Help choosing balance of 401k

[warehouse]

Hi All,

Looking for some guidance in choosing how to allocate my employer run 401k. I currently am 100% invested in "SSgA Target Retirement 2050" I am 30 right now but hoping to FIRE in 10 years with my husband. The current balance is just over $30k in this account so not a huge sum. I am new to all of this and before coming to this site I never would have considered changing the default selection! Also I can choose to automatically rebalance at 90 or 180 days, any suggestions which is best?

I can assign any of the accounts below a percentage value with the total equaling 100%. Just looking for some guidance :)

Premixed Portfolios           
    SSgA Target Retirement Income      
    SSgA Target Retirement 2010      
   SSgA Target Retirement 2015      
    SSgA Target Retirement 2020      
    SSgA Target Retirement 2025      
    SSgA Target Retirement 2030      
    SSgA Target Retirement 2035      
    SSgA Target Retirement 2040
    SSgA Target Retirement 2045   
    SSgA Target Retirement 2050   
    SSgA Target Retirement 2055   
Core Funds
Stable Value      
    Putnam Stable Value   
Bond      
    PIMCO Total Return       
    Inflation Protected Bond       
Balanced   
    T. Rowe Price Balanced       
Large U.S. Equity   
    Dodge & Cox Stock       
    Vanguard Institutional Index       
    Harbor Capital Appreciation       
Small/Mid U.S. Equity      
    Mid Cap Equity Select   
    T. Rowe Price Small Cap Stock   
International   
    American EuroPacific Growth       
    Vanguard Total Int'l Stk Index

[MDM]

On the face of it, that appears a reasonable choice.  Need to know, however, what fees are charged to you for each of the options.

In general you should also look at (not rely on) historical performance when choosing funds.  Yes, good historical performance is no guarantee of future bliss - but a fund that has underperformed for 10-20 years is unlikely suddenly to deliver great results.

[ZiziPB]

Please post the expense ratio for each fund.  You have two Vanguard funds and a stable value fund available so you should be able to put together a nice portfolio.  How old are you?  Do you have any savings outside of your 401k?  Also, do you have any idea of what type of asset allocation you are looking to achieve? 

[seattlecyclone]

What is your desired asset allocation? What other accounts do you have (if any) and what are their balances? You should consider your entire portfolio as a unit when deciding how to allocate your money. For example if you decide you want to invest 20% of your money in bonds, but you don't like the bond funds available in your 401(k), you might decide to do all stocks in your 401(k) and invest in bonds in your IRA where you can buy whatever fund you want.

[warehouse]

Thanks for your replies!

Total Expense Ratios

SSgA .17 for all

Putnam Stable Value Fund .27

PIMCO Total Return Fund .46

BlackRock Inflation Protected Bond .45

T Rowe Price Balanced Fund .64

Dodge & Cox Stk .52

Vanguard Institutional Index Fund .04

Harbor Capital Appreciation Fund .65

JPMorgan Mid Cap Equity .91

T Rowe Price Small Cap Stock .91

American Funds EuroPacific Growth Fund .54

Vanguard Total International Stock Index Fund .14



Wow there is a big range in there!!


In a quick review the Vanguard Institutional Index fund has great historical returns… I will review all historical results more closely.

I do not have a desired asset allocation, still learning what is best. We do have another account with $130k in it, it's an IRA my husband inherited from his dad. Current allocations are..

Domestic Equity (MSA/Delaware Mgmt)   14%
Index 500 Stock (MSA)   14%
Fidelity VIP Mid Cap   7%
Index 600 Stock (MSA)   3%
International Equity(MSA/Franklin Tmpl)   6%
Emerging Markets Equity (MSA/MFS)   6%
Select Bond (MSA/Wells Capital Mgmt)  18%
Multi Sector Bond (MSA/PIMCO)      9%
High Yield Bond (MSA/Federated Inv.)   3%
Russell Global Real Estate Securities   5%
Credit Suisse Commodity Strategy    5%

I am 30 years old now, have run the numbers and FIRE at 40 seems achievable. A big part of that is military benefit my husband receives at $20k a year for the rest of his life.

