Author Topic: 401K allocation - please help me  (Read 3412 times)

Zikzin

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401K allocation - please help me
« on: September 14, 2016, 12:12:43 PM »
I called my 401K provider and asked how much was my rate of return last year, she said 5.61% O______O

I dont think i have allocated my funds correctly, so i seriously need your help! there's only 2 Vanguard funds that they are offering, so i wanted to just stick with Vanguard:

currently:
Vanguard Small Cap index fund (VSGAX) - 30%
Vanguard Growth Index fund (VIGAX) - 70%

I'm thinking of Switching it to:
Vanguard Small Cap -65%
Vanguard Growth - 35%
Active Bond fund (JIADX)- 10% -- do i need this? 

I am 38 years old and still a long way to ER





slugline

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Re: 401K allocation - please help me
« Reply #1 on: September 14, 2016, 01:16:32 PM »
2015 wasn't a great year for stocks -- the indexes were basically ended close to where they started -- so that 5-or-so percent doesn't sound all that bad.

Are you sure there aren't any other good fund choices in the 401(k)? Vanguard isn't the only place to get index funds.

Zikzin

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Re: 401K allocation - please help me
« Reply #2 on: September 14, 2016, 01:23:29 PM »
My 401K is with John Hancock, not very familiar with their funds and the YTD returns were just about the same as Vanguard but have higher fees, the Vanguard funds even charge 1.18% ,

So should i just stick to the current allocation?  The small cap is under aggressive and the Growth fund is showing to be in the moderate., Do you suggest to switch to aggressive since I have about 10 years till ER?

frugaliknowit

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Re: 401K allocation - please help me
« Reply #3 on: September 14, 2016, 01:25:41 PM »
I think this guy makes sense (because of your young age, you probably would choose the "aggressive" allocations):  http://paulmerriman.com/vanguard/

Jack

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Re: 401K allocation - please help me
« Reply #4 on: September 14, 2016, 01:26:10 PM »
Post all the funds available and their expense ratios.

Zikzin

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Re: 401K allocation - please help me
« Reply #5 on: September 14, 2016, 01:43:05 PM »
Here's all the funds and their expense ratios:

Aggressive:
Aston/Fairpointe Mid Cap Fund CHTTX  - 1.19%
Vanguard Small Cap growth Fund VSGAX - 1.18%
DFA US Small Cap Fund DFSTX - 1.47%
Templeton World Fund TEMWX - 1.66%

Growth:
Vanguard Small Cap Value Index VSIAX - 1.18%
Value Fund JEVLX - 1.49%
Capital World Growth & Income RWIFX - 1.54%
New Perspective Fund RNPFX - 1.54%
Massachusetts Investors Fund MITHX - 1.32%
Fidelity ADV diversified stock FTDOX - 1.46%
Vanguard Growth Index fund VIGAX - 1.18%
Pru Jennison Mid Growth Fund PEGZX - 1.60%

Growth & Income:
Fundamental Large Cap Value - 1.31%

Income:
Active Bond Fund JIADX - 1.28%

Conservative:
John Hancock Stable Value - 1.55%

plog

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Re: 401K allocation - please help me
« Reply #6 on: September 14, 2016, 01:45:58 PM »
Quote
I'm thinking of Switching it to:
Vanguard Small Cap -65%
Vanguard Growth - 35%
Active Bond fund (JIADX)- 10% -- do i need this? 

Since that's 110% my answer is not only don't you need it, its not possible. It also doesn't make financial sense, seems like your just throwing things at the wall hoping they will stick. 

Using Morningstar (http://performance.morningstar.com/fund/performance-return.action?t=VSGAX) I ran both your cases:

$100 invested in your actual situation (30/70) turned into $101.55
$100 invested in your new stock only allocation (65/35) turned into $101.26     
$100 invested in your new stock and bond allocation (60/30/10) turned into $101.12

You actually would have done worse if you had either of your proposed allocations last year.  Now to answer your next question and deliver some bad news--the most likely reason I calculated a return of 1.55% and you were told 5.61% is because the rep was most likely including new contributions (yours and companies) as gains.
« Last Edit: September 14, 2016, 01:49:27 PM by plog »

Zikzin

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Re: 401K allocation - please help me
« Reply #7 on: September 14, 2016, 02:12:29 PM »
Quote
I'm thinking of Switching it to:
Vanguard Small Cap -65%
Vanguard Growth - 35%
Active Bond fund (JIADX)- 10% -- do i need this? 

