Author Topic: 401k (and Roth) allocation questions  (Read 2644 times)

freezerburn

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401k (and Roth) allocation questions
« on: April 18, 2015, 06:50:15 PM »
Hi Mustachians,

I hope you can help with a case study about my 401k.

My 401k managers recently visited the office and I had the chance to consult them about my allocations. I'm new to all this and didn't know what to make of their recommendations so I'd love to hear what you all think, and whether I should change my current allocations at all in either my 401k or my Roth.

I'm 37, and getting a late start on retirement savings, now focused on increasing contributions and reducing spending with the goal of FI in 10 years. I opened a Roth with Vanguard last year before becoming eligible for the employer 401k, and before discovering MMM. Since the new year I've increased my 401k contributions to 27% of my salary, and paused contributions to the Roth until I can reduce spending further (which should happen in June when I move to a cheaper house). I get a 4% match. I eventually plan to max the 401k but it'll take me a little time to get to that point (which is a topic for a more general case study than this one). My employer also offers a Roth 401k but since I already had one via Vanguard, I opted for the regular. They don't offer an HSA.

My current allocations/assets/fees are:
Roth: VTIVX / $1,775 / 0.18 expense ratio. I chose this pre-MMM-discovery, not sure if I should change it.
401k: VFIAX / $2,915 / 0.05 expense ratio. This amount includes my contributions + the employer match to date, however I don't become 100% vested until August 2015. If I leave the job before then (unlikely) I get 0% of the match.

The 401k dudes were advising that I allocate 50% in a Vanguard target date, up to 5% in emerging markets, 1% to 5% in precious metals, and the rest of the percentage in other S&P trackers.

Here are the funds I have available (ticker name / fee%):
AYBPX / 0.71
DIPSX / 0.12 - among their recommendations
MWTIX / 0.45
PLTPX / 0.59
VSGBX / 0.20
CHCYX / 0.81
RLBGX / 0.29
RERGX / 0.49
RNPGX / 0.45
YACKX / 0.76
BUFTX / 1.01
FSDPX / 0.82
FSCRX / 1.01
GITUX / 1.27 - among their recommendations as a fund of funds
JSMGX / 0.76
JVAIX / 0.90
MFLDX / 2.66 - among their recommendations, due to large cash allocation, I think? (Or the bigger fee...?)
ODVIX / 0.87 - this was the emerging markets recommendation for 5% allocation
POGRX / 0.66
VFIAX / 0.05
VEIRX / 0.21
VEXAX / 0.10
VIGAX / 0.09
VGPMX / 0.25 - this was the precious metals one they'd recommended, for 1-5%
VSGAX / 0.09
VSMAX / 0.09
VTXVX / 0.16
VTWNX / 0.16
VTTVX / 0.17
VTHRX / 0.17
VTTHX / 0.18
VFORX / 0.18
VTIVX / 0.18
VFIFX / 0.18
VFFVX / 0.18
VTTSX / 0.18
VMMXX / 0.17

I typed that all in due to inability to copy/paste in ungarbled form from our online system, so let me know if info is missing here that would help.

Did they give me good advice? Should I change anything? Or ignore and leave everything as is? I'd prefer to figure out a strategy for allocations now and then leave it all alone and not think about it unless I absolutely need to.

Thanks in advance for your thoughts!

PS: If I should add any info for case study purposes, please ask and I'll edit this post.

MDM

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Re: 401k (and Roth) allocation questions
« Reply #1 on: April 18, 2015, 08:50:50 PM »
My current allocations/assets/fees are:
Roth: VTIVX (2045 Target Date)/ $1,775 / 0.18 expense ratio. I chose this pre-MMM-discovery, not sure if I should change it.
401k: VFIAX (500 Index)/ $2,915 / 0.05 expense ratio.
Both are defensible.

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The 401k dudes were advising that I allocate 50% in a Vanguard target date, up to 5% in emerging markets, 1% to 5% in precious metals, and the rest of the percentage in other S&P trackers.
Note that VTIVX has the following allocation:
1    Vanguard Total Stock Market Index Fund Investor Shares    62.2%
2    Vanguard Total International Stock Index Fund Investor Shares    27.6%
3    Vanguard Total Bond Market II Index Fund Investor Shares†    8.0%
4    Vanguard Total International Bond Index Fund Investor Shares    2.2%

Don't know that I would bother with the "up to 5%" or "1% to 5%" suggested additions.  And I suspect you are correct on the "bigger fee" reason....

Quote
PS: If I should add any info for case study purposes, please ask and I'll edit this post.
For a full case study (i.e., more than just 401k allocation) see http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/

forummm

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Re: 401k (and Roth) allocation questions
« Reply #2 on: April 19, 2015, 07:39:10 AM »
Your current funds look good. I was 100% VFIAX for a long time. You could add some VEXAX if you want total market exposure (80% VFIAX + 20% VEXAX = 100% VTSAX--which is in your VTIVX). I don't think the emerging markets fund they recommended is worth it given the higher fees. You could open an IRA (or taxable account) at Vanguard and buy their VEMAX with only a 0.15% fee (for $10k balance--VWO is the ETF with the same expense but no balance requirement). But if you want emerging markets, you can just buy VTIAX (which is also in your VTIVX) and is more diversified.

Other than that, just decide if the amount of bonds in VTIVX is right for you given your risk tolerance and time to retirement.

freezerburn

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Re: 401k (and Roth) allocation questions
« Reply #3 on: April 22, 2015, 11:11:27 PM »
Thanks for the replies! (Looks like my earlier thank you got lost...) I'll leave things where they are for now.

Other than that, just decide if the amount of bonds in VTIVX is right for you given your risk tolerance and time to retirement.

As an investing noob I honestly don't know enough to confidently decide this now, but I'll start doing some more research :)