Author Topic: 403(b) Allocation  (Read 1573 times)

EastCoastBestCoast

  • 5 O'Clock Shadow
  • *
  • Posts: 10
  • Age: 31
  • Location: Charlotte, NC
403(b) Allocation
« on: October 07, 2016, 03:44:16 PM »
DW just started a new job with a school district.  They offer a 403(b) through TIAA with Vanguard options.  See attached for all available Vanguard funds. 

Should I put all contributions in the VFIAX?
« Last Edit: October 07, 2016, 03:46:24 PM by EastCoastBestCoast »

DavidAnnArbor

  • Handlebar Stache
  • *****
  • Posts: 2267
  • Age: 54
  • Location: Ann Arbor, Michigan
Re: 403(b) Allocation
« Reply #1 on: October 09, 2016, 05:10:00 PM »
Yes that looks like a sensible choice, VFIAX, Vanguard 500 Index Fund Admiral Class, which seems to be a 0.05% expense ratio. Some people also would like some international stock exposure. So you can decide what asset allocation you want for that and add VGTSX

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5406
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: 403(b) Allocation
« Reply #2 on: October 09, 2016, 05:16:39 PM »
To mimic a Total Stock Market fund, purchase the 500 Index and Extended Market Index in a 4:1 ratio. The Total Bond Market fund and Total International Stock fund are both very good options for filling out those respective parts of your asset allocation.

So the real question is: what do you wish for your asset allocation to be? How risk tolerant are you? What percentage of your savings do you want to keep in stocks vs. bonds? US vs. international? These are questions we can't answer for you. But once you come to a decision, you have good options for them in your plan.

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 2942
Re: 403(b) Allocation
« Reply #3 on: October 10, 2016, 08:37:29 AM »
The classic 3-fund portfolio is Total Stock market, Total Bond market, and Total International (stock).  While expense ratios are important, I wouldn't advice 0% international just because the expense ratio is 0.12% vs 0.05%.  If you put one third into international, and have just one year of contributions, that's probably about $18,000 x 1/3rd = $6,000.  The expense ratio is $7.20/yr for international vs $3/yr for S&P 500.  It's definitely worth $4/year to diversify an $18,000 portfolio to international.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5406
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: 403(b) Allocation
« Reply #4 on: October 10, 2016, 04:19:38 PM »
Come up with an asset allocation that you wish to implement across your portfolio as a whole. That's step 1.

You don't need to perfectly mirror that asset allocation in each of your accounts. Sometimes an employer account will only have a decent-ish fund for one or two of your asset classes, so you'll invest that account in those things and invest in other things in a different account to make everything add up right. My advice for the IRAs is to see what you can do to minimize fees in your employer accounts. Then see what areas of your asset allocation are still a bit short and invest the IRA money in those things.

DavidAnnArbor

  • Handlebar Stache
  • *****
  • Posts: 2267
  • Age: 54
  • Location: Ann Arbor, Michigan
Re: 403(b) Allocation
« Reply #5 on: October 11, 2016, 09:35:02 PM »
Instead of contributing to the Roth IRA, I would instead contribute to a Traditional IRA if your income allows you to do so. I would take advantage of the tax deferred savings now during your working career.