Author Topic: Case Study - Help Newlyweds Start Right  (Read 9361 times)

ttd

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Case Study - Help Newlyweds Start Right
« on: January 13, 2014, 10:09:14 PM »
First off, sorry if this is not the correct use of the label "case study," but it seemed appropriate.

So I've been diving into the world of MMM for about 2 weeks. I've read all of the "important" posts and have slowly been reading all of them from the beginning. I'm not quite done yet, but the more I read, the more confused I get about how and where to invest. My wife and I live pretty frugally, and now I need to know what the hell to do with this money!

Background and Goals: Our simple goal is to become 1/2-Mustachian (1/2-retired) as quickly as possible. My wife and I got married 5 months ago (Early twenties). I've been working at my job for three months, and she for seven. She loves her job and will absolutely want to work it until retirement age; it's her calling. I, however, tolerate my job and would jump ship if a better offer came around, but I fear I'm just not the 9-5 grind type of guy. I would love to "retire" as soon as I can.

The good news, of course, is that she will most likely retire at normal age. So we'll have that steady pay check/health and benefits to aid us when I do "retire."

Income: Me - Around 47,000. Her - 17,500. I have huge advancement opportunities if I stick around. My wife is currently a paid intern, and it will move to full time position (its absolute, no question about it) in 4 months. Her pay should double.

My passion/freelance, which I want to "retire" into, I think will bring in about 5,000 this year. (It would obviously bring in more if I wasn't working full time). I think I would also enjoy land lording but let's not get ahead of ourselves.

Liabilities: None. *Does a little dance*

Expenses/Saving We currently save 35%-40% of our income (depending on the month), but after reading the MMM blog I'm not happy with that amount. We can easily raise it to 50% by cutting out needless crap. Also, when wife moves to full time, our expenses will remain the same so savings will obviously go up.

Assets: Joint Checking Account- $4,308, Joint Savings - $4,100, Her savings - $2,000.

For Christmas, her father opened us each up a Roth IRA with fidelity and put in $500 each. Not sure if this was the best "move" but it was amazingly generous of him. We have not invested in anything yet.

My companies 401k plan is with pai. My company matches 20% of my first 5%, which is almost $500/year at my current salary. My account there is Roth 401k, as advised by the accountant there. This account opens tomorrow.

Questions:
1) So obviously I'm going to keep reading through the MMM website, but what are the best resources (books) to learn about economics and investing. I feel so very ignorant.

2) What the bloody hell do I do with my money? We have it just sitting around in the bank, scattered in different Roths with different companies. Which might be the right thing to do, but I have no idea.

3) Going further with 2, Should I contribute to my company for the match, and then invest elsewhere, or max out the 401k? Then what? Invest in the Fidelity Roth IRAs or do the Vanguard index funds MMM talks about (which would mean transferring the money from the Roth. Father in law might not like that but oh well). So, I guess the question is what are the different levels of investment and what are the best places to invest?

4) We're currently renting a house, but know buying is in our future.  Should we keep some money in savings for a future down payment or can we pull that out of whatever account we've invested in in the future. What about emergency funds?

Thank you so much for the help. I know I asked a lot and in a confusing way. Let me know if I've been too vague or if my goals need to be more defined. I really know nothing about this stuff (who regrets taking an easy elective instead of economics now!) so feel free to talk to me like I'm a child.

captainawesome

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Re: Case Study - Help Newlyweds Start Right
« Reply #1 on: January 14, 2014, 07:44:35 AM »
Congrats! seems you are doing all the right things. You have the right idea, and I can relate to needing info on where to look. Generally, I always recommend taking the match for the 401k (free money).  If you are comfortable with your savings, cool.  I might work on bumping the savings up to cover 3-6 months worth of expenses for an unexpected job loss. 

For retirement accounts, I like to make it easy on myself and have my accounts in one place (Vanguard for me, but YMMV). I have a Roth IRA with them and they are extremely helpful in finding the right fund for you. 

