Author Topic: What fund(s) would you select from this list [401k]  (Read 3722 times)

kscubz

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What fund(s) would you select from this list [401k]
« on: November 05, 2014, 09:18:12 AM »
Hello Mustachians, I've been lurking for a while and soaking up as much info from this forum and blog as possible. Thank you to all for your contributions to this community. I hope to one day be knowledgable and experienced enough to contribute as well.

About me:
I'm 26 years old and recently re-entered the workforce after an extended stay at college. I have no debt, and live very frugally, often ride a bike, eat at home, etc. Now that I'm making real money I have started getting serious about investing and planning for FIRE. I have already funded a traditional IRA as well as a taxable account with vanguard in VTSMX and VTSAX respectively. I am fully convinced that low cost index funds are the way to go and I would like to keep my asset allocation at or near 100% equities for now.

Unfortunately I don't have access to Vanguard funds through my 401k plan.

Here is a link to the list of funds available to me http://seafarers.org/memberbenefits/benefitplans/documents/FundProfiles07_01_2014.pdf

I'm leaning towards:
MM S&P 500 Index Fund (MIEAX)
and/or
T. Rowe Price Spectrum Growth (PRSGX)
due to their near 100% stock holdings as well as lower expense ratios.

If anyone cares to peruse the list I linked to, I would love to hear any and all opinions about what fund or funds you would pick in my situation.

Thanks

wtjbatman

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Re: What fund(s) would you select from this list [401k]
« Reply #1 on: November 05, 2014, 09:24:14 AM »
What a terrible selection of overpriced funds. Even the S&P 500 "index fund" has an expense ratio of .63

I'd probably invest in MM S&P 500 Index Fund (MIEAX) in the 401k and then balance your AA using your IRA and taxable accounts where you can select your own low cost and diversified funds.

kscubz

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Re: What fund(s) would you select from this list [401k]
« Reply #2 on: November 05, 2014, 09:41:10 AM »
Thanks batman, I was thinking the same thing.

The less than desirable funds as well as lack of an employer match makes me want to forgo contributing altogether but I know the tax savings should make up for it. 

Maybe I'll just max it out by front loading in the beginning of the year then quit, rollover to vanguard, and then go get my job back, rinse and repeat.

I'm slightly joking about that by the way.

wtjbatman

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Re: What fund(s) would you select from this list [401k]
« Reply #3 on: November 05, 2014, 10:16:45 AM »
I like how you think.

With those investment options and lack of an employer match I'd definitely look into any other tax deferred investment accounts you may have access to. I know you already said that you max out your tIRA. How about your health insurance, do you have a HDHP with a HSA?

kscubz

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Re: What fund(s) would you select from this list [401k]
« Reply #4 on: November 05, 2014, 10:26:05 AM »
I would love to do an HSA but the highest deductible plan available to me is $375 annually. I'm exploring all options though, including finding a new employer.

Catbert

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Re: What fund(s) would you select from this list [401k]
« Reply #5 on: November 05, 2014, 10:31:25 AM »
From those choices I'd also pick the S&P 500 option.

What marginal tax bracket are you in?  If it's 15% then you might want to skip the 401k in favor of a Roth IRA and regular brokerage account. 

kscubz

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Re: What fund(s) would you select from this list [401k]
« Reply #6 on: November 05, 2014, 11:43:33 AM »
Thanks for the input Mary.

My income puts me near the top of 25% bracket and I have very low living expenses. Basically I have no problem maxing out a 401k, and an IRA, and am not eligible for an HSA. I don't think there are any other tax advantaged options I qualify for. I'm going the tIRA route because I plan to retire early and expect my post retirement income to be much less than during my working life. I Just wish I had better fund options in the 401k.

seattlecyclone

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Re: What fund(s) would you select from this list [401k]
« Reply #7 on: November 05, 2014, 12:18:12 PM »
It sounds like you likely plan to switch employers in the next several years. Is that true? If so, suck it up and pay the high fees for now and roll over to an IRA when you switch jobs. The benefit of the tax deferral in the 25% bracket outweighs the cost of being forced to invest in high-fee funds, at least for a few years.

Eric

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Re: What fund(s) would you select from this list [401k]
« Reply #8 on: November 05, 2014, 12:25:01 PM »
Don't forget to complain to whoever is in charge about how terrible your options are and what a rip off these expense ratios are.  It wouldn't be a shock to find out that the person in charge really has no idea, and may be open to switching to a better plan with a little push.

surfhb

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Re: What fund(s) would you select from this list [401k]
« Reply #9 on: November 05, 2014, 12:35:49 PM »
Don't forget to complain to whoever is in charge about how terrible your options are and what a rip off these expense ratios are.  It wouldn't be a shock to find out that the person in charge really has no idea, and may be open to switching to a better plan with a little push.

I agree....at least ask

I'd keep the index fund and max it out at $18k if possible.   Roll it over to Vanguard if you quit

kscubz

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Re: What fund(s) would you select from this list [401k]
« Reply #10 on: November 05, 2014, 03:09:12 PM »
It sounds like you likely plan to switch employers in the next several years. Is that true? If so, suck it up and pay the high fees for now and roll over to an IRA when you switch jobs. The benefit of the tax deferral in the 25% bracket outweighs the cost of being forced to invest in high-fee funds, at least for a few years.

It's entirely possible, my current gig is good for a lot reasons but there are better paying jobs with better schedules out there that I'm qualified for. In fact I just applied for one a few days ago. Im always looking for new opportunities in order to make the most of my hopefully short career.


Don't forget to complain to whoever is in charge about how terrible your options are and what a rip off these expense ratios are.  It wouldn't be a shock to find out that the person in charge really has no idea, and may be open to switching to a better plan with a little push.

Will do!


I agree....at least ask

I'd keep the index fund and max it out at $18k if possible.   Roll it over to Vanguard if you quit

Yep thats the plan for now. I have decided on the S&P 500 (MIEAX) fund.