Author Topic: Help With 401k allocation  (Read 2354 times)

Paper_town_girl

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Help With 401k allocation
« on: August 04, 2015, 02:00:19 PM »
Hello,

I'm seeking some advice in regards to what funds to contribute to with my 401k.

A little about me: I am 25 years old with no car debt.  I do have $15000 left in student loans at 6.8%, so smashing those is my top priority.  I also have a Roth IRA that I am maxing out for the year. My employer will contribute a "discretionary match" to my 401k.  In the past they have contributed dollar for dollar, but this is not set in stone.  I plan to focus on getting rid of my student loans first before really optimizing my contributions.  I am interested in contributing 3-5% of my salary for now.

These are my options:
Mutual Funds:
Vanguard Growth Index
Fidelity ContraFund
Yacktman Focused
Pimco Fundamental Index
American Cent Mid Cap Val
Pimco Small Cap Stock
Gamco Westwood MM
Lazard Emerging Markets
Dodge & Cox International
American-EuroPacific
Columbia Acorn Int'l
Oppenheimer Dev Markets
Loomis Sayles Inv. Grade

Index Funds:
Vanguard 500 Index
Vanguard Mid Cap Index
Vanguard Small Cap Index
Vanguard Total Int ST Index
Vanguard Em Mkts St Index
Vanguard Balanced Index
Vanguard Tot Bond Mkt Index

Asset Allocation Models:
(these are actively managed)
Aggressive Growth
Growth
Moderate Growth
Conservative Growth
Conservative

I don't have any fee info.  It's not included on my forms.  Any advice or insight would be greatly appreciated.

tiger002

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Re: Help With 401k allocation
« Reply #1 on: August 04, 2015, 04:06:36 PM »
The Vanguard 500 Index is probably a good one. Vanguard is well liked around here due to their low fees, and the 500 Index will track the S&P which long term is a good investment. You may want to consider the Tot Bond Index if you want to diversity and have some money in something more stable than stocks, though based on your age, going heavy into stocks is probably a good idea.

Jack

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Re: Help With 401k allocation
« Reply #2 on: August 04, 2015, 04:39:12 PM »
First of all, if the employer is matching dollar-for-dollar with no limit, that's HUGE! Under that circumstance, paying more than the absolute minimum on your student loans makes no sense whatsoever, and in fact you should even consider switching to the lowest-monthly-payment repayment plan you can possibly find. By prioritizing paying off student loans instead of contributing to the 401K, you're literally picking a 2-7% return instead of a 100%+ return! Shovel every cent you can into that thing until your employer wises up! If you can, max it out!

Second, I agree with the general principle that at your age, you should be at 100% stocks or close to it. IMO, you certainly don't need bonds if you have debt since paying off the debt is like investing in bonds.

Third, although those Vanguard index funds are probably your best bet, since you didn't post the expense ratios for each fund it's impossible for us to know for sure. (It's a shady thing to do, but it's possible your 401K plan administrator could be adding its own fee on top of Vanguard's.)

Assuming the expense ratios aren't being screwed with, I'd suggest something like the following:

simple portfolio:
  • 70-90% Vanguard 500 Index
  • 10-30% Vanguard Total Int ST Index

fancy portfolio with less large-cap & US tilt than above:
  • 50% Vanguard 500 Index
  • 20% Vanguard Mid Cap Index
  • 5% Vanguard Small Cap Index
  • 20% Vanguard Total Int ST Index
  • 5%  Vanguard Em Mkts St Index

The second portfolio should be higher risk and higher potential return than the first, but do a bunch of research and understand what you're doing before picking it. If in doubt, stick with the simple portfolio, which is perfectly adequate.

Scandium

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Re: Help With 401k allocation
« Reply #3 on: August 06, 2015, 04:40:04 AM »
Definitely stop contributing to the roth and use the 401k instead, especially with the match! It will also lower your taxes so give you more to pay off the loan.

MDM

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Re: Help With 401k allocation
« Reply #4 on: August 06, 2015, 04:57:23 AM »
I don't have any fee info.  It's not included on my forms.  Any advice or insight would be greatly appreciated.
Call your HR department or the 401k plan administrator and ask where to find the fees and other information.  See http://www.dol.gov/ebsa/publications/401k_employee.html for information that should be provided to you.

forummm

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Re: Help With 401k allocation
« Reply #5 on: August 06, 2015, 08:08:46 AM »
If the discretionary match is actually dollar-for-dollar with no limit, then maxing out ($18k/year) is your absolute top priority (above Roth and loans). But my guess is that there is some limit. It would be good to find out.