If your short term goal is to purchase a house, then you will have to put money in taxable investments (if you are willing to accept the fluctuating market) or low-yield accounts like CDs or money market accounts.  Depending on when you are trying to buy a house is really going to shape where you put your money.  I would still recommend matching the 401k, but put the rest aside for your house if that's where you see yourself in 1-3 years. 

You obviously have the long term goal in mind, keep cost of living down.  I think you just need to focus on your shorter term goals (saving for a house, then maxing out retirement accounts and then investing in index funds)  No need to overly complicate it.  It won't all happen at once, but you'd be surprised how quickly you can build savings and how gratifying that is.

SunshineGirl

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Re: Case Study - Help Newlyweds Start Right
« Reply #2 on: January 14, 2014, 08:32:13 AM »
You guys are setting up a great life for yourselves by looking at these things early, before you have any debt and while your income is slated to go up.

I'd recommend that you read Your Money Or Your Life. It's a great book that gets you thinking.

Also, 99% of people are super gung-ho about saving in 401Ks, but I think your company's plan sucks, absolutely, and I personally wouldn't tie up my money with a plan like that for a measly $500/year at a job you don't intend to stay with anyway. You could redirect that into a traditional IRA or Roth IRA.

Your FIL did you a major solid by opening those Roth IRAs for you. I'm guessing you will be able to get lots of good financial advice from him over the years, and you should consider what he says seriously.

Since you are intrigued by the idea of landlording, I suggest you save and then purchase a triplex or fouplex, and you live in one of the units for a period of time, allowing your tenants to pay your mortgage and for you to live free.

Finally, I hope you can establish a mindset that you'll keep working for XX years. The job you have might simply not be a good fit for you, but banking good money when you're young and then being responsible about saving and growing it is KEY to living the life you want in your 30s and 40s and beyond. There are so many stages in life, and you're at a very early one. It could be quite a costly mistake for you to leave a good-paying job before it's time.

Welcome!

Cincy Stache

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Re: Case Study - Help Newlyweds Start Right
« Reply #3 on: January 14, 2014, 09:35:47 AM »


I'd recommend that you read Your Money Or Your Life. It's a great book that gets you thinking.
A or Roth IRA.


Sunshine girl: Who is the author of this book?  My library shows numerous books with the same title.
Thanks!

Frankies Girl

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Re: Case Study - Help Newlyweds Start Right
« Reply #4 on: January 14, 2014, 09:58:29 AM »
This may be a stupid question on my part, but what are you investing IN?

You mention Roths, but it sounds like you may not have actual investment elections selected for your accounts?

I have Spartan index funds through Fidelity, and they are pretty close to the Vanguard index fund series (Vanguard is going to be cheaper, but I like Fidelity myself and it's within fractions of a percentage of the Vanguard funds).

And just random stuff - if you're going to be buying a house in the next 5 years, then don't invest that savings as you can't guarantee you'll have those funds grow in that time period. And I'm going to throw out this link: http://jlcollinsnh.com/stock-series/ since it's a super explanation of investing and the market.

SunshineGirl

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Re: Case Study - Help Newlyweds Start Right
« Reply #5 on: January 14, 2014, 10:25:57 AM »
Vicki Robin and the late Joe Dominguez.

the fixer

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Re: Case Study - Help Newlyweds Start Right
« Reply #6 on: January 14, 2014, 10:57:51 AM »
I thought MMM and jlcollinsnh explained investing better than anything I had found before, so if you're still not getting it, maybe a video approach? http://financinglife.org is a favorite site of mine.

Also try reading A Random Walk Down Wall Street if you want to learn a lot more about the details of the investing world, but at some point you start suffering from analysis paralysis. You don't have to understand a lot to make money nowadays with stocks and bonds. Rick Van Ness' videos I linked to can explain everything you need to know in about an hour. Everything else is optional, and the financial benefits are small at best.

