Author Topic: Workplace Retirement Advice Needed, Please.  (Read 558 times)

willx

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Workplace Retirement Advice Needed, Please.
« on: May 14, 2019, 10:36:07 AM »
Hello all. I'm very new to personal finance in general, I've definitely started much later than I should have. Regardless, no sense in looking back, I've taken it seriously recently. I've read the Stock Series, I've read "The Simple Path to Wealth", and quite a few topics on this forum as well as quite a few podcasts regarding FI. However, I'm still a little confused with what I should do with my workplace retirement account. I have two questions, the first regarding what to roll over my previous 401k to, and the second regarding my current options. To preface my questions, I have 6 months of emergency funds in a savings account and a personal Vanguard account with $10,000 in VTSAX. I'm also in the 24% tax bracket, so I'm going to contribute the max amount to my work retirement account to hopefully lower that.

First question: I have $16,000+ from a previous employer in a 401k. Should I roll that over into my work retirement account (401k or IRA), or my personal Vanguard into some type of IRA?

Second question: Through my work, I have a 401K with TRowe Price, but they don't offer VTSAX. They do offer VINIX (S&P 500 Index), so right now I've put all my contributions towards that. Given the options I have, is this the best place to be contributing or should I mix it up. Below are all my options my plan has available.

STOCKS:
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BLUE CHIP GROWTH FUND
TRBCX Expense Ratio: 0.70%
The fund's objective is to provide long-term capital growth. Income is a secondary objective.

FIDELITY EXT MKT INDEX FUND
FSMAX Expense Ratio: 0.05%
The investment seeks to provide investment results that correspond to the total return of stocks of mid- to small-capitalization United States companies.

INTERNATIONAL STOCK FUND
PRITX Expense Ratio: 0.81%
The fund seeks long-term growth of capital through investments primarily in the common stocks of established, non-U.S. companies.

MID-CAP GROWTH FUND
RPMGX Expense Ratio: 0.75%
The fund seeks to provide long-term capital appreciation by investing in mid-cap stocks with potential for above-average earnings growth.

MID-CAP VALUE FUND
TRMCX Expense Ratio: 0.78%
The fund seeks to provide long-term capital appreciation by investing primarily in mid-size companies that appear to be undervalued.

OPPENHEIMER DEVELOP MARKETS, Y
ODVYX Expense Ratio: 1.05%
The Oppenheimer Developing Markets Fund aggressively seeks capital appreciation. The Fund invests mainly in common stocks of issuers in emerging and developing markets throughout the world.

REAL ESTATE FUND
TRREX Expense Ratio: 0.78%
The fund seeks to provide long-term growth through a combination of capital appreciation and current income.

SMALL-CAP STOCK FUND
OTCFX Expense Ratio: 0.89%
The fund seeks to provide long-term capital growth by investing primarily in stocks of small companies.

VANGUARD EQUITY INCOME ADM
VEIRX Expense Ratio: 0.18%
The fund primarily invests in common stocks of medium-sized and large companies whose stocks pay above-average levels of dividend income and are considered to have the potential for capital appreciation.

VANGUARD INST INDEX
VINIX Expense Ratio: 0.04%   N/A
The Vanguard Institutional Index Fund seeks to track the performance of a benchmark index that measures the investment return of large-capitalization stocks. The fund attempts to replicate the target index by investing all, or substantially all, of assets in the stocks that make up Standard & Poor's 500 index.

VANGUARD TTL INT STOCK IND ADM
VTIAX Expense Ratio: 0.11%
The Vanguard Total International Stock Index Fund seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in Europe, the Pacific region, and emerging markets countries.

