Author Topic: Need Help with 401K Choices  (Read 5066 times)

takingbackmylife

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Need Help with 401K Choices
« on: April 16, 2013, 09:21:32 AM »
Hello Mustachians!  I am fairly new here and trying to get over my many years of money sins....  One of which being the random 401K allocation method I have chosen to employ up until now.  No lie.  Totally random for the past 10 years.  I will take many well-deserved face punches for that one.

So, having turned over a new leaf, here are my index fund choices.  I do not think they are the best, but there did not seem to be anything much better in the Self-Managed (more expensive and complicated) options either.  There were no Vanguard choices, etc.

They are all State Street, most of which are apparently not publicly traded:

SSgA S&P 500 Index Fund - Class A,  ER .41%, ticker is SVSPX
SSgA Russell Small Cap Index Fund - Class A, ER .53%, no ticker that I could find
SSgA Moderate Strategic Balanced Fund - Class I, ER .83%, no ticker
SSgA US Bond Index Fund - Class A, ER .48%, no ticker
SSgA Real Asset Fund - Class C, ER .22%, no ticker
SSgA International Index Fund - Class A, ER .55%, ticker ZVAO1

Reviewing the performance and expense docks, my inclination is to put all of my $$ in the first two choices, with most of it in the S&P Index.  I really am just learning though, so I have no confidence this is the right decision.

In case you need more info - age 44, one income $80's, one soon-to-go-to-college daughter.  I would ideally like to be able to move out of my current (boring AND stressful) occupation into an occupation by choice within about 5-7 years.  I have about $100K left on my mortgage and am quickly slamming down my student loans ($23K left).

I appreciate any help you can give me!

brewer12345

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Re: Need Help with 401K Choices
« Reply #1 on: April 16, 2013, 10:11:56 AM »
The balanced fund would be ideal - fire and forget.  However, it has the highest expenses of all the funds you list, which disqualifies it from consideration.  I think you can construct a quite reasonable portfolio out of the S&P500, Intl Index and Bond index funds.  The exact proportions would depend on your risk tolerance.  You could mimic a balanced fund quite easily by just putting 1/3 in each of these funds for contributions and rebalancing the accumulated amounts back to 1/3 each annually.  But before you pick an allocation, figure out your risk tolerance.

the fixer

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Re: Need Help with 401K Choices
« Reply #2 on: April 16, 2013, 10:35:10 AM »
I agree with brewer, use those three funds AFTER you figure out what asset allocation you should have. Typical advice for someone in their 40s is to have 30-40% of their portfolio in bonds, but this is a highly personal decision you need to make about how strong of a stomach you have for the roller coaster that the stock market can be.

For international vs. domestic, I'd say put about 1/5 - 1/3 of your stocks in international. So if you had 40% bonds, you'd want 12% international and the rest (48%) stock to get one fifth of all your stocks in non-US holdings.

takingbackmylife

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Re: Need Help with 401K Choices
« Reply #3 on: April 16, 2013, 04:40:26 PM »
Thanks so much to both of you!  I will spend some time researching asset allocations and thinking about how much risk I am willing to assume.  I appreciate your help.

GreenGuava

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Re: Need Help with 401K Choices
« Reply #4 on: April 16, 2013, 08:29:18 PM »
What do you have elsewhere for retirement investments (for sure, your IRA(s), and also taxable, if you have it and want to count it as part of the same thing as this).  Also, what are the approximate balances, as well as expected contributions in 2013?

In short, if you have a good IRA balance, you can use it to counter the mediocre (but not terrible) choices here instead of dealing with a balanced fund that is approximately twice the cost of the other options.  You also may want to use some or all of your taxable towards this, too (reasonable people disagree as to whether your tax-advantaged 'stash and taxable stash should be treated as separate things).

frugalcoconut

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Re: Need Help with 401K Choices
« Reply #5 