As for what to invest in, take a look at these sites:
http://www.bogleheads.org/wiki/Lazy_portfolios
http://www.obliviousinvestor.com/8-sample-and-simple-portfolios/
Look up the funds listed on these sites by their ticker symbols at http://finance.google.com (there are others, but Google is what I like to use)

If you're ignorant of econ, try finding a good book in the library on microeconomics. It's a great mindset. Basically, all traditional economics is based on the idea of individuals in an economy making rational decisions, which is the choice that provides the most gain. It's been known for a while that this assumption is not rock-solid, but the models still seem to describe the way markets work and any irrationality was assumed to be random. Recently, some economists have realized that not only are people not always making rational decisions, but it's not random either. Look for the book "Predictably Irrational" by Dan Ariely if you want to learn more. But I think this demonstrates the value of understanding economics: by studying it, you can learn to make rational decisions and recognize when people are presenting a rational financial argument to you versus an irrational/emotional one.

Cinder

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Re: Case Study - Help Newlyweds Start Right
« Reply #7 on: January 14, 2014, 11:18:11 AM »
Gah, the fixer beat me below, but Not all of my information is duplicated..

I was putting together a collection of investing info for a friend, and I copied it over here.  I wonder if we should get a sticky with a good collection of information to point people at?

Quoting one of the posts
"You might be better off in one of the Lifestrategy or Target Retirement funds in the intermediate-term while you learn more about investing."


Here's a good collection of references

http://www.bogleheads.org/wiki/Lazy_portfolios
http://www.madfientist.com/retire-even-earlier/
http://jlcollinsnh.com/stock-series/
http://www.econtalk.org/archives/2007/04/bogle_on_invest.html


https://forum.mrmoneymustache.com/investor-alley/30-year-old-just-starting-out-all-vtsax-or-bonds-as-well/
particularly - https://forum.mrmoneymustache.com/investor-alley/30-year-old-just-starting-out-all-vtsax-or-bonds-as-well/msg193892/#msg193892


This describes what marginal tax rate really means - https://forum.mrmoneymustache.com/investor-alley/401k-employer-match-vs-extra-pay/msg196609/#msg196609

http://www.bogleheads.org/wiki/Category:Asset_allocation
and of course - https://forum.mrmoneymustache.com/investor-alley/

BoulderTC

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Re: Case Study - Help Newlyweds Start Right
« Reply #8 on: January 14, 2014, 12:03:50 PM »
And I'm going to throw out this link: http://jlcollinsnh.com/stock-series/ since it's a super explanation of investing and the market.

+1

ttd

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Re: Case Study - Help Newlyweds Start Right
« Reply #9 on: January 15, 2014, 07:15:09 PM »
Thank you everybody! This all has been amazing. I've looked through everything (and I do mean everything), and my head is swarming with things I should have learned in high school. The jlcollinsnh stock series was incredibly helpful so kudos to everyone who suggested it.

So if everyone is still there and willing, I have some more updates/questions:

1) Wife and I decided to delay buying a house. Our current rent is a steal (renting from family) and we'd be stupid to give this up.

2) I pretty much want to go with the jlcollinshnh and MMM strategy. My company's matching is pretty pathetic, and the only thing I can invest in there are a large collection of mutual funds , which I am now privy to. I might put in the 5%, but certainly not more.

3) We both want to start investing in VTSAX and maybe a small percentage (5-10%) in VBTLX. One thing I didn't quite catch in any of these is how much per year can I invest into a VTSAX? Because if it's like a roth and 5,000 dollars is the limit, I will quickly hit that and have money to spare.

From jlcollinsnh Comments such as this: If you keep working, while living on your 4% pour 100% of your pay into your investments. This will help dramatically expand your net worth. I am led to believe that you can invest more than 5,000 a year (certainly 100% of this person's pay is more than 5%.

