401k Allocation for 23yo

[mmmkyle]

So I'm 23 years old and after a year at my firm I've qualified for enrollment in our 401k plan. I was excitied until I started looking over the available funds and feel like they are decidedly lackluster. Some important info...

-Our firm does contribute 3% safe harbor which essentially means they will contribute 3% of my salary without any contribution from me (this is not a match).
-I currently have about $5700 left on student loans at 6.55% (paid off about 28k in year since graduated)
-Salary is only 38k :(
-My ideal fund would be a vanguard total stock market index but there is only one large cap index available
-Ok with riskier (read: stocks) portfolio due to age

I am wondering (1) What I should allocate their 3% contirbution to and (2) if I should contribute any additional money myself- or should i throw the rest of my money at my pesky student loans.

The funds are as follows:
                                                           Exp. Ratio
WR Ivy Scnc Tech WSTYX                     1.30%

INTERNATIONAL STOCKS
Amfds Cap Wrld Gr Inc R3 RWICX          1.10     
Amfds EuroPacific Gr R3 RERCX             1.14
Amfds New Prospect R6 RNPGX             0.46
Opp Developing Market A ODMAX           1.36
Opp Global Opp A OPGIX                        1.22
Ptnm Intl Cap Oppr A PNVAX                   1.41

SMALL CAP
Heartland Val Pls HRVIX                           1.16
JPM SmCap Eq VSEAX                             1.42

MID_CAP
Baron BIOPX                                          1.39
Goldman Gr Oppr GGOAX                       1.41
Goldman MdCap GCMAX                         1.15
NeuBer Genesis NBGEX                           1.11
Princpl MdCap PCBIX                               0.65
TRowe RRMVX                                        1.32

LARGE CAP
AMfds RFNGX                                         0.31
Blackrock MDDVX                                    0.99
Drey DGAGX                                           0.97
Janus JGORX                                           1.05
Janus JARTX                                            1.04
Nationwide S &P 500 GRMSX                    0.61
WFA CBEQX                                             1.36

BALANCED
Fidelity 2005                              0.81
Fidelity 2010                               0.86
Fidelity 2015                               0.87
Fidelity 2020                               0.91
Fidelity 2025                                0.97
Fidelity 2030                                0.98
Fidelity 2035                                1.02
Fidelity 2040                                 1.02
Fidelity 2045                                 1.03
Fidelity 2050                                 1.04
Fidelity Free Inc FAFAX                   0.72
Janus Bal JABRX                             1.08
Oakmark Eq inc OARBX                   1.09

BONDS
Blackrock Hi yeild BHYAX                  1.01
PIMCO Total return PTTAX                0.85
TCW Total Return TGMNX                 0.84

[Nothlit]

Those fund options are pretty lackluster, and the expense ratios are high. If it were me, I'd probably pick one of the Fidelity target date funds for now, and then try to advocate with the company's HR department for better fund options in the future.

[fiveoclockshadow]

Ouch - that selection does suck.  I thought mine was pretty bad, only sensible thing I've got is an SP500 with an ER of 0.3%.  Sadly your SP500 is at 0.6% - dang!

For the 3% they put in since you are young I'd target one of the large cap funds with a low ER.  The targeted date funds ERs are just too high.  GRMSX is stupid expensive for what it is, but still might be your best bet.  If you can find out more about RFNGX that's another option - I can't quite read it, all stocks so it looks index like but the holding percentages look like active management so I just don't know.  Don't freak out about the ERs too much right now - you won't have much under management.  See if you can poke your HR department about the fund choices and ERs for the long term.

Beyond that I would say open a Vanguard Roth IRA account and contribute to that.  Only after you've saved the maximum into that would I consider putting more into this 401k plan.  The usual order of priority is 401k up to the match, then IRA, then 401k up to the contribution limit.  For you there is no match, so IRA first.

As to the student loan thing that is a pretty high interest rate considering the current interest rate environment and even long term stock returns.  So I think that is a pretty high priority.  You could go either way with it, but if it was me I'd pay it off before 401k contribution but might do IRA contribution before paying off.

[Zaga]

In order I would:

Pay off your student loans
Contribute the max to a Roth IRA
Contribute what you can above that to your 401-K, putting it into the S&P 500 index probably, though it would pain me a bit to pay that ER.  Remember that you have lots of time, and you will most likely be changing jobs at some point and therefore roll over to a good low cost fund.

[mmmkyle]

Yea it's good to see i'm not crazy...These funds are terrible! I took a look at the AmericanFunds RFNGX and the asset allocation looks like this:
 Cash 3.69%
 US Stock 74.63%
 Non US Stock 19.43%
 Bond 0.77%
 Other 1.49%

I'm thinking that the Nationwide S&P 500 index would be better but it still does have a 0.61% expense ratio compared to the 0.31% of RFNGX above. I know expense ratio wouldn't matter too much with the minimal funds but of the two what would you reccommend?

I will pay off the rest of these damn loans before I contribute anything to retirement but for the free money the firm provides I just need to know where to park it. Thanks guys!

[fiveoclockshadow]

Unless I could really understand what RFNGX is I'd suck up the ER on the SP500 index.  I actually did look up RFNGX for you yesterday and tried to figure it out for five minutes without learning much beyond the allocation you posted and looking at their top held securities (which don't appear to correlate with any index I'm aware of).

In my experience the "ER" of not knowing what exactly it is you are investing in can be very, very expensive.  Stick with the index fund.

And as others said, ERs eat your lunch over a very long time.  In the short term don't sweat the 0.5% of excess.  You are young, you'll be moving jobs in a few years anyway and at that time you can roll the 401k into a Vanguard IRA with very low ERs.

[mmmkyle]

I agree. In a brief look at the allocation I saw that "Home Depot" was the largest holding I believe at ~4%. Doesn't jive with the index. I'll go with the crappy NW index. Thanks for the help