Author Topic: Another Retirement Fund Allocation Question Thread  (Read 1287 times)

zataks

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Another Retirement Fund Allocation Question Thread
« on: January 29, 2015, 12:31:34 PM »
I have an employer sponsored 457(b) plan through Voya.  Since I started this job (April 2013) I've had my deferred compensation going entirely into their target date 2045 retirement fund with an ER of 0.44%.

I plan on leaving this job within 19 years (15 years prior to the target date) and may use some of this fund to support my FIRE plans until my pension kicks in somewhere around 2045. 

I'm considering changing from the target date fund to three different funds all with similar expense ratios (+/- 0.02% of the target date fund): SSgA Russell All Cap Index; SSgA Global Equity ex US Index; SSgA US Bond Index.  My intended balance for this at the moment (28 years old, again leaving in <19 years) would be 50%, 40%, 10%, respectively. 

My thought behind this is, 1) I'm not sure given my other investment and forthcoming pension that the reduced volatility of the target fund is necessary for me (I feel like I'd rather adjust allocations on my schedule as it's non-traditional) and 2) I am supplementing this account with taxable investments through Vanguard (currently only VTI but only had the Vanguard account for a couple weeks). 

So questions:
1) Is this a reasonable allocation balance
2) Is there any reason I should not do this that is foreseeable?
3) Anything I'm missing/need more info?

Thanks guys!

TheMoneyBadger

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Re: Another Retirement Fund Allocation Question Thread
« Reply #1 on: February 01, 2015, 08:23:39 PM »
Conceptually I don't see anything wrong with moving from the target retirement fund to the three different funds so that you can dial in the asset allocation to be exactly what you want.  You will need to remember to rebalance to get back to your desired allocation periodically - something that just happens for you in the target retirement fund.

Personally, having 40% in the SSgA Global Equity ex US Index seems a little high.  Personally I prefer a 80/20 or 70/30 split for US/international - you're looking at 60/40 which is a fairly high stake in international.  That said, there are people that advocate a 50/50 split.  Your current Voya fund has 28% international equity.  You'd be increasing your international exposure by about 12 points...

zataks

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Re: Another Retirement Fund Allocation Question Thread
« Reply #2 on: February 01, 2015, 08:50:10 PM »
Thanks for the reply MoneyBadger. 

My thought with the higher international allocation was to have a little more higher-risk exposure. 

I'm ok with rebalancing; my idea with these 3 funds were to avoid a lot of the lower risk holdings such as cash as I near the target days because I plan on drawing this money well before traditional retirement.

TheMoneyBadger

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Re: Another Retirement Fund Allocation Question Thread
« Reply #3 on: February 02, 2015, 09:02:35 AM »
Just my personal opinion but if I was looking to increase my risk a bit I'd probably do it by increasing the equity stack or, possibly, by tilting a bit towards Small Cap Value.  I'm not convinced that tilting International actually increases your high-risk exposure in the long-term (unless of course you focused it on less developed countries).  Small and/or mid-cap equities would increase risk and potential reward but can be accomplished with US securities.