Well, is all of this sound? I am definitely looking forward to further feedback.

mushroom

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Re: Case Study - Help Newlyweds Start Right
« Reply #10 on: January 16, 2014, 06:53:21 AM »
I would definitely participate to at least get the match, which is like a guaranteed 100% return, even if it has higher fees. But I would do a straight 401K instead of a Roth 401K, assuming that your income now is higher than it would be in the future, in order to also save on taxes now.

clarkm04

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Re: Case Study - Help Newlyweds Start Right
« Reply #11 on: January 16, 2014, 07:53:41 AM »
What was your company's accountant's rationale for the ROTH 401K over a 401K?

It seems unless I'm missing something, that a traditional 401K will work better for you.

Yes, the match isn't the best, but the tax savings from a 401K makes it attractive enough that I'd be fairly aggressive about investing in it and then do a rollover to Vanguard when you leave the company. It's almost magical how little your take home pay is influenced by an 401K increase given the upfront tax savings. 

IRA/ROTH IRA contribution limits are 5,500 per person with a job so you could place 11,000 (5,500 into each) into the accounts your family member opened for you.

SunshineGirl

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Re: Case Study - Help Newlyweds Start Right
« Reply #12 on: January 16, 2014, 08:45:59 AM »
When you're done maxing your Roth accounts, you can just invest in the exact same Vanguard funds in a regular, taxable account.

I'm glad to hear you're delaying buying a house. You're making some really good decisions.

reepstache

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Re: Case Study - Help Newlyweds Start Right
« Reply #13 on: January 16, 2014, 01:31:21 PM »

3) We both want to start investing in VTSAX and maybe a small percentage (5-10%) in VBTLX. One thing I didn't quite catch in any of these is how much per year can I invest into a VTSAX? Because if it's like a roth and 5,000 dollars is the limit, I will quickly hit that and have money to spare.

From jlcollinsnh Comments such as this: If you keep working, while living on your 4% pour 100% of your pay into your investments. This will help dramatically expand your net worth. I am led to believe that you can invest more than 5,000 a year (certainly 100% of this person's pay is more than 5%.

Well, is all of this sound? I am definitely looking forward to further feedback.

I think you have some confusion about taxable investment accounts and non-taxable. If I misunderstood, apologies.

A Roth or a 401k are tax-advantaged accounts. These accounts come in two different kinds: Roth and Traditional. A Roth account means you put money in now, you pay taxes now, your money grows tax free, you take it out tax fee. A Traditional means you put money in now, it grows tax free, when you take it out, you pay taxes on whatever your tax bracket is at the time.

A Roth (IRA or Traditional) has a contribution limit of $5,500 (for this year, this goes up every so often to keep up with inflation, so stay on top of it). A 401k has a contribution limit of $17,500 (there are some exceptions to both of those numbers, but in general that's where you're at). What that means is that you can shelter money from taxes in both of those accounts, for a total of $23,000 each year. However, you don't HAVE to invest in Roths or 401k's accounts--they are just wrappers around your money. You buy investments INSIDE of these wrappers, so you purchase the VTSAX inside of your Roth, and your money is safe from the tax man.

If you choose not to use a Roth or 401k, you can invest in the VTSAX (or any other index fund) in a regular brokerage account. As others have mentioned, Vanguard is a good choice for both your Roth and for a regular brokerage account. So, for example:

You put 5% to get the match into your 401k. Let's call that $2,350. You put $5,500 into a Roth IRA. Together, that means that you have $7,850 safe from taxes this year (your 401k is pre-tax, your roth post-tax). If you want to invest more of your money in index funds, you put however much you want (no contribution limit!) in regular index funds in a brokerage account.  You could invest 25k, 100k, whatever you want, in index funds.

I hope that clears things up.

Cheddar Stacker

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Re: Case Study - Help Newlyweds Start Right
« Reply #14 on: January 16, 2014, 02:17:05 PM »
Great job on finding this site early. No regrets for me, but I would be in a much better position at 35 had I found this site (and had my wife on board) when we first got married.

I agree - thanks are due to your father-in-law on the ROTH gift, and take any advice you can get from him since he clearly values investing over spending. Don't cash that out, leave it where it is but make sure it's invested in the right funds.

You didn't mention a future 401K for your wife. If hers has a better match and/or better investment options consider maxing that one out and only doing the 5% in yours.

