Author Topic: Help me rebalance old 401k or Rollover to ?  (Read 3548 times)

Angie55

  • Guest
Help me rebalance old 401k or Rollover to ?
« on: September 03, 2014, 11:49:01 AM »
I have a 401k from an old employer I have no idea what to do with. Every time I look at it I get upset because it plainly shows the vesting I did not get. Additionally, my personal rate of return for 2014 is (-0.78%). Yes, NEGATIVE. Anyway, I go to look at my options to reallocate and they are the following:

My Balance (approx)         Fees:
88.36%  $26500       XOM Stock (no fee maybe?)
                    $0       Equity Units    0.02%
                    $0       Extended Market Units    0.03%
11.60%  $3500         International Equity Units    0.08%*
                    $0       Bond Units    .03%
                    $0       Balanced Fund Units    0.03%*
                    $0       Common Assets

Previous Performance:
Fund Name...                YTD...     1yr...       3 yrs....       5 yrs.....   10yrs....
ExxonMobil Stock          0.82%   20.12%   14.30%   7.53%   11.93%
Equity Units                  7.15%   32.45%   16.24%   18.10%   7.38%
Extended Market Units   6.27%   38.34%   16.38%   22.78%   10.48%
International Equity Units 5.89%   21.98%   7.93%   12.44%   7.07%
Bond Units                    4.02%   -2.60%   3.24%   4.58%   4.50%
Balanced Fund Units     5.92%   21.55%   11.22%   14.38%   7.49%
Common Assets           1.05%   2.49%   2.73%   3.00%   3.74%



Additional Questions:
1. Should I switch around my allocations or just wait out as is and hope the stock is just in a lull?
2. Are there any specific times I should look to do these changes. I think they are dividend stocks so I'm not sure if I should wait until the dividend to jump ship.
3. Would I be better off just rolling over into a traditional 401k with more options? I admit I've never really looked or considered what my 401k deposits go into. I'm not too up to date on what would be the best to put it in anyway. I would likely pick off the cuff anyway, and lots of choices tends to give me analysis paralysis so doesn't really matter to me if its 10 good choices or 10000.

Cheddar Stacker

  • Magnum Stache
  • ******
  • Posts: 3719
  • Age: 42
  • Location: USA
Re: Help me rebalance old 401k or Rollover to ?
« Reply #1 on: September 03, 2014, 11:55:43 AM »
I would roll it over to Vanguard into a Traditional IRA and put it all in the total stock market index based on everything you described here. This is why:

1) 401k's tend to have higher fees.
2) 401k's choices are limited - it doesn't sound like you want too many choices, but just go with Vanguard's total stock market index.
3) You have 88% of your retirement funds in a single company's stock. This is not a good idea. Feast or Famine, that's what you just did. And so far 2014 is Famine. It's time for a change.
4) Don't wait for a turnaround or a dividend. It might help, but you can't afford that stock to go down any more.

skyrefuge

  • Handlebar Stache
  • *****
  • Posts: 1007
  • Location: Suburban Chicago, IL
Re: Help me rebalance old 401k or Rollover to ?
« Reply #2 on: September 03, 2014, 01:14:20 PM »
1) 401k's tend to have higher fees.

Yes, they tend to, but she told you the fees for this one, so there's no reason to rely on generalizations.

This 401(k) appears to give you access to funds with extremely low expense ratios, and on top of that, the options, though limited, appear to be the exact type of broad-based index funds that are generally recommended through Vanguard. For example, by looking at the returns, "Equity Units" appears to be an S&P 500 fund, with an expense ratio less than half that of Vanguard's Admiral shares.

So I would say to keep your 401(k), but reallocate. To determine what you should reallocate to, you first need to decide what you want your entire portfolio's asset allocation to look like, and then reallocate this 401(k) in a manner that fits that asset allocation. I strongly recommend selling XOM and replacing it with a broad-based fund instead. The "Equity Units" fund would keep you invested in large US companies, but with less risk.

However, if you already have an existing IRA and don't feel like having an old 401(k) account to keep track of for the rest of your life, it might make more sense to roll the 401(k) over into that IRA. With the relatively small amount of money in the 401(k), the lower expense ratios, while better, might not be a big enough benefit to outweigh the administrative hassle.

