Author Topic: Employer 401K surgery advice  (Read 7270 times)

KulshanGirl

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Employer 401K surgery advice
« on: May 02, 2013, 12:08:35 PM »
Now that I am learning more about investing, I am appalled by the fees on my work 401K options.  I'm at Fidelity and I'm about to slash and cut and carve this into something that is simpler and more efficient.  I have some questions, the first is do you think this looks okay?

50% DSPIX (stock index fund) with expense ratio of .21%, this is by far the lowest of all and also the only index fund that I can see.
26% FIADX (international stocks, 1% expense ratio, ouch, but this is the lowest one available.
20% FSRIX (bonds) 
4% PURZX (global real estate)

My other question is, is there a good way/good timing to move things around that are already in there?  Or just go for it and move it? Also, I currently have two kinds of bonds, half stable value and half income.  But the stable value ones have a high enough expense ratio that I wonder if I should even bother and go to the above.  I also have a Roth IRA at Vanguard in the target retirement account for my age.  (42) so there is some bond coverage there too.  What do you think?  I'm meeting with our benefits 401K advice guy in June and I want to go in there with a plan that he won't talk me out of.  (fees!)

icefr

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Re: Employer 401K surgery advice
« Reply #1 on: May 02, 2013, 12:30:39 PM »
My 401(k) is at Vanguard and I can exchange stuff easily online. I assume that Fidelity has a similar tool.

How much do you have in your 401(k) vs your Roth IRA? At a 1% expense ratio on anything else, I would honestly consider just putting 100% of your 401(k) into the S&P 500 index fund and take care of everything else in your Roth IRA... Unless of course you have way more money in your 401(k).

What are the expense ratios for the other funds you listed?

brewer12345

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Re: Employer 401K surgery advice
« Reply #2 on: May 02, 2013, 12:56:34 PM »
I'd prefer stable value to any bond fund you care to name right now.  As for the rest, I think I would also just skip the international fund and lump it into the S&P 500.  I also would probably skip the real estate fund.

the fixer

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Re: Employer 401K surgery advice
« Reply #3 on: May 02, 2013, 01:02:03 PM »
icefr +1

Invest outside your 401(k) for whatever you can get the most savings on at Vanguard. International and bonds are probably the most important. Splitting up your asset allocation across multiple accounts makes rebalancing more logistically difficult, but it can save you money.

It might even make sense to hold international in a taxable account. You at least get to claim the foreign tax credit that way.

Airwhale

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Re: Employer 401K surgery advice
« Reply #4 on: May 02, 2013, 01:39:35 PM »
Just wanted to point out that there is at least one international fund with a lower expense ratio given through fidelity.  I have Fidelity netbenfits in an old 401k from my employer,  and I have FSPNX (Fidelity Spartan Intl Idx Instl) which is an international index fund with only a 0.07% expense ratio. 

KulshanGirl

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Re: Employer 401K surgery advice
« Reply #5 on: May 02, 2013, 02:43:13 PM »
I don't have access to that one through my plan though.  I have:

BISIX (1.30%, ouch ouch!)
FIADX (1.00% ouch!)
IHOTX (.91% somewhat less ouch, but really crap performance from what I can see)
JEMSX (1.57% super ouch with an ouch cherry on top)

All of the domestic stock options have around 1% except for this DSPIX at .2%.  I had thought of doing what is suggested above, but I do have a lot more in my 401K than the others.  Here it is:

$62K in the Fidelity 401K, I am not adding to this at this time, I'm focusing on the Roth instead at Vanguard.  My work puts in 11% of my pay once per year without me having to match, so this will keep growing by a goood chunk anyway.

$7K in my Roth at Vanguard, currently in the targeted fund for my age.  I put $458 per month in here to hit the max by the end of the year.

3.7K in the taxable fund.  I have this in VTSMX.  Adding around $100 per month, looking to increase this.

While I'm listing things, here are my bond options through work:

FA Stable Value .69%
FSRIX (income) .75%
MNTRX (income) .79%
ACITX (??) .48%

I could do the 401K at maybe 70/30 index stocks to bonds, and the Vanguard Roth to an international index fund? I wouldn't get the foreign credit (I am a noob, I have no idea about that) but at least I won't be paying so much in fees.  And it would be a little off balance for a while while it grows, or I could do both the Roth and taxable to international index to make it closer.  Once my Vanguard numbers grow enough, I could move towards 100% domestic in the 401K and the others at Vanguard.