Others mentioned IRA's rather than maxing out your 401K. This could benefit you but I don't know enough about the investment options in your 401K. The problem with not fully utilizing your 401K is you miss out on a lot of tax deferral. As someone mentioned, the IRA limit is 5,500, but the 401K limit is 17,500 so you can put $12K more in the 401K to avoid taxes.

401K Roth vs 401K traditional (and IRA vs. Roth IRA) - I don't know why the accountant would recommend Roth either, but a lot of people, including some on this site, prefer a Roth when you are in a low tax bracket (10-15%) which you are. The reasoning is that it's a low rate and you might have a higher rate later. I say it might be right for some but most would benefit more from traditional. Here's why:

1) Immediate tax deduction at a guaranteed rate, right now, vs. a future deduction at an unknown rate. Yes the IRS might increase rates, but they also might go down.
2) Most people on this site will have low expenses now, and in the future. Therefore we won't need to withdraw much from our IRA's. The less you take out, the lower the tax rate. If you are living on $30K now but earning $50K, you will only need $30K in retirement (ignoring inflation) so you will have lower income and likely be in a lower tax bracket.
3) Kudos again to Cinder for beating me to the punch on the madfientist link. TTD - read this link, and make sure you understand it well. Read all the other posts linked to that link. Traditional wins in most scenarios, but not all.


ttd

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Re: Case Study - Help Newlyweds Start Right
« Reply #15 on: January 16, 2014, 04:35:46 PM »
You didn't mention a future 401K for your wife. We don't have that information yet. She doesn't have that option as an intern.

401K Roth vs 401K traditional Yep I see what you're talking about now. I'll definitely be sure to switch that. I think the accountant was assuming (and it was probably a safe assumption) that I was going to work 45 years and be upper management when I retired.

I think you have some confusion about taxable investment accounts and non-taxable. If I misunderstood, apologies

No, I was definitely not getting it, so thank you. From a quick google search (meaning I'm probably misinformed), I see that if I try to withdraw funds before 59 1/2 with a roth, as Mustachians often do, then I will pay a penalty. So would it be best to put 5% in the 401k and then the rest in the vanguard brokerage account?

clarkm04

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Re: Case Study - Help Newlyweds Start Right
« Reply #16 on: January 16, 2014, 04:50:12 PM »
You are incorrect regard Roth.  You can withdrawal your contribution anytime with no consequences.

ttd

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Re: Case Study - Help Newlyweds Start Right
« Reply #17 on: January 16, 2014, 05:02:57 PM »
You are incorrect regard Roth.  You can withdrawal your contribution anytime with no consequences.

Ah, I read a little deeper and see where I made my mistake.

And, finally, after a ton of help and research (and even the research I had help with), I think I only have two more questions.

1) Vanguard is a good choice for both your Roth and for a regular brokerage account. Do I have to set-up two separate accounts for this or can both be managed from one account?

2) Would it be worth the tax-advantage to also have my wife set up a a roth account with Vanguard, so we can invest 11,000 in a roth every year?
« Last Edit: January 16, 2014, 08:11:12 PM by ttd »

Cheddar Stacker

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Re: Case Study - Help Newlyweds Start Right
« Reply #18 on: January 16, 2014, 07:15:37 PM »
You are incorrect regard Roth.  You can withdrawal your contribution anytime with no consequences.

Ah, I read a little deeper and see where I made my mistake.

And, finally, after a ton of help and research (and even the research I had help with), I think I only have two more questions.

1) Vanguard is a good choice for both your Roth and for a regular brokerage account. Do I have to set-up two separate accounts for this or can both be managed from one account?

2) Would it be worth the tax-advantage to also have my wife set up a a roth account with Vanguard, so we can invest 10,100 in a roth every year?

Roth principal can be withdrawn without tax or penalty after 5 years before you turn 59 1/2. Earnings need to stay in it.

1) One account (as in one login to the website with username and password) but two separate investments accounts (Roth and regular brokerage) within your vanguard login.