(the keeping-the-401(k) route also assumes that the fund expense ratios are the only fees you pay, and that there aren't other account-based fees or anything else on top of them.)

Cheddar Stacker

  • Magnum Stache
  • ******
  • Posts: 3719
  • Age: 42
  • Location: USA
Re: Help me rebalance old 401k or Rollover to ?
« Reply #3 on: September 03, 2014, 01:24:15 PM »
1) 401k's tend to have higher fees.

Yes, they tend to, but she told you the fees for this one, so there's no reason to rely on generalizations....

...(the keeping-the-401(k) route also assumes that the fund expense ratios are the only fees you pay, and that there aren't other account-based fees or anything else on top of them.)

Your second part was what I was referring to - I should have been more clear. I pay a 0.50% admin fee in my plan. When you look at the quarterly statements it really adds up. I'm doing an in-service distribution as soon as my last 2014 contribution hits this/next week to avoid this fee.

OP might not have any extra fees, but this:

I admit I've never really looked or considered what my 401k deposits go into. 

made me concerned and made me think it's possible there could be more fees OP is unaware of.

Angie55

  • Guest
Re: Help me rebalance old 401k or Rollover to ?
« Reply #4 on: September 03, 2014, 01:37:59 PM »
Thanks for the suggestions thus far! I know I need to get on top of it  once and for all I just need to figure out all the details. I'm tempted to rollover to Vanguard primarily because I hate to log in every month to see the actual amount since mint pulls the total balance (including the unvested portion). The non-vesting part still brings anger/guilt/regret/whatifs and other negative feelings as leaving was not on the best of terms. I also have my new Roth IRA (all VTSAX for now) and my current 401k (have no idea what this is in either). But if the fees on this account are lower and options comparable it does make sense to keep it where it is and just reallocate. I typically choose the option with the best numbers regardless of emotions.

I'm not really sure of the fees I can't say I ever checked. But the percentage above was a total of two fees. I started buying 100% stock with my contributions when it was "low" and then set it and forgot about it. I don't really have a concept of what is good or great in terms of fees and past returns other than what personal capital tells me. I know negative is bad. And I also know this is by far the worst performing 401k since I've been tracking my net worth for the past year.

I'm hoping to tackle all my accounts by the end of the year. DH has two old 401ks I think mostly in some Target Retirement Funds. Then I have my current 401k. We both have Roth IRA's started about 6-months ago all in VTSAX.

skyrefuge

  • Handlebar Stache
  • *****
  • Posts: 1007
  • Location: Suburban Chicago, IL
Re: Help me rebalance old 401k or Rollover to ?
« Reply #5 on: September 03, 2014, 02:10:33 PM »
Your second part was what I was referring to - I should have been more clear. I pay a 0.50% admin fee in my plan. When you look at the quarterly statements it really adds up. I'm doing an in-service distribution as soon as my last 2014 contribution hits this/next week to avoid this fee.

My experience working for mega-corps vs. mini-corps is that the scale and leverage that gives mega-corps really low fund expense ratios also eliminates any account-based fees. http://www.exxonmobilfamily.com/family-english/hr/suppinfo/spd/Savings/SavingsInvestOp.html does not mention any fees beyond the fund expense ratios, but yeah, that doesn't completely eliminate the possibility that they exist.

Thanks for the suggestions thus far! I know I need to get on top of it  once and for all I just need to figure out all the details.

Yes, this is the key. It sounds like you might need to do some reading about investment strategy. http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit is a good start. "choosing the option with the best numbers" is not really a good strategy, since that's chasing past performance, which is almost guaranteed to be a losing strategy (this might be the very reason that you chose XOM to invest in, and why it subsequently performed poorly for you?)

Keeping your $30k in your 401(k) will save you only about $10 a year vs. having it in similar Vanguard funds in an IRA. Understanding your investments and consolidating them into your desired allocation will likely "save" you a lot more than that in the long run, so if this 401(k) is doing anything to prevent you from taking action, then it's best to do a rollover.