The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: triple7stash on July 13, 2020, 06:22:34 PM
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Hello All,
I currently have a defined contribution (401k & 457b) plan with my employer that has limited investment options. The account administrator used to offer various index funds, however they are canceling the index funds and replacing them with actively managed funds (expense ratios of about 0.6%). While this sucks, they do offer a "Personal Choice Retirement Account (PCRA)". The PRCA is essentially the option to move my 401k/457 plans over to a Schwab account and invest the money myself in whatever I'd like.
So I have created the Schwab account, with the intent to put the money into VTSAX, however I am seeing that Schwab charges a transaction fee of $50 everytime you buy VTSAX (as well as any other mutual fund that is not in the Schwab network). However, they don't charge a fee on any mutual funds in their network or any individual stocks (maybe they don't charge for ETFs as well). Since I will likely be contributing to my 401k/457b I am thinking I am definitely not going with the VTSAX w/ fee option. I am thinking of investing in the Schwab Total Market Index:SWTSX. SWTSX has a lower expense ratio of 0.03% and looks comparable, any thoughts on this index fund or other index fund options?
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Schwab charges $0/trade for stocks and ETFs, so you can buy Vanguard or iShares ETFs at Schwab.
Vanguard Total Stock Market ETF (VTI) has the exact same contents as VTSAX - they are actually two ways to invest in the exact same assets. I'd suggest looking at buying shares of VTI at Schwab.
But you could also buy SCHB or even ITOT (iShares Total Stock Market) in your account.
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SWTSX is s decent option if you want to avoid the fee and just have to own a mutual fund. Personally, I just buy the equivalent ETF in my Schwab accounts and avoid the fee. So look for VTI, BND, etc. Schwab also carries their own broad/total market ETFs which I have used in the past and have no complaints about.
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Is the Personal Choice Retirement Account (PCRA) an IRA that your retirement funds automatically get rolled over into, or would the money still be in a 401k/457b?
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Schwab charges $0/trade for stocks and ETFs
Perfect, thank you for the insight as I am new to Schwab.
So look for VTI, BND, etc. Schwab also carries their own broad/total market ETFs which I have used in the past and have no complaints about.
I am probably going to go with some sort of blend (70% VTI & 30% international vanguard etf - any suggestions?) as I am only 28 with ~8 years until FI.
Is the Personal Choice Retirement Account (PCRA) an IRA that your retirement funds automatically get rolled over into, or would the money still be in a 401k/457b?
The money is still in my 401k/457b plan, not my personal IRA.
Also, does the dividend yield automatically get re-invested into the ETF funds?
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I agree that commission free ETFs (VTI, VXUS, BND would do it) are a good option. If you'd rather stick with mutual funds these would be good options: https://www.bogleheads.org/wiki/Charles_Schwab
As far as what the appropriate mix for you is, consider: https://www.bogleheads.org/wiki/Asset_allocation. I would say anything between 60-100% stock is appropriate at any stage of the the retirement process higher when you're further away and lower when you're closer both before and after). I would consider international as 20-40% of stocks to also be reasonable.
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... does the dividend yield automatically get re-invested into the ETF funds?
Vanguard offers reinvestment for ETFs.
https://investor.vanguard.com/investing/brokerage-dividend-reinvestment
At Schwab, I'm not sure ... I found an external website mentioning Schwab can reinvest ETFs, but I couldn't find that confirmed on Schwab's website.
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Thanks all for the replies! I think I'll do about a 75/25 split with VTI and VXUS. I did some research and Schwab appears to have a dividend reinvestment option when initially purchasing.