Author Topic: Help with 401K options please!  (Read 3440 times)

MEJG

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Help with 401K options please!
« on: June 17, 2015, 07:06:07 AM »
My husband's 401k options stink.  His company uses Great West Retirement Services.  There are very few index funds and everything is high fee.  Any input would be welcome.

Investing background:
We have minimal retirement savings at this point, but will be aggressively saving from here on out. This year we will max his 401K, and IRAs for both of us which will be at Vanguard.  We have no plans for a taxable account at this time, as we have some low (4-5%) interest student loans that we are paying off.

His company matches 100% of the 1st 7% of his contribution (awesome!) and we plan on maxing out his 401k this year.  His income will probably come in around 100,000 this year (he's commission so exact income unknown). So we're looking at this 401k being a sizeable part of our retirement planning at about $25,000/year for the foreseeable future.   While the options here are not awesome we do want to max out for tax planing purposes.  My job will bring in $45-55,000 this year, so we're solidly in the 25% tax bracket.

401K account currently held in the Great West Lifetime 2055 fund.

Other accounts:
Traditional IRA - $3,200 in VFFVX  Vanguard in target retirement 2055
Roth IRA- $19,500 at vanguard in Yale U's Lazy unconventional lazy portfolio - VTSMX 30%, VGSIX (Vanguard Riet index) 20%, VPSIX (inflation protected securities) VUSTX (long term treasury fund), and VGTSX (total international stock index) all at 15%, and VEIEX (emerging markets index) 5%

I'm currently reading JLCollinsnh stock series and will move on from there with my research. Right now I am happy to dump any contributions into the current holdings at vanguard for 2015 contributions as I figure out an investment strategy for us.  We are firmly in the buy and hold mind set and will probably be moving toward a 1-4 fund strategy for our holdings at Vanguard.  I've not quite convinced myself to just buy VTSMX.... but that will be the core of the portfolio I am building.

So, our holdings at GW will hopefully compliment that...

Options
Lifetime funds- aka target retirement funds:
2015- 0.99/0.97 (gross expense/net expense)
2025- 1.02/1.01
2035- 1.07/1.07
2045- 1.07/1.06
2055- 1.08/1.07

Asset Allocation Funds:
GW conservative profile - 0.9/0.82
GW moderate profile - 0.02-0.96
GW Agressive profile - 1.18/1.18

International funds:
American Funds Europacific Growth- 1.13/1.13
GW international index- 0.7/0.7
MFS international Value- 1.34/1.32
Oppenheimer Globa A- 1.13/1.13

Speciality:
GW Real Estate Index - 0.7/0.7

Small Cap:
GW small cam 600 index - 0.6/0.6
ClearBridge small cal growth - 1.26/1.26
Ridgeworth Small cap Growth - 1.31/1.30
Royce total return - 1.53/1.53


Mid Cap:
Fidelity Advisor Leveraged Co - 1.32/1.32
GW S&P mid call 400 index- 0.6/0.6
GW T Rowe Price Mid cap Gr- 1.01/1.03
Lord Abbett Value Opportunities - 1.17/1.17
Ridge worth Mid cap value equity- 1.40/1.40

Large Cap Funds:
American Funds Growth Fund of Amer- 0.98/0.98
Columbia diversified equity income- 1.08/1.08
Dreyfus Appreciation - 0.93/0.93
GW American Century growth fund- 1.0/1.0
GW S&P 500 index dun - 0.6/0.6
GW T Rowe Price Eq Inc Fund- 0.83/0.83
Invesco Comstock- 1.08/1.07
Marisco Focus- 1.34/1.34

A few Bond funds, and one guaranteed income fund.

Thanks!


**Edited for clarity**
 


 
« Last Edit: June 17, 2015, 08:09:39 PM by MEJG »

forummm

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Re: Help with 401K options please!
« Reply #1 on: June 17, 2015, 08:26:33 AM »
Ouch. I would just put it all in the GW S&P 500 index dun - 0.6/0.6, or 70% in that one and 15% each in the small and mid cap funds. The extra fees to have it in the lifecycle fund are too much for me.

Then when he leaves the job, just roll it all over into a Vanguard IRA.

seattlecyclone

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Re: Help with 401K options please!
« Reply #2 on: June 17, 2015, 08:36:51 AM »
Ouch. I would just put it all in the GW S&P 500 index dun - 0.6/0.6, or 70% in that one and 15% each in the small and mid cap funds. The extra fees to have it in the lifecycle fund are too much for me.

Yes, I agree that these are your best two options. Use your IRAs to fill out the fixed-income and international parts of your asset allocation.

Jeremy E.

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Re: Help with 401K options please!
« Reply #3 on: June 17, 2015, 11:27:06 AM »
Personally I would just put it all in the GW S&P 500 index fund, good luck!

MDM

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Re: Help with 401K options please!
« Reply #4 on: June 17, 2015, 12:09:11 PM »
Interesting question, especially given how close you are to the 15% tax bracket (and its consequent 0% federal tax on qualified dividends and long term capital gains).

Definitely get the employer match. 

To quantify things beyond that, consider using the "401k vs Taxable" tab on the case study spreadsheet.  For tax rates, include both federal and state.  The answer for your question appears to change depending on the dividend and LTCG tax question.

There is a "rule of thumb" in the Bogleheads' 401k wiki entry: ''consider investing in a taxable account if the product of the extra costs and the number of years you will stay in the plan exceeds 30%."  Unfortunately the conditions under which that rule is appropriate aren't given, so caveat user

The Bogleheads wiki also links to http://thefinancebuff.com/alternatives-to-a-high-cost-401k-or-403b-plan.html, from which one can access an online evaluation tool.  The linked article was written in 2008, when things such as backdoor Roths weren't in use.  The online evaluation tool doesn't allow one to see calculation details, but it and the case study spreadsheet match exactly for traditional 401k and taxable account calculations over a variety of inputs.  Ease of use is in the eye of the beholder, so use whatever is easiest for you.

MEJG

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Re: Help with 401K options please!
« Reply #5 on: June 17, 2015, 02:31:40 PM »
Thanks for the replies!

MDM- we are not even close to the 15% bracket :) my husband has the potential to make $130,000 this year, but likely won't got that high, and my income will sit between $45-60,000 depending on commission as well. It will be our highest earning year thus far and possible ever. Reducing our taxes is one of the goals of maxing the 401k- just his option aren't great.

MDM

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Re: Help with 401K options please!
« Reply #6 on: June 17, 2015, 02:50:24 PM »
we are not even close to the 15% bracket :)

Yes, in that case do the 401k (for him - and you, too!).  Nearness to the 15% bracket was based on "we'll be maxing it out this year with a probably income around 100,000" in the OP.

Good for both you, and best wishes for your future!

MEJG

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Re: Help with 401K options please!
« Reply #7 on: June 17, 2015, 08:14:36 PM »
Thanks for pointing that out MDM- I edited for clarity.

I don't have a 401k, Simple or Sepp and my current job, which is terrible.   Our health plan is no deducible through my husband's job so no HSA either.  We're going to be hit pretty hard with taxes with our current employment. No use being a complainipants though, we have high incomes, an amazing health insurance plan with literally $0 out of pocket expenses, our kids do not need child care since he works week days and I work part time weekends and his 401K has a 7% match.  Yep- we're pretty darn lucky right now.