been at this income level for about a year (~100k). I had some credit card debit that I needed to take care of before I could concentrate on saving. I transferred the balance of my last outstanding account so that I could have some breathing room. I believe that I still qualify for the Roth so I will prioritize that account for the moment and pause house hunting.

Topic Author
maybethisone
Posts: 5
Joined: Sat May 23, 2020 1:04 pm

Re: Which funds and allocations for accounts?

Post by maybethisone » Sat May 23, 2020 7:19 pm

Duckie wrote:
Sat May 23, 2020 6:42 pm
maybethisone wrote:Which fund(s) should I be using for my 401k?
Those are high costs. The least worst options are:
  • INVS EQ-WGT S&P500 R (VADRX) 0.77% -- Large caps, 80% of US stocks
  • PIF SMCP S&P 600 R3 (PSSMX) 0.73% -- Small caps, 14% of US stocks
  • DL CORE FIXED INC N (DLFNX) 0.73% -- US bonds
  • and possibly FA STABLE VALUE II 0.97% depending on its current interest rate
Continue to use your IRAs for international and the remainder of your US stocks.
Does it make sense to max out the account?
Yes. Although high, the above expense ratios are under 1.00% and they are not totally unreasonable (for an employer plan).
In which order should I fund my accounts?
If you can max your Roth IRA do that first. Then max your 401k. If you can't contribute to the Roth IRA because your income is too high either make non-deductible contributions to a TIRA (not the Rollover IRA) or contribute to a taxable account.
Thanks Duckie. I am 100% equities at the moment (I know, aggressive). What would be the right allocation of small/large cap funds? I am trying to keep things simple but if I need to change the ETFs in my IRA/Roth accounts to have have the right mix PLMK.

Why fund a new TIRA instead of the Rollover?

Triple digit golfer
Posts: 5153
Joined: Mon May 18, 2009 5:57 pm

Re: Which funds and allocations for accounts?

Post by Triple digit golfer » Sat May 23, 2020 7:35 pm

maybethisone wrote:
Sat May 23, 2020 7:13 pm
Triple digit golfer wrote:
Sat May 23, 2020 4:10 pm
Use the S&P 500 index in your 401k. At 0.77% it is not cheap, but mine is worse.

Round out the rest of your portfolio with Total Stock or 500 Index for U.S. and Total International for international.

In the 24% tax bracket and only $209k mortgage, I think unless there's some information you left out, you should be able to save more.

Are you sure you're eligible for Roth contributions at your income level?

At only 2 months cash, I would bump the emergency fund significantly. What happens if you lose your job and can't find another for a year?

Have you only been at this income level a short time? Portfolio balance seems low for your income level and age, unless you recently paid off student loans and/or income was much lower before. Doctor, for example.

Until you have more cash for your emergency fund, I wouldnt buy a more expensive house. Build up your portfolio first.

If you are eligible for a Roth IRA, I think at your income you should be able to max 401k, Roth, and add to your emergency savings.
Thanks Triple Digital Golfer. Yes, I have only been at this income level for about a year (~100k). I had some credit card debit that I needed to take care of before I could concentrate on saving. I transferred the balance of my last outstanding account so that I could have some breathing room. I believe that I still qualify for the Roth so I will prioritize that account for the moment and pause house hunting.
I was actually thinking of the married filing joint thresholds so I figured you were well into six figures. I wasn't thinking that for single filers the thresholds are much lower. That is why I was stressing how much more I thought you should be saving. My mistake.

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Duckie
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Re: Which funds and allocations for accounts?

Post by Duckie » Sat May 23, 2020 8:00 pm

maybethisone wrote:What would be the right allocation of small/large cap funds?
80/20 or 85/15. You could skip small caps in the 401k since you have total stock in the IRAs.
Why fund a new TIRA instead of the Rollover?
You don't have to but it separates the former employer plan assets from personal IRA assets which can be useful if you ever decide to roll the Rollover IRA into a current employer plan. Although the IRS does not require it anymore there used to be a rule about "conduit IRAs" and some employer plans are still sticky about it.

tashnewbie
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Joined: Thu Apr 23, 2020 12:44 pm

Re: Which funds and allocations for accounts?

Post by tashnewbie » Sat May 23, 2020 9:17 pm

Welcome!

Definitely read the fund placement and other wiki links posted above.

If I were you, I’d max the Roth IRA first, then if you have the ability add as much to the 401k as you can (I’d use the S&P 500 index fund). If you have any more money after that, I’d opt for a taxable brokerage account before putting money in a Traditional IRA that you can’t deduct from your taxes. Obviously though, you should also prioritize knocking out that credit card debt in the next 15 months (~$500/month will do it). I’d do that and beef up my EF before maxing the 401k.

pkcrafter
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Re: Which funds and allocations for accounts?

Post by pkcrafter » Sat May 23, 2020 9:34 pm

maybethisone wrote:
Sat May 23, 2020 7:05 pm
pkcrafter wrote:
Sat May 23, 2020 3:59 pm
Use one of the TRP target date funds, but be sure to always max your Roth.
Thanks Paul. Should I consider the index funds as well? (PSSMX and PSSMX)
You might consider adding a small cap fund, but small caps are difficult to hold because they don't follow the market and they have long periods of underperformance.

The S&P 500 fund you have is equal weighted and it has underperformed the standard cap-weighted index.

https://www.morningstar.com/funds/xnas/vadrx/quote

Here's how to approximate total stock market. This won't be accurate if you are using an equal-weighted S&P 500 fund.

https://www.bogleheads.org/wiki/Approxi ... ock_market

Here is TRP target 2060 fund which is ~90% stock including U.S. and International. Target funds hold everything, so you don't need anything else and they rebalance, so just buy, hold and let her go.

https://www.troweprice.com/financial-in ... -fund.html

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Topic Author
maybethisone
Posts: 5
Joined: Sat May 23, 2020 1:04 pm

Re: Which funds and allocations for accounts?

Post by maybethisone » Sun May 24, 2020 12:39 pm

Thank you all for the advice. I will definitely max my Roth, build my emergency fund and kill my cc debt. I will also try speaking with the 401k custodian to see if there is anyway to add some index funds with lower ERs to the mix. If that fails, I will continue to add to the target dated fund.

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