Author Topic: Brokerage Account for 401k  (Read 245 times)

LearningMustachian72

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Brokerage Account for 401k
« on: January 09, 2019, 10:07:03 AM »
Hey!

I am 30 years old, have roughly $70k in my 401k and just started contributing the max in 2019.

I am looking to optimize my portfolio until I will begin making penalty free withdrawals...

Based on the research I have done, it seems the best way to do this will be to set up a brokerage account through Vanguard, select low fee funds across different classes such as below and link this to my 401k.

50% (Large US)
15% (Mid US)
15% (Small US)
10% (Developed Countries)
5% (Emerging Markets)
5% (Bonds)

Does this sound like a decent strategy?  Any tips/recommendations on this or which Vanguard funds to select?

FYI, I plan to start investing outside of 401k once I stabilize my lifestyle/budget after contributing the 401k max.  Next step here would be to contribute the max to an IRA, correct?

Thank you in advance!

LearningMustachian72

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Re: Brokerage Account for 401k
« Reply #1 on: January 09, 2019, 10:21:48 AM »
UPDATE:

Was thinking of this allocation instead...

Vanguard 500 Index (VFINX) - 30%
Vanguard Small-Cap Index (NAESX) - 30%
Vanguard Total International Stock Index (VGTSX) - 30%
Vanguard Total Bond Market Index (VBMFX) - 10%

Thoughts?

ysette9

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Re: Brokerage Account for 401k
« Reply #2 on: January 09, 2019, 11:27:07 AM »
They are both fine asset allocations. The question is more are they right for you, your risk tolerance, timeline, and goals?

Yes, max out all tax-advantaged space before moving to a taxable account. So 401k (do you have the mega backdoor Roth option?), IRA, HSA, etc. first before taxable. You’ve seen the Investment Order sticky thread, yes?

LearningMustachian72

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Re: Brokerage Account for 401k
« Reply #3 on: January 09, 2019, 11:44:31 AM »
Thank you for the note.

I am not familiar with the mega roth backdoor option.

If you would not mind sharing the investment order thread, I would appreciate it!

I have the option to link a brokerage account to my 401k and would like to do so as my 401k only offers one index fee with a fee of 0.11% while all the other options are actively managed and with the next lowest fee being 0.42% ranging up to 0.9%.

As I am relatively young, I like the idea of linking a brokerage with diversified index funds that offer low fees.  However, I have never had a brokerage account and am wondering if there are any nuances to linking one to your 401k.

appleshampooid

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Re: Brokerage Account for 401k
« Reply #4 on: January 09, 2019, 12:11:54 PM »
Thank you for the note.

I am not familiar with the mega roth backdoor option.

If you would not mind sharing the investment order thread, I would appreciate it!

I have the option to link a brokerage account to my 401k and would like to do so as my 401k only offers one index fee with a fee of 0.11% while all the other options are actively managed and with the next lowest fee being 0.42% ranging up to 0.9%.

As I am relatively young, I like the idea of linking a brokerage with diversified index funds that offer low fees.  However, I have never had a brokerage account and am wondering if there are any nuances to linking one to your 401k.
Who is the provider of your 401(k)? I ask because the fine details will be very specific to that provider, and it's likely someone here has had experience with them.

I am guessing it is Fidelity since they have a product called "BrokerageLink." Most 401(k) providers don't have anything like this - you have access to a list of funds, and you get what you get. So, be thankful you have the option!

LearningMustachian72

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Re: Brokerage Account for 401k
« Reply #5 on: January 09, 2019, 12:22:01 PM »

ysette9

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ysette9

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Re: Brokerage Account for 401k
« Reply #7 on: January 09, 2019, 03:01:51 PM »
Mega backdoor Roth:

https://www.madfientist.com/after-tax-contributions/

Note that if your plan allows this you may be able to either Roth-ify your after-tax contributions and keep the money in your plan or roll it over into a Roth IRA. It just depends on what the plan has set up.