BONDS:
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ISHARES US AGG BOND INDEX K
WFBIX Expense Ratio: 0.06%
The iShares U.S. Aggregate Bond Index Fund K seeks to provide investment results that correspond to the total return performance of fixed-income securities in the aggregate, as represented by the Barclays U.S. Aggregate Bond Index

PIMCO INCOME INST
PIMIX Expense Ratio: 0.74%
The PIMCO Income Fund's primary investment objective is to maximize current income. Long-term capital appreciation is a secondary objective. The Fund seeks to achieve its investment objectives by investing under normal circumstances at least 65% of its total assets in a multi-sector portfolio of Fixed Income Instruments of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts, or swap agreements.

VARIOUS TARGETED RETIREMENT FUNDS:
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Expense Ratio: .72%

Apologies for the long post, any advice would be greatly appreciated!
« Last Edit: May 14, 2019, 10:57:05 AM by willx »

Financial.Velociraptor

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Re: Workplace Retirement Advice Needed, Please.
« Reply #1 on: May 14, 2019, 11:51:53 AM »
First question: I have $16,000+ from a previous employer in a 401k. Should I roll that over into my work retirement account (401k or IRA), or my personal Vanguard into some type of IRA?

Second question: Through my work, I have a 401K with TRowe Price, but they don't offer VTSAX. They do offer VINIX (S&P 500 Index), so right now I've put all my contributions towards that. Given the options I have, is this the best place to be contributing or should I mix it up. Below are all my options my plan has available.

Gratz for taking control of your financial destiny.

First question: It depends on when you want to retire.  If you roll into your work plan, you will be able to access the funds without penalty at 55.  (Rule of 55).  The low cost options available to you are actually pretty good and the ever so slightly better options at Vanguard aren't worth the trouble to my way of thinking. 

Second  question: You probably want FSMAX or VINIX for stocks.  Those have low ratios and are indexed to a broad basket.  The VINIX has a trivially smaller expense ratio but is less diversified.  WFBIX is hands down better option than the PIMCO fund for bonds.

Asset allocation is one of the biggest drivers of investment returns.  Have you settled on a bond allocation yet?

willx

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Re: Workplace Retirement Advice Needed, Please.
« Reply #2 on: May 14, 2019, 12:41:05 PM »
Gratz for taking control of your financial destiny.

First question: It depends on when you want to retire.  If you roll into your work plan, you will be able to access the funds without penalty at 55.  (Rule of 55).  The low cost options available to you are actually pretty good and the ever so slightly better options at Vanguard aren't worth the trouble to my way of thinking. 

Second  question: You probably want FSMAX or VINIX for stocks.  Those have low ratios and are indexed to a broad basket.  The VINIX has a trivially smaller expense ratio but is less diversified.  WFBIX is hands down better option than the PIMCO fund for bonds.

Asset allocation is one of the biggest drivers of investment returns.  Have you settled on a bond allocation yet?

Thanks for the reply, very much appreciated. With regards as to when I want to retire, realistically I'll be 55 before that's an option. 60 (17 years) is my target, but I'm 43 now and what I laid out is what I have other than a little home equity. So with that, along with what you mentioned, I'm guessing it's best to roll my previous 401k into my employer 401k?

Honestly, I haven't put much thought into asset allocation. I'm pretty risk tolerant, and with my retirement horizon being at least 17 years away, I was thinking I should probably stay in stocks right now. Am I being naive with that train of thought? What type of allocation would you recommend based off that?

Thanks again for the reply. I've read a lot, but I still feel like I have so much to learn.

sisto

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Re: Workplace Retirement Advice Needed, Please.
« Reply #3 on: May 14, 2019, 12:56:59 PM »
I am in the camp of nearly 100% stocks and I'm older than you are. If it were me, I'd roll that old 401K over to Vanguard for the cheaper cost and put it in VTSAX. I have access to great cheap Fidelity options through my work and use those for 401K, but I keep my personal stuff in Vanguard. I have VTSAX post tax account as well as traditional and ROTH IRAs there. Congratulations for planning your retirement now.