This is all really new to me.  In one sense, I feel like a total goober trying to figure it out, and at the same time I am kind of impressed that I'm starting to catch on.  Hehe.

icefr

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Re: Employer 401K surgery advice
« Reply #6 on: May 02, 2013, 03:40:53 PM »
I could do the 401K at maybe 70/30 index stocks to bonds, and the Vanguard Roth to an international index fund? I wouldn't get the foreign credit (I am a noob, I have no idea about that) but at least I won't be paying so much in fees.  And it would be a little off balance for a while while it grows, or I could do both the Roth and taxable to international index to make it closer.  Once my Vanguard numbers grow enough, I could move towards 100% domestic in the 401K and the others at Vanguard.

This is all really new to me.  In one sense, I feel like a total goober trying to figure it out, and at the same time I am kind of impressed that I'm starting to catch on.  Hehe.

Yeah...I would probably put the international in your Roth IRA and in taxable for any future $$ (just leave the VTSMX there) and then pick the least bad bond fund in your 401(k). I might pick the stable value fund as your "fixed income" one myself. Or compare the other three in Morningstar against say VBMFX (Vanguard Total Bond index). (great for comparing mutual funds from different companies!) Those international options in your 401(k) are just not worth it, but the bond ones aren't all bad, especially the 0.48% one if it's not a bad fund.

And then when you leave your employer...I wouldn't hesitate for a moment to roll your 401(k) over to Vanguard and then you'll get all the awesome funds you want!!

And the foreign credit is actually SUPER easy. Vanguard's 1099 form indicates the amount of it and then I enter it on my 1040 or in the tax software. It's not that much though. On ~$10k last year in VTIAX (total international index admiral shares) I only got a foreign tax credit of ~$20. I'll take the savings, but not anything to write home over.

The biggest lesson I've probably learned is that it isn't an exact science and things will always be somewhat out of balance. It takes practice to be okay with that and I'm still working on it!

KulshanGirl

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Re: Employer 401K surgery advice
« Reply #7 on: May 02, 2013, 05:16:03 PM »
Okay, punch me in the face if needed, but ...

Work 401k:

70% DSPIX S&P index fund .2%
20% FA Stable Value bond fund .69%
10% FSRIX Strat. Income bond fund .75%

Vanguard Roth:  VGTSX or VPACX

Vanguard Taxable:  Stick with VTSMX for now, maybe move half to International when it hits $6K and can split. 

Am I sounding mustachian or full of shite?  I feel like this is good.  Well, better anyway.  I'll be low on the international stocks for a while, but shoveling it in there almost exclusively between now and january, when my 401k will get another jolt.  There will be the $100 per month plus hitting the domestic market, this is a little bit of an incentive to find more to put there too.  Downsides to my plan?  Remember, the 401k is sitting forlorn now, nothing else gets put in until January but what IS in there will get set to the above allocations. 

If you had told me 6 months ago that I'd be discussing foreign tax credits and asset allocation, I'd have snorted my $5 latte out my nose, and here I am.  :)

LowER

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Re: Employer 401K surgery advice
« Reply #8 on: May 02, 2013, 06:11:09 PM »
2 days ago I discovered that my Fidelity 403b best option for bonds was a PIMCO fund that had a 0.45 ER, which on face value I thought was somewhat (and relatively) reasonable until I dug deeper on the Fidelity site and it also has a 0.45% "administration fee" which prompted me to make some changes.  It was the least-of-evils bond fund option but I don't want to be paying 0.90% for a bond fund right now.  I decided to stick with the available Spartan funds at 0.05 and 0.06, neither of which have extra administration fees attached to them, but this puts my 403b at 100% stock index funds, which is a little unnerving for my nearly 50 year old self. 

I'm not advocating for anyone else to do this, just want to make the point that it took me awhile to find that extra admin fee, so dig deep into the Fidelity website to find all the fees.  I can't see them on the Fidelity site, just on the Fidelity NetBenefits site.

Caveat emptor.....

Another Reader

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Re: Employer 401K surgery advice
« Reply #9 on: May 02, 2013, 06:26:52 PM »
ACITX is different from most bond funds.  It is a fund comprised of government issued inflation protected securities.  In theory, if inflation pops up, this fund will not drop in value as significantly as other bond funds.  The fund is well managed and I would consider a position as part of my bond allocation.

With bond funds, you really need to evaluate the underlying paper.  Some bond funds are taking on significant risk to juice the yields.  Read what some of these funds own and it's like looking at the ingredients in a package of hot dogs.

I don't think you are too far off track, especially for a beginner.  You will fine tune as your knowledge and experience grow and you gain confidence.  Pretty soon the only reason you will be drinking a $5 latte is because a friend buys you one to get your investment advice.

KulshanGirl

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Re: Employer 401K surgery advice
« Reply #10 on: May 03, 2013, 09:38:56 AM »
I gave up the lattes long ago.  LOL! 

So, do you think that maybe the ACITX could take the place of the stable value fund in there, or should I do 10/10/10 and have all three for Bonds?

