The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: goosefraba1 on October 22, 2018, 06:57:16 AM
-
Well, I have been with my employer for 4 years now. 403B is though Empower. I have been blindly throwing in the minimum 2% for the previous 3 years to get the 2% match from my employer. A few months ago, I cranked up my contribution to the full $18,500 allowed. Since I have a little more skin in the game, went to register at their website last week to learn that they had all of my contribution in Western Conservative (All bonds with a 2% yearly charge). I feel swindled as I am only 30.
So, here is the conundrum. Was hoping to put all of this into Vanguard Total Market, but that is unavailable. Looks like the two best options long term are Vanguard 2060 retirement fund at 0.16% cost or Fidelity SP500 at 0.02% cost. I put everything and future contributions into the fidelity fund.
Right move?
-
The advantage of the vanguard target date fund is that it also gets you international diversification. Whether that is worth the increased ER is something that is going to vary person to person. In your shoes I'd have made the same choice you did, and have my international allocation in my taxable account.*
*Which is more tax efficient anyway since you get income tax credits for dividends withheld to pay taxes in foreign countries, but if you have your international allocation in a IRA/401k/403b/457 you still pay the foreign tax withholding but don't get any offsetting domestic tax credits.
-
Fed here, when I started they put you at 3% in the govt securities fund. You had to manually change it to 5% (full match at 5%) or higher and select more aggressive funds on your own. I suspect there are many that never deviated from this (though I believe they now start new hires in the target 2050 fund). In fact, only 77.4% as of the 4th quarter of 2017 contribute enough to receive the full match regardless of which fund(s) selected. I'd wager a chunk of those people would say they feel swindled if they ever realized they're a far cry from optimizing their retirement vehicle.
Good call on the Fidelity fund.
-
My first year with a 401k I did the same thing. Never logged in to actually see where my money was going, and found out that it was just sitting in the money market fund earning a pittance. Not sure why I expected them to just pick a fund for me.
At least you found out now instead of another couple years from now. Good luck man.
-
Yes, the right move. I'd do the Fidelity fund, but either is better than what you had.
-
+1 for the Fidelity fund. The difference in fees is significant.