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Re: Workplace Retirement Advice Needed, Please.
« Reply #4 on: May 14, 2019, 01:20:15 PM »
Either rolling over to an IRA for VTSAX or going for more VINIX in the 401k are both good options.

caracarn

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Re: Workplace Retirement Advice Needed, Please.
« Reply #5 on: May 14, 2019, 01:26:38 PM »
I am in the camp of nearly 100% stocks and I'm older than you are. If it were me, I'd roll that old 401K over to Vanguard for the cheaper cost and put it in VTSAX. I have access to great cheap Fidelity options through my work and use those for 401K, but I keep my personal stuff in Vanguard. I have VTSAX post tax account as well as traditional and ROTH IRAs there. Congratulations for planning your retirement now.
This is almost exactly what I do (no Roth IRAs).

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Re: Workplace Retirement Advice Needed, Please.
« Reply #6 on: May 14, 2019, 02:23:01 PM »
Does your current 401k offer a mega backdoor Roth option (also called “in-plan Roth conversion”)? If it did, can you afford to contribute more than $19k/yr to your 401k? Do you contribute to an IRA or are you past the income limit for a Roth IRA?


willx

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Re: Workplace Retirement Advice Needed, Please.
« Reply #7 on: May 14, 2019, 02:51:08 PM »
Does your current 401k offer a mega backdoor Roth option (also called “in-plan Roth conversion”)? If it did, can you afford to contribute more than $19k/yr to your 401k? Do you contribute to an IRA or are you past the income limit for a Roth IRA?

Yes, I believe my plan does off an in-plan Roth conversion. In the plan details it states: "You may directly roll over a distribution from the plan into a Roth IRA. The amount rolled into the Roth IRA is taxable income to you in the year of the rollover."

No, I haven't contributed nor do I currently contribute to an IRA and I'm not past the income limit for a Roth. With regards to the 401k limit, that depends. My goal is to make the 19k contributions, but I'm not 100% certain I'll be able to make it because I've started so late in the year with regards to upping my contributions. It sounds like your suggestion hinges on me maxing out my 401k limit. What would be your suggestion if I can, or if I can't?

Are you suggesting I roll over 6K to a Roth from my current 401k and roll the previous 401k into my current 401k? Please excuse my naivety.

willx

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Re: Workplace Retirement Advice Needed, Please.
« Reply #8 on: May 14, 2019, 02:57:38 PM »
Either rolling over to an IRA for VTSAX or going for more VINIX in the 401k are both good options.

Thanks, it sounds like rolling it over into VINIX would be most beneficial route, as I'm trying to get my tax rate down this year to a lower bracket. But my concern is that VINIX only covers the S&P and that any tax I do pay from the Roth rollover would be covered by the gains in VTSAX, but doing that would definitely keep me from moving down a tax bracket.

ysette9

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Workplace Retirement Advice Needed, Please.
« Reply #9 on: May 14, 2019, 02:58:09 PM »
I think we are talking about different things. A “mega backdoor Roth” in your 401k is when you have already reached the $19k tax advantaged limit and you continue adding post tax money to your 401k. You then do a Roth conversions on that post-Tax contribution and either keep it in your plan (“in-plan Roth conversion”) or roll it into a Roth IRA.

If you can’t afford to contribute more than $19k per year then it may be moot point.

https://www.madfientist.com/after-tax-contributions/ for some reading

sisto

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Re: Workplace Retirement Advice Needed, Please.
« Reply #10 on: May 16, 2019, 10:24:09 AM »
I am in the camp of nearly 100% stocks and I'm older than you are. If it were me, I'd roll that old 401K over to Vanguard for the cheaper cost and put it in VTSAX. I have access to great cheap Fidelity options through my work and use those for 401K, but I keep my personal stuff in Vanguard. I have VTSAX post tax account as well as traditional and ROTH IRAs there. Congratulations for planning your retirement now.
This is almost exactly what I do (no Roth IRAs).
The only reason I have part of it in ROTH is because of my MAGI. I deduct what I can and the remainder goes to the ROTH.