I've also been taking another look at my domestic stock options in the plan.  I think I am going to hold on to a few of them even though they have higher expense ratios.  The latest:

401k, no new contributions other than employer contribution in january (11% of income hits all at once):

40% - DSPIX (index, .20%)
10% - JDESX (large cap, .64%)
10% - FIMEX (mid cap index, .57%)
10% - VSMIX (small cap, .92%)

10% FA stable value bonds
10% FSRIX income bonds
10% ACITX inflation protected bonds

Plus I would move my Roth IRA to the international fund at Vanguard and contribute $458 per month to that, as well as $100+ to VTSMX.  I would have only about 9% of my investments in international stocks but I would be adding to that quite a bit to balance it out better.  Once my VTSMX taxable account reaches $6K, I'll split off $3K of that to International and maybe by then I'll be able to contribute $200 per month so each can get $100. 

This is quickly moving from scary to fun.  :) 

icefr

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Re: Employer 401K surgery advice
« Reply #11 on: May 03, 2013, 10:44:05 AM »
That is fine, just a lot of funds. That's 7 funds! Plus your two Vanguard ones. I'd just stick to the one index fund and one bond fund, myself. The most important part is that you stay the course and don't fidget with it too much. So write down this plan somewhere.

Another Reader

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Re: Employer 401K surgery advice
« Reply #12 on: May 03, 2013, 11:12:37 AM »
In your shoes, I would probably favor the first 403b allocation you suggested.  At your age and with the current uncertainty about lnterest rates and if/when they will rise, I would keep a lower bond exposure and make some of it the ACITX.  I have not researched the performance of the funds, but I like the higher equity allocation and a little real estate exposure.  I might reduce the international exposure a bit and increase the allocation to the US equity index fund.

These are not the kind of choices I expect to see from Fidelity.  I'm surprised more of their funds are not part of the offerings.  Can you post the entire list of available funds?

KulshanGirl

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Re: Employer 401K surgery advice
« Reply #13 on: May 03, 2013, 11:37:10 AM »
We have a company that is our "benefits coordinator" middleman sort of thing.  I don't know what sort of deal/partnership they have with Fidelity, but here's my options, sorry about the all-caps, I didn't want to type this all in:

            
AM CENT EQUITY INC (TWEIX) 
         
DREY BASIC S&P 500 (DSPIX) 
         
FA NEW INSIGHTS I (FINSX) 
         
JPM DISCPL EQ SELECT (JDESX) 
         
MAINSTY ICAP SELEQ I (ICSLX) 
         
TRP GROWTH STOCK (PRGFX) 
         
JPM MID CAP VAL SEL (JMVSX) 
         
NUVEEN MDCP INDEX I (FIMEX) 
         
PRU/J MID CAP GR Z (PEGZX) 
         
ALL/BERN SMCP GR ADV (QUAYX) 
         
FA SMALL CAP GR INST (FCIGX) 
         
INVS SM CAP VAL Y (VSMIX) 
         
BLKRK INTL OPP INST (BISIX) 
         
FA INTL DISCOVERY I (FIADX) 
         
HTFD INTL OPPS R5 (IHOTX) 
         
JPM EMRG MKTS EQ SEL (JEMSX) 
         
FA TECHNOLOGY I (FATIX) 
         
NUVEEN REAL ESTATE I (FARCX) 
         
PRU GLOBAL RE Z (PURZX) 
         
FA FREEDOM 2005 I (FFIVX) 
         
FA FREEDOM 2010 I (FCIFX) 
         
FA FREEDOM 2015 I (FFVIX) 
         
FA FREEDOM 2020 I (FDIFX) 
         
FA FREEDOM 2025 I (FITWX) 
         
FA FREEDOM 2030 I (FEFIX) 
         
FA FREEDOM 2035 I (FITHX) 
         
FA FREEDOM 2040 I (FIFFX) 
         
FA FREEDOM 2045 I (FFFIX) 
         
FA FREEDOM 2050 I (FFFPX) 
         
FA FREEDOM 2055 INST (FHFIX) 
         
FA FREEDOM INC I (FIAFX) 
         
PIM ALL ASSET INST (PAAIX) 
         
FA STABLE VALUE 
         
FA STRAT INCOME I (FSRIX) 
         
WFA CORE BOND ADM (MNTRX) 
         
AMCENT INFL-ADJBD IV (ACITX) 
         
FID RETIRE MMKT (FRTXX) 
         

Right now I have a self-made mishmash of things that are based on the target-date allocation.  Their targeted ones have just about every single one of those included in tiny little bits, I simplified it when I began contributing but I would LOVE to get even simpler.  I just notice that the returns on the three I put back in up there are really strong, even over 5-10 years the performance kind of makes up for the fees.  But maybe that's not actually something I should consider?  I would love, LOVE to just do something like:

70% DSPIX
30% ACITX

and call it a day. 