Since that's 110% my answer is not only don't you need it, its not possible. It also doesn't make financial sense, seems like your just throwing things at the wall hoping they will stick. 

Using Morningstar (http://performance.morningstar.com/fund/performance-return.action?t=VSGAX) I ran both your cases:

$100 invested in your actual situation (30/70) turned into $101.55
$100 invested in your new stock only allocation (65/35) turned into $101.26     
$100 invested in your new stock and bond allocation (60/30/10) turned into $101.12

You actually would have done worse if you had either of your proposed allocations last year.  Now to answer your next question and deliver some bad news--the most likely reason I calculated a return of 1.55% and you were told 5.61% is because the rep was most likely including new contributions (yours and companies) as gains.

LOL thanks for pointing that out, I wasn't considering the bond fund at first and then realized maybe my allocation is too aggressive.

 I have not been contributing to this fund much last year as I was paying off all my credit card debt, now, I'm ready to increase my contribution. So I guess I will leave the allocation as it is?  It has the lowest expense ratios as well.

Jack

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Re: 401K allocation - please help me
« Reply #8 on: September 14, 2016, 02:20:05 PM »
Here's all the funds and their expense ratios:

Aggressive:
Aston/Fairpointe Mid Cap Fund CHTTX  - 1.19%
Vanguard Small Cap growth Fund VSGAX - 1.18%
DFA US Small Cap Fund DFSTX - 1.47%
Templeton World Fund TEMWX - 1.66%

Growth:
Vanguard Small Cap Value Index VSIAX - 1.18%
Value Fund JEVLX - 1.49%
Capital World Growth & Income RWIFX - 1.54%
New Perspective Fund RNPFX - 1.54%
Massachusetts Investors Fund MITHX - 1.32%
Fidelity ADV diversified stock FTDOX - 1.46%
Vanguard Growth Index fund VIGAX - 1.18%
Pru Jennison Mid Growth Fund PEGZX - 1.60%

Growth & Income:
Fundamental Large Cap Value - 1.31%

Income:
Active Bond Fund JIADX - 1.28%

Conservative:
John Hancock Stable Value - 1.55%

That's all the choices? Every single one? There's no an S&P 500 index somewhere, or even a set of target-date funds?

If that's really the case, that 401k is so bad the people who picked it should be sued for breach of fiduciary duty.

Zikzin

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Re: 401K allocation - please help me
« Reply #9 on: September 14, 2016, 02:35:38 PM »
Oh yes they have target funds too at 1.29% sorry I forgot to include these:

Asset Allocation - Target Date
JH Ret To 2060 Managed Port      
 
JH Ret To 2055 Managed Port      
 
JH Ret To 2050 Managed Port      
 
JH Ret To 2045 Managed Port      
 
JH Ret To 2040 Managed Port      
 
JH Ret To 2035 Managed Port      
 
JH Ret To 2030 Managed Port      
 
JH Ret To 2025 Managed Port      
 
JH Ret To 2020 Managed Port   

Looks like the ones that picked the funds don't really have any idea about stocks, just glad there's 3 Vanguard funds

   
 
JH Ret Income Managed Port

retiringearly

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Re: 401K allocation - please help me
« Reply #10 on: September 14, 2016, 02:39:38 PM »
Am I reading that correctly? EVERY fund choice has an expense ratio over 1%?  And there are no index funds offered?
That can't be right.

retiringearly

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Re: 401K allocation - please help me
« Reply #11 on: September 14, 2016, 02:41:21 PM »
Here's all the funds and their expense ratios:

Aggressive:
Aston/Fairpointe Mid Cap Fund CHTTX  - 1.19%
Vanguard Small Cap growth Fund VSGAX - 1.18%
DFA US Small Cap Fund DFSTX - 1.47%
Templeton World Fund TEMWX - 1.66%

Growth:
Vanguard Small Cap Value Index VSIAX - 1.18%
Value Fund JEVLX - 1.49%
Capital World Growth & Income RWIFX - 1.54%
New Perspective Fund RNPFX - 1.54%
Massachusetts Investors Fund MITHX - 1.32%
Fidelity ADV diversified stock FTDOX - 1.46%
Vanguard Growth Index fund VIGAX - 1.18%
Pru Jennison Mid Growth Fund PEGZX - 1.60%

Growth & Income:
Fundamental Large Cap Value - 1.31%

Income:
Active Bond Fund JIADX - 1.28%

Conservative:
John Hancock Stable Value - 1.55%
\

I don't think that is accurate.  It states that the expense ratio for VSIAX is 1.18%, when in reality it is 0.08%.

Jack

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Re: 401K allocation - please help me
« Reply #12 on: September 14, 2016, 02:47:49 PM »
I don't think that is accurate.  It states that the expense ratio for VSIAX is 1.18%, when in reality it is 0.08%.

I'm guessing the company administering the plan is taking 1.1% for itself. (Hence the "breach of fiduciary duty" statement I made before.)

boarder42

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Re: 401K allocation - please help me
« Reply #13 on: September 14, 2016, 03:47:39 PM »
yeah this is a bad plan... you should ask who your company fiduciary is.

slugline

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Re: 401K allocation - please help me
« Reply #14 on: September 14, 2016, 03:58:02 PM »
Seeing Vanguard funds marked up with expense ratios over 1% is making me cry. Zikzin, I sure hope there are other good things about your employer that make up for this sad 401(k).

Zikzin

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Re: 401K allocation - please help me
« Reply #15 on: September 14, 2016, 05:27:14 PM »
This plus no match, it's really sad.  That's why I have not been so enthusiastic with contributing, Is this still worth it or should I open up an IRA with Vanguard instead? 

Jack

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Re: 401K allocation - please help me
« Reply #16 on: September 14, 2016, 05:37:39 PM »
This plus no match, it's really sad.  That's why I have not been so enthusiastic with contributing, Is this still worth it or should I open up an IRA with Vanguard instead?

Not even a match?! Jeez, what a screw-job!

No, you should absolutely max out your IRA before putting even a penny in the 401k.

The question of whether you should contribute to your 401k at all (after maxing your IRA) or just move on to taxable requires additional information to answer. (Usually it's a no-brainer -- use the tax-advantaged space! -- but yours is just so damn bad I don't know.)
  • What's your gross income (so we can calculate your tax bracket)?
  • Does the 401k plan in question offer something called "in-service distributions?" If it does, it would be the only saving grace...
  • If not, how long do you plan to work at this employer?

Zikzin

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Re: 401K allocation - please help me
« Reply #17 on: September 14, 2016, 05:58:54 PM »
This plus no match, it's really sad.  That's why I have not been so enthusiastic with contributing, Is this still worth it or should I open up an IRA with Vanguard instead?

Not even a match?! Jeez, what a screw-job!

No, you should absolutely max out your IRA before putting even a penny in the 401k.

The question of whether you should contribute to your 401k at all (after maxing your IRA) or just move on to taxable requires additional information to answer. (Usually it's a no-brainer -- use the tax-advantaged space! -- but yours is just so damn bad I don't know.)
  • What's your gross income (so we can calculate your tax bracket)?
  • Does the 401k plan in question offer something called "in-service distributions?" If it does, it would be the only saving grace...
  • If not, how long do you plan to work at this employer?

We max my husband's IRA every year and I put 10% of my gross income into my 401K, our accountant advised to put away at least 10K in pre tax accounts to not end up paying taxes.
My gross income $70,000 (due for increase)
Husband's $80,000
Boss is really good, and work cant complain, so might be here for awhile
I dont think there's any other perks with the current 401K :(

I have been thinking about setting up my own IRA account, but I wasnt sure if I still get the tax break with the combined income? I have read it somewhere that there's an income limit when you have a 401K (Husband doesnt have 401K since he's a per diem employee)

boarder42

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Re: 401K allocation - please help me
« Reply #18 on: September 14, 2016, 06:11:03 PM »
You Gross enough combined that you should be maxing your 401k at 18k. Funds suck but you're saving money in the 25% bracket from taxes.

Zikzin

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Re: 401K allocation - please help me
« Reply #19 on: September 14, 2016, 06:17:26 PM »
You Gross enough combined that you should be maxing your 401k at 18k. Funds suck but you're saving money in the 25% bracket from taxes.

Yes that's the plan now that we've paid off all our credit card debt, just had to revisit my allocation coz I can't keep putting into this account and will just earn about 5-6% a year.