Author Topic: 401k options - which to choose  (Read 2977 times)

Drew664

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401k options - which to choose
« on: January 12, 2015, 02:26:53 PM »
Hi,

Looking for opinions to determine which avenue is best given the funds available in my company's 401k program. I like the targeted funds, but the expenses seem to run high here when compared to similar Vanguard funds. The issue is, the only Vanguard fund available is a S&P 500 one that doesn't balance well for what I want (stocks international/US as well as Bonds - probably 80/20 split there). This type of split and remaining choices don't really fill that void of international stocks/Bonds. Currently I've got investments in the following funds as a % of my 401k portfolio:


PIMCO Total Return       42.08%
Vanguard S&P 500 Index Fund       2.94%
T Rowe Price Rtmt 2040       54.98%

Fund balance now looks a little silly as I didn't really know what I was doing when setting up the account (went conservative) and have recently added the Vanguard fund to the mix a few months ago.

Currently I'm meeting my employer match at 5% for contributions and will be looking at doing more once this part is figured out.

20% is going into the PIMCO Total Return
30% is going into the Vanguard S&P 500 Index Fund
50% is going into the T Rowe Price Rtmt 2040

I can rebalance at any time as well as sell existing shares to purchase others if needed.


Below are the options available:


    Wells Fargo Stable Return Fund
    PIMCO Total Return Fund (PTTRX)
    Dodge & Cox Balanced Fund (DODBX)
    Vanguard S&P 500 Index Fund (VFIAX)
    Nuveen Winslow Large-Cap Fund (NVLIX)
    American Funds Washington Mutual Investors Fund (RWMGX)
    Fidelity Low Priced Stock Fund (FLPSX)
    Royce Pennsylvania Mutual Fund (PENNX)
    Dimensional International Value Fund (DFIVX)


    T. Rowe Price Retirement Balanced Fund
    T. Rowe Price Retirement 2005 Fund
    T. Rowe Price Retirement 2010 Fund
    T. Rowe Price Retirement 2015 Fund
    T. Rowe Price Retirement 2020 Fund
    T. Rowe Price Retirement 2025 Fund
    T. Rowe Price Retirement 2030 Fund
    T. Rowe Price Retirement 2035 Fund
    T. Rowe Price Retirement 2040 Fund (TRRDX)
    T. Rowe Price Retirement 2045 Fund
    T. Rowe Price Retirement 2050 Fund
    T. Rowe Price Retirement 2055 Fund
    T. Rowe Price Retirement 2060 Fund


So the big question is, what is best for this 401k? Go all target retirement fund and have a little extra going to the S&P 500 since it's inexpensive to do, or is there a 80/20 mix of stocks US/International and Bonds that I'm just not seeing and is a great deal better than the targeted fund?

Slowly getting the hang of this - so thanks in advance for any advice. Can't wait to get this part streamlined. :)

skyrefuge

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Re: 401k options - which to choose
« Reply #1 on: January 12, 2015, 03:09:07 PM »
So the big question is, what is best for this 401k?

No, the big question is "what is best for my entire investment portfolio? What asset allocation to I want?" Then what to do with your 401(k) is a subset of that larger question, and depends on what you do with your other investment accounts.

It sounds like you probably don't have any other investment accounts yet (IRAs, taxable accounts), so the 401(k) is your only concern, but you should still think about it in that wider context to prepare for the future. Often, if your 401(k) only provides one fund that matches your desired asset allocation, then you would invest in that one option in your 401(k), and use other accounts where you have more choices (like an IRA) to fill out that desired allocation with other funds. In your case, if you really don't like your 401(k) choices besides the Vanguard fund (it would be good to see the expense ratios on all the funds), then you could potentially contribute there up to the employer match, and then fund an IRA to get you to your preferred balance with bonds and international stock.

But to my eye, I think you can get your desired allocation within your 401(k). PIMCO Total Return (which is a bond fund, if you didn't know), Vanguard S&P 500 Index Fund, and Dimensional International Value Fund  would cover your desire for Bonds, US Stock, and International Stock, respectively.

Either that, or just pick one of the T. Rowe Price Retirement funds and put all your money in that.

It really makes no sense to be invested in a Target Retirement fund AND other funds. Target Retirement funds are intended to be single-fund solutions. If you instead want to be in control of your own asset allocation (which you seem to), then just do that rather than mixing the two strategies together.

I'm not a fan of T. Rowe Price's version of target retirement funds, since they invest in an giant number of sub-funds, many of which are managed and expensive, and contrary to the idea of the simplicity of an all-in-one fund in my mind. But if there is one that meets your desired allocation, and its expenses are better than your other choices, it's certainly worth considering.
« Last Edit: January 12, 2015, 03:11:44 PM by skyrefuge »

Drew664

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Re: 401k options - which to choose
« Reply #2 on: January 18, 2015, 11:35:59 AM »
Decided to go with what I thought was the best of the bunch in the target 2040 fund. 100% of my contributions going there and I've also increased my contribution amount to 9%!


RapmasterD

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Re: 401k options - which to choose
« Reply #3 on: January 18, 2015, 03:18:16 PM »
Underscore this. Brilliant.

<<No, the big question is "what is best for my entire investment portfolio? What asset allocation to I want?" Then what to do with your 401(k) is a subset of that larger question, and depends on what you do with your other investment accounts.>>

It only took me 25 years to learn this lesson and life has been so much simpler since then.