2) Yes. $5,500 per person, so up to $11K depending on income but you are under the limits. You can also do a traditional IRA rather than a Roth for the extra tax savings if preferred.

clarkm04

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Re: Case Study - Help Newlyweds Start Right
« Reply #19 on: January 16, 2014, 08:47:56 PM »
That's incorrect on ROTH IRA. You can withdraw your contributions at any time and earnings after 5 years.

http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2012/08/06/can-a-roth-ira-be-your-emergency-fund

Cheddar Stacker

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Re: Case Study - Help Newlyweds Start Right
« Reply #20 on: January 16, 2014, 11:31:35 PM »
That's incorrect on ROTH IRA. You can withdraw your contributions at any time and earnings after 5 years.

http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2012/08/06/can-a-roth-ira-be-your-emergency-fund


Thanks for setting me straight. I was confusing the roth conversion ladder method with regular contributions. Based on what I just read, straight contributions are available at any time. When you convert an IRA to a Roth IRA, you have to wait 5 years to withdraw the amounts you rolled over.

astadt

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Re: Case Study - Help Newlyweds Start Right
« Reply #21 on: January 17, 2014, 12:32:39 AM »
The Roth 401K is a great option for you! I don't know why any one would advise you to switch. You're in the 15% income tax bracket, so you're only getting a 15% bump now, but where will your taxes be in the future? What happens when they raise income taxes for everyone, you wouldn't have to worry about. You've got a $27500 roth opportunity that a lot of people don't get. You should keep it.

I would invest up to the Roth 401K match.

I would then invest up to $11K for 2013 in a Vanguard (or whatever) Roth IRA.

If you have another $11k around put that in your Roth IRA for 2014.

From there keep funding your Roth 401K

Dont forget to Fund a none retirement account as you'll want to be really careful about pulling money from your Roth IRAs.


astadt

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Re: Case Study - Help Newlyweds Start Right
« Reply #22 on: January 17, 2014, 12:42:37 AM »
My SO stole my computer and sent that before I could add these last points.

You and yours are young, you'll have plenty of Compounding time to grow your $$ into some really big cash. Congrats! You'll be happy when you're not paying taxes on it.

And dont worry about investing your cash accounts yet, The market is overpriced and in serious need of correction. Follow the advice of all the greatest investors and buy when prices are falling. 

aj_yooper

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Re: Case Study - Help Newlyweds Start Right
« Reply #23 on: January 17, 2014, 06:30:38 AM »
When we started out, we lived on one income and saved the rest.  That helped us get our house and our investment nut.  You are on the right path.  There is danger "among the English"-Lifestyle Inflation.

ttd

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Re: Case Study - Help Newlyweds Start Right
« Reply #24 on: January 21, 2014, 03:05:30 PM »
Hello all again.

I finally got access to the funds that my employer offers. Any of them look like winners?

INVESTMENT, PERFORMANCE      
1 MO TOTAL   3 MO TOTAL   1 YR TOTAL   3 YR  ANN.   5 YR  ANN.   10YR  ANN.   SINCE INCEPTIon   

     American Funds American Balanced Fund (R3)   
F P
1.57%    7.28%    21.33%    12.65%    14.22%    6.64%   N/A   
    
Total annual operating expense as of 06/30/13: 0.95% (or $9.50 per $1,000 invested.)
     Eaton Vance Large-Cap Value Fund (R)   
F P
1.99%    9.38%    29.01%    12.39%    12.69%    7.09%    6.82%   
    
Total annual operating expense as of 05/01/13: 1.24% (or $12.40 per $1,000 invested.)
     Am. Funds 2035 Target Date Retire. Fund (R3)   
F P
1.92%    7.61%    25.03%    12.12%    15.68%   N/A    5.48%   
    
Total annual operating expense as of 01/01/14: 1.19% (or $11.90 per $1,000 invested.)
     Am. Funds Cap. World Gro. & Inc. Fund (R3)   
F P
2.01%    7.59%    24.51%    10.87%    14.06%    8.68%   N/A   
    