[ZiziPB]

You have some great choices in your 401k but I would suggest you first decide what type of allocation you want and use that for the entire portfolio, not just the 401k account.  A lot of people recommend at least some bond/fixed income allocation - 80% stock and 20% bonds/fixed income is widely recommended.  Then decide if you want international stock (again, recommended) and how much of it.  Here is some recommended reading for beginning investors:  https://www.bogleheads.org/wiki/Getting_started

Your least expensive options are the Vanguard Funds.  Vanguard Institutional Index tracks S&P 500, and the Total International Stock Index Fund is just what its name says.   These are both excellent choices. For the bond/fixed portion, you have a choice of a couple of funds but you should check what the Stable Value Fund is yielding (look for its current yield, if it's over 2% that would be a good option). 

So your portfolio could look something like this:
Vanguard Inst Index   60%
Vanguard Total International 20%
Putnam Stable Fund 20%

I don't know much about the SSgA Target Date funds but 0.17 is a good expense ratio.  You need to look "behind the curtain" and see what is in those funds (most likely a mix similar to what I listed above but at different ratios depending on the date).  So you can just pick one of the target date funds with the investment mix you desire and not worry about individual funds. 

For the inherited IRA, you need to do a bit more research.  First of all find out the expense ratios and what assets these funds invest in.  Also, where is this IRA held?

[FLBiker]

+1 to the Boglehead link.  It might also be useful to read this: http://www.bogleheads.org/wiki/Three-fund_portfolio

Personally, I do something like this: 49% US stock, 33% INT stock, 10% bond, 5% REIT, 3% Other.  The last two are entirely optional, though.

So if I were doing that in your 401K, I'd do something like:
Vanguard Inst Index   50%
Vanguard Total International 35%
PIMCO Total Return 15%

I don't love PIMCO, though, but I'm not familiar with Putnam Stable Fund, so I can't speak to whether or not that's a good stand in for a bond index fund.  Truthfully, if I were you, I'd just do the two Vanguard indexes (60/40 or something like that) in the 401K and get a bond index with a lower expense ratio in your husband's IRA.

The key (as I understand it) isn't picking the right "magic number" of percentages, it's picking a balance and sticking to it (meaning, rebalancing as needed).  As far as 90 vs 180, I'd probably do 180, but I think either would be fine.

[Scandium]

In a quick review the Vanguard Institutional Index fund has great historical returns… I will review all historical results more closely.

Don't.

[warehouse]

For the inherited IRA, you need to do a bit more research.  First of all find out the expense ratios and what assets these funds invest in.  Also, where is this IRA held?

The IRA is through Northwestern Mutual. It is a "front end design individual retirement annuity." I can't find any information on expense ratio on the account. I will contact my "guy" and find out.

Thanks for the link, I will study up!

[warehouse]

In a quick review the Vanguard Institutional Index fund has great historical returns… I will review all historical results more closely.

Don't.

Deal ;)

[johnny847]

In a quick review the Vanguard Institutional Index fund has great historical returns… I will review all historical results more closely.

Don't.

Deal ;)

I agree. Historical returns are 100% irrelevant! What's relevant is the asset classes of the underlying investments - stocks, bonds, etc

Historical date that is important in a taxable account (I know we're talking about 401k's here, but just for your knowledge) is the history of capital gains distributions and proportion of dividends that are qualified. These two things are generally pretty predictable given past data. You want funds that keep capital gains distributions to a minimum and maximize the proportions of dividends that are qualified.

[MDM]

In a quick review the Vanguard Institutional Index fund has great historical returns… I will review all historical results more closely.

Don't.

Deal ;)

I agree. Historical returns are 100% irrelevant! What's relevant is the asset classes of the underlying investments - stocks, bonds, etc

"Those who cannot remember the past are condemned to repeat it."