Zaga

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Re: Employer 401K surgery advice
« Reply #14 on: May 03, 2013, 11:53:42 AM »
Something to remember about international investing - most, if not all, large US stocks do business around the world.  So by investing in a US stock index you are ALSO investing in the rest of the world.

Another Reader

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Re: Employer 401K surgery advice
« Reply #15 on: May 03, 2013, 12:52:17 PM »
Oh, god, some of those choices stink on ice.  I really miss Fund Alarm when I see lists like this.  This is the type of plan where I would pick the best available funds and and make up the remaining asset allocation elsewhere.  I can't look at every fund on the list, but some I recognize.

Two decent, consistent, but not particularly outstanding choices in the managed funds are TWEIX and PRGFX.  TWEIX is what is called an equity income fund, which balances income with equity growth.  It's from the same company as ACITX.  At 0.95 percent expenses, it's not the cheapest.  PRGFX is a large cap growth fund.  At 0.7 percent expenses, it's a solid boring fund.  T Rowe Price has several excellent managed funds, this one is more average. 

The index fund follows the S&P 500.  I definitely would allocate some to this fund.  Ummm...a lot to this fund.  I can't find info on the Nuveen mid-cap index fund.

I don't like any of the international choices much.  BISIX is focused on large cap drugs and holding companies, mostly European.  Expenses are high.  The Fidelity fund FIADX if it is the Advisor version of FIGRX is also a large cap fund with different holdings.  Both are sorta kinda ok.

Overall, the remaining funds are a sea of mediocrity with some garbage floating in it.  I suggest you look them up on the Fidelity website to see how they have performed and what they own.   For some you will have to look up the retail version of the advisor fund. 

FSRIX is a diversified bond fund if it is the same as the retail fund FSICX.  There is no info on FSRIX. I would probably use that and ACITX for the bond allocation.  MNTRX is stable and boring and could be considered as well.  The returns are lower than FSIRX but it has been less volatile.

You will definitely get an education researching these fund offerings.....

brewer12345

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Re: Employer 401K surgery advice
« Reply #16 on: May 03, 2013, 12:59:12 PM »
I would keep it real simple: 70& S&P 500 index, 30% stable value.  You can lose money in bond funds, you cannot with a stable value fund.

grantmeaname

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Re: Employer 401K surgery advice
« Reply #17 on: May 04, 2013, 03:55:41 PM »
I would keep it real simple: 70& S&P 500 index, 30% stable value.  You can lose money in bond funds, you cannot with a stable value fund.
You mentioned that. Bonds and stable value are different, and a hot tip from a stranger on the internet shouldn't be a sufficient reason to eliminate a core category of your holdings.

brewer12345

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Re: Employer 401K surgery advice
« Reply #18 on: May 04, 2013, 05:40:38 PM »
I would keep it real simple: 70& S&P 500 index, 30% stable value.  You can lose money in bond funds, you cannot with a stable value fund.
You mentioned that. Bonds and stable value are different, and a hot tip from a stranger on the internet shouldn't be a sufficient reason to eliminate a core category of your holdings.

Which invalidates everything OP has been told on this thread.  Of course, anyone investing should do their own due diligence on anything suggested to them anywhere.

KulshanGirl

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Re: Employer 401K surgery advice
« Reply #19 on: May 15, 2013, 03:43:57 PM »
Okay, here is the newest version of my plan.  I think I am going to keep the allocation more or less the same as it is now, even though I'll have the higher fee on the international stock fund. 

My reason is that I am not contributing to this 401k at all right now, (other than the once per year chunk).  I'm only contributing monthly to my Vanguard Roth and my Vanguard Taxable account.  If I remove all international from this 401K and load my Roth with just international, it means that I am ONLY buying international with my $458 per month.  I'd rather buy a bit of each according to my chosen allocation: domestic, international and bonds.  So I'm going to keep my Target fund for the Roth, and make my 401K match my asset allocation and let that ride.  I think that moving 50% of it to the low-fee index fund is enough to satisfy me for now.  Once my Vanguard accounts get big enough to move things around a bit more, maybe I will make some more sweeping changes.

New 401K (simple on the stocks, a little of each of the bonds.  Keeping that RE fund too.)

50% DSPIX (low fee index)
20% FIADX (international)
10% FA stable value bonds
10% ACITX (inflation protected bonds)
6% FSRIX (income bonds)
4% PURZX (global real estate)

Whatchoo think?  I'd feel better about my dollar cost averaging being at work across all of my categories, and this way it would be. 

Also, I am not following any one person's advice on here, I'm just interested in what other people think.  So, don't worry about moi. :)