Total annual operating expense as of 02/01/13: 1.10% (or $11.00 per $1,000 invested.)
     American Funds EuroPacific Growth Fund (R3)   
F P
1.81%    7.53%    19.79%    7.05%    13.17%    8.59%   N/A   
    
Total annual operating expense as of 09/30/13: 1.14% (or $11.40 per $1,000 invested.)
     Invesco Small Cap Growth Fund (R)   
F P
3.30%    9.48%    39.55%    17.50%    22.35%    9.33%   N/A   
    
Total annual operating expense as of 06/30/13: 1.48% (or $14.80 per $1,000 invested.)
     Am. Funds 2055 Target Date Retire. Fund (R3)   
F P
1.98%    7.74%    25.67%    12.24%   N/A   N/A    13.30%   
    
Total annual operating expense as of 01/01/14: 1.25% (or $12.50 per $1,000 invested.)
     Am. Funds 2045 Target Date Retire. Fund (R3)   
F P
2.06%    7.79%    25.75%    12.26%    15.79%   N/A    5.56%   
    
Total annual operating expense as of 01/01/14: 1.20% (or $12.00 per $1,000 invested.)
     Am. Funds 2040 Target Date Retire. Fund (R3)   
F P
2.00%    7.80%    25.71%    12.29%    15.82%   N/A    5.56%   
    
Total annual operating expense as of 01/01/14: 1.19% (or $11.90 per $1,000 invested.)
     Am. Funds 2030 Target Date Retire. Fund (R3)   
F P
1.95%    7.55%    24.80%    12.10%    15.61%   N/A    5.49%   
    
Total annual operating expense as of 01/01/14: 1.18% (or $11.80 per $1,000 invested.)
     BlackRock Small Cap Index Fund (A)   
F P
1.95%    8.66%    38.72%    15.28%    19.59%    8.44%   N/A   
    
Total annual operating expense as of 04/30/13: 0.91% (or $9.10 per $1,000 invested.)
     American Funds Fundamental Investors (R3)   
F P
3.06%    9.84%    31.09%    14.39%    17.73%    8.71%   N/A   
    
Total annual operating expense as of 06/30/13: 0.96% (or $9.60 per $1,000 invested.)
     Hartford Mid Cap Fund (R3)   
F P
3.26%    8.90%    38.58%    14.55%    19.03%    10.03%    19.34%   
    
Total annual operating expense as of 08/30/13: 1.49% (or $14.90 per $1,000 invested.)
     Am. Funds 2010 Target Date Retire. Fund (R3)   
F P
0.93%    4.10%    11.78%    8.15%    11.17%   N/A    3.99%   
    
Total annual operating expense as of 01/01/14: 1.12% (or $11.20 per $1,000 invested.)
     Am. Funds 2050 Target Date Retire. Fund (R3)   
F P
2.03%    7.77%    25.74%    12.27%    15.80%   N/A    5.56%   
    
Total annual operating expense as of 01/01/14: 1.20% (or $12.00 per $1,000 invested.)
     Am. Funds 2020 Target Date Retire. Fund (R3)   
F P
1.34%    5.76%    17.92%    9.97%    13.17%   N/A    4.45%   
    
Total annual operating expense as of 01/01/14: 1.15% (or $11.50 per $1,000 invested.)
     American Funds Money Market Fund (R3)   
F P
0.00%    0.00%    0.00%    0.00%   N/A   N/A    0.00%   
    
Total annual operating expense as of 12/01/13: 0.51% (or $5.10 per $1,000 invested.)
     PIMCO Total Return Fund (R)   
F P
- 1.01%   - 0.20%   - 2.55%    3.41%    6.21%    5.31%   N/A   
    
Total annual operating expense as of 09/30/13: 1.10% (or $11.00 per $1,000 invested.)
     Am. Funds 2025 Target Date Retire. Fund (R3)   
F P
1.75%    7.09%    22.91%    11.54%    14.90%   N/A    5.11%   
    
