Author Topic: 401K Sanity Check  (Read 1230 times)

frozen

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401K Sanity Check
« on: March 21, 2019, 05:53:09 PM »
I started a new job last year and my 401K is with Voya and wanted to get some feedback on my investment elections as a sanity check.
For reference, I am 50 years old. I enjoy my job and so I don't necessarily plan to retire early, but do max out my contributions each year, including the catch-up contributions.
Here are my elections; do they make sense?

31% Vanguard Total Bond Market Index Fund
49% Vanguard 500 Index Fund, Admiral Shares
5% Vanguard Mid Cap Index Fund, Admiral Shares
5% Vanguard Small Cap Index Fund, Admiral Shares
10% Total International Stock Market Fund, Admiral Shares

TomTX

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Re: 401K Sanity Check
« Reply #1 on: March 21, 2019, 06:32:01 PM »
Too heavy on bonds for me, and your small/midcap are so tiny, I would say "why bother?"

I'm 100% VTI.

frozen

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Re: 401K Sanity Check
« Reply #2 on: March 21, 2019, 07:08:23 PM »
Too heavy on bonds for me, and your small/midcap are so tiny, I would say "why bother?"

I'm 100% VTI.

Thank you for the feedback.
Please keep a couple of things in mind:
1. This is a 401K and they do not offer a total stock market fund. I was trying to approximate it with adding small and mid cap funds.

2. I am 50 years old. I like my job and intend to work about 10 more years.

Anyone else want to weigh in?

Chrissy

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Re: 401K Sanity Check
« Reply #3 on: March 21, 2019, 07:55:27 PM »
Looks fine to me.  I'd shoot for 25% bonds / 75% equities, but you have to do what makes you comfortable.

Financial.Velociraptor

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Re: 401K Sanity Check
« Reply #4 on: March 21, 2019, 08:57:48 PM »
I think you have something close to the "right" allocation.  Don't listen to naysayers that poo-poo your bond allocation.  If that is what keeps you from panicking and "selling low" in the next correction, it is damn well worth it.  Your sanity and sleep are well worth a few basis points of expected lifetime return.  I use 40% allocation to "income" (Bond, REIT, BDC, MLP, preferreds) in my ER now in year 6.  I sleep like a baby. 

Retireatee1

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Re: 401K Sanity Check
« Reply #5 on: March 22, 2019, 05:06:46 AM »
You aren't too far from the Fidelity Freedom 2020 composition which I use as a reference :

Equities
33.71%

International Equities
20.41%

Bonds
36.68%

Short-Term Debt & Net Other Assets
7.27%

dcunitedfan

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Re: 401K Sanity Check
« Reply #6 on: March 24, 2019, 06:44:44 AM »
The stock/bond allocation is up to you, your risk tolerance, age, etc.  I'm the same age and have nearly the same ratio, so of course I'll be fine with your choice :)

Second what TomTX said about the mid/small cap percentages.  They are pretty small, you'll get more benefit (assuming of course that you are following some sort of rebalancing criteria - schedule or percentage, or whatever, as long as it's consistently applied) by increasing those to say at least the same as your international allocation.  If you're not rebalancing, then never mind (but you might want to read one of William Bernstein's books on investing, he explains allocation and rebalancing better than most)

Finally, in addition to the dimension of risk (stock/bond), there is the dimension of country.  How much to have in US vs International. 90% US / 10% International does not give the latter much contribution to your performance.  I'm in a similar situation myself where my International is even lower than yours, and I'd like it to be higher.  I'm aiming to raise it slowly over the next few years, maybe to at least 20%, probably should be even higher, up to 40%, but I'm not ready to go there yet.  I'm fighting Home Bias as many of us are.

MustacheAndaHalf

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Re: 401K Sanity Check
« Reply #7 on: March 24, 2019, 07:50:13 AM »
Your bond allocation looks very close to Vanguard's Target 2030 fund:
https://investor.vanguard.com/mutual-funds/profile/portfolio/vthrx
30% bonds
42% U.S. stock market
28% international equities

Have you considered 15-20% international in your portfolio?  In general even someone who fears international can benefit by allocating 1/5th of their stocks to international.  And people more patient and willing to take more risk can benefit up to 2/5ths (which is Vanguard's allocation, above).

Also, I think you'd want slightly more mid-caps than small caps.  Roughly 7:2:1.  So if you go with 15% international, maybe:
30% bonds
15% international
41% U.S. large cap (S&P 500 index)
9% U.S. mid cap
5% U.S. small cap


Also... how the heck did you find such good choices in a "Voya 401(k) plan"?  I'm really stumped by that - Voya typically charges 1% or more in expense ratios, often with a 0.25% marketing fee (12-1b fee) as part of it.  I'm very surprised you started a post with "Voya" and then showed a group of Vanguard funds as your choices...

frozen

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Re: 401K Sanity Check
« Reply #8 on: March 24, 2019, 07:17:46 PM »
Your bond allocation looks very close to Vanguard's Target 2030 fund:
https://investor.vanguard.com/mutual-funds/profile/portfolio/vthrx
30% bonds
42% U.S. stock market
28% international equities

Have you considered 15-20% international in your portfolio?  In general even someone who fears international can benefit by allocating 1/5th of their stocks to international.  And people more patient and willing to take more risk can benefit up to 2/5ths (which is Vanguard's allocation, above).

Also, I think you'd want slightly more mid-caps than small caps.  Roughly 7:2:1.  So if you go with 15% international, maybe:
30% bonds
15% international
41% U.S. large cap (S&P 500 index)
9% U.S. mid cap
5% U.S. small cap


Also... how the heck did you find such good choices in a "Voya 401(k) plan"?  I'm really stumped by that - Voya typically charges 1% or more in expense ratios, often with a 0.25% marketing fee (12-1b fee) as part of it.  I'm very surprised you started a post with "Voya" and then showed a group of Vanguard funds as your choices...

Thank you and everyone else for the feedback!

I was reading on Bogelheads and saw it was suggested to increase mid caps over small caps when trying to approximate the total US market, so I will consider your suggestion.

I also wonder how I seemingly lucked out with Voya! We have lots of Vanguard Admiral Shares choices, but I donít know what our fees are. I had Voya with another company previously and we had very different choices, which I think were their own proprietary funds.
« Last Edit: March 24, 2019, 07:37:32 PM by frozen »