Author Topic: 401k has no target date funds  (Read 2569 times)

thecrazydoglady

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401k has no target date funds
« on: October 07, 2016, 09:32:40 AM »
Hi all,

I was hoping my 401k would have some sort of set it and forget  it target date fund since I'm a beginner at investing. Unfortunately, it does not. The funds that have been chosen for me in my current portfolio have very high expense ratios. I'm 25 so i'm comfortable with a lot of risk. What would you recommend given the choices I have attached? My employer offers 3% match and I am currently putting in 10%. I'm considering maxing it out. I love the company I work for and am not planning on leaving unless something drastic changes or I get laid off. Therefore, I don't think i'll be rolling it over any time soon and I want to make sure all of my money isn't going to fees. Thank you all! I really appreciate any advice!
« Last Edit: October 07, 2016, 09:37:16 AM by thecrazydoglady »

Gin1984

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Re: 401k has no target date funds
« Reply #1 on: October 07, 2016, 09:41:27 AM »
Take the Vanguard ones!  I might invest internationally in a Roth or traditional IRA because those rates suck.

Philociraptor

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Re: 401k has no target date funds
« Reply #2 on: October 07, 2016, 09:41:57 AM »
Vanguard Institutional Index tracks the S&P 500. Personally I put 100% of my 401(k) into that since it has by far the lowest fee, then I put some bonds into my IRA to balance it out. You could do 80% VINIX and 20% PIMCO Total Return if you want to be 80/20 stocks/bonds within your 401(k) but the fees on the PIMCO fund are pretty high (0.75% vs 0.04% on the VINIX). So I'd just go 100% VINIX.

Jack

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Re: 401k has no target date funds
« Reply #3 on: October 07, 2016, 09:51:53 AM »
I'd go with either:

  • 100% "Vanguard Institutional Index I"

Or, to approximate the total market:

  • 81% "Vanguard Institutional Index I"
  • 4% "Vanguard Mid Cap Index I"
  • 15% "Vanguard Small Cap Index I"

Later, once you've learned more about investing, you might consider tilting by increasing the mid and small cap allocation above 4 and 15% respectively.

Also, if you want international funds (e.g. VTIAX) or bonds, hold them in your IRA because the choices in your 401k for those asset classes suck (relatively speaking).

thecrazydoglady

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Re: 401k has no target date funds
« Reply #4 on: October 07, 2016, 09:56:41 AM »
Thanks for all of the input already- you are all amazing! Another question- if I have them move everything to 100% Vanguard Institutional Index would there be tax implications with changing my previous allocation of stocks and bonds?

pbkmaine

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Re: 401k has no target date funds
« Reply #5 on: October 07, 2016, 10:03:29 AM »
There are no tax implications for investment changes within a 401(k).

Philociraptor

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Re: 401k has no target date funds
« Reply #6 on: October 07, 2016, 10:03:52 AM »
Thanks for all of the input already- you are all amazing! Another question- if I have them move everything to 100% Vanguard Institutional Index would there be tax implications with changing my previous allocation of stocks and bonds?

No. Rebalancing within a 401(k) or IRA is not a taxable event.

Paul der Krake

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Re: 401k has no target date funds
« Reply #7 on: October 07, 2016, 10:16:33 AM »
I'm considering maxing it out.
Maxing out a 401(k) when you're still young is the winning move for almost everybody. You will pay less taxes today, have more income in retirement, and ensure that you pay yourself first.

Adjust your contribution today. You may still be able to contribute the maximum before 2017 rolls around and that 2016 tax-advantaged space is lost forever.

LAGuy

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Re: 401k has no target date funds
« Reply #8 on: October 07, 2016, 10:34:05 AM »
I agree with just setting 100% to Vanguard Institutional if you just want a set it and forget it plan. That way you don't need to rebalance either. I did exactly this when I first started investing in the late 90's in my 401k. I chop it up more now that I've had time to do the research, but it served me well through some pretty hard times in the market.

That's actually not a real bad looking plan. Don't know what the management fees are, but those are solid fund choices.

TexasRunner

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Re: 401k has no target date funds
« Reply #9 on: October 07, 2016, 11:02:09 AM »
Vanguard Institutional Index tracks the S&P 500. Personally I put 100% of my 401(k) into that since it has by far the lowest fee, then I put some bonds into my IRA to balance it out. You could do 80% VINIX and 20% PIMCO Total Return if you want to be 80/20 stocks/bonds within your 401(k) but the fees on the PIMCO fund are pretty high (0.75% vs 0.04% on the VINIX). So I'd just go 100% VINIX.

This exactly.  You are in a very similar position to me.  Dump it all in S&P500 (VINIX) until you start looking at 6 digits in your portfolio, then you can consider diversification.  The low fee is going to help you MUCH more than a target fund.

robartsd

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Re: 401k has no target date funds
« Reply #10 on: October 07, 2016, 11:21:42 AM »
Within the 401(k) I'd choose VINIX, but I wouldn't max out the 401(k) if that doesn't leave you enough money to also max your IRA contribution for the year (if you can max both, all the better). IRA contributions can be made a little later (until April 15th of the following year), so if you can max your 401(k) for the year by December and contribute $5500 to an IRA early in 2017, that will maximize your 2016 tax advantaged savings. If you want exposure to bonds or international stocks, you'll be able to get it in a Vanguard IRA for reasonable expense. If you open a Roth IRA instead of traditional, I would be sure to be at least as aggressive in the Roth account as the traditional account - Roth earnings are never subject to income tax if they come out as qualified distributions - so a Roth IRA would be a poor choice for bonds.

catccc

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Re: 401k has no target date funds
« Reply #11 on: October 07, 2016, 01:03:35 PM »
I echo what a lot of others said.  Also, I was kind of bummed when my new 401K didn't have the easy target date funds I had at my old job... but I replicated it pretty easily (with help from this forum...) and the total expenses were lower, too!  So hurrah for making your own mix!