Total annual operating expense as of 01/01/14: 1.17% (or $11.70 per $1,000 invested.)
     American Funds Growth Fund of America (R3)   
F P
2.79%    9.30%    33.43%    15.01%    17.96%    7.99%   N/A   
    
Total annual operating expense as of 11/01/13: 0.98% (or $9.80 per $1,000 invested.)
     Oppenheimer Intl. Diversified Fund (N)   
F P
2.59%    6.65%    24.07%    8.11%    17.19%   N/A    7.61%   
    
Total annual operating expense as of 08/28/13: 1.52% (or $15.20 per $1,000 invested.)
     Am. Funds 2015 Target Date Retire. Fund (R3)   
F P
1.20%    5.05%    14.89%    9.01%    11.96%   N/A    4.30%   
    
Total annual operating expense as of 01/01/14: 1.13% (or $11.30 per $1,000 invested.)
     American Funds American High Inc. Trust (R3)   
F P
0.73%    2.71%    6.07%    7.16%    15.84%    6.73%   N/A   
    
Total annual operating expense as of 12/01/13: 1.01% (or $10.10 per $1,000 invested.)
     Oppenheimer Main Street Sm & Mid Cap Fund (N)   
F P
2.49%    7.47%    32.97%    14.55%    20.33%    8.54%   N/A   
    
Total annual operating expense as of 10/28/13: 1.36% (or $13.60 per $1,000 invested.)
     Invesco Equally Weighted S&P 500 Fund (R)   
F P
2.85%    9.59%    34.97%    15.99%    22.15%    8.59%    10.54%   
    
Total annual operating expense as of 12/20/13: 0.82% (or $8.20 per $1,000 invested.)
     J Hancock Disciplined Val. Mid Cap Fund (R2)   
F P
4.13%    11.21%    38.97%    18.04%    23.28%    12.07%    23.69%   
    
Total annual operating expense as of 07/01/13: 2.36% (or $23.60 per $1,000 invested.)

Hope this comes out readable

Cheddar Stacker

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Re: Case Study - Help Newlyweds Start Right
« Reply #25 on: January 21, 2014, 06:53:28 PM »
Wow. A bit hard to read but I think I got what I needed. A few problems:

1) You have waaaaaaay too many choices. It's good to have options but 26 funds is silly for the average employee to choose from.
2) Almost every expense ratio is north of 1%, a few are north of 1.5%, and the last one is 2.36% (although it's returns are crazy good). Hell even the money market, which has a 0.0% ROR, charges a 0.51% annual fee. WTF?

This is not surprising to me. My 401K used to have American funds and it was the same scenario. Don't let the high fees deter you from making hefty 401K contributions since the tax savings will outweigh the high fees. However, if you can do in-service withdrawals do them as soon/often as possible and put it into an IRA/Roth IRA. If you change jobs or your employer changes 401K providers use that opportunity to transfer anything you can into an IRA/Roth IRA so you have more control and less fees.

My method is to choose funds with historically good returns and very low fees. This makes the winners, in my opinion:
Invesco Equally Weighted S&P 500 Fund (R)   
BlackRock Small Cap Index Fund (A)
American Funds Growth Fund of America (R3)

It would be hard to pass up the returns in the last one, but the expense ratio is crazy.
J Hancock Disciplined Val. Mid Cap Fund (R2)   
F P
4.13%    11.21%    38.97%    18.04%    23.28%    12.07%    23.69%   
    Total annual operating expense as of 07/01/13: 2.36%

If you want to diversify more, including into some bonds funds (which I wouldn't bother with at your age) you will have to choose some additional funds other than these ones since they're all stock based from what I can tell.
Good luck!

astadt

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Re: Case Study - Help Newlyweds Start Right
« Reply #26 on: January 22, 2014, 12:11:37 AM »
See if your 401k plan includes some advice to see if you can weed through those plans.

Most employers plans provide some sort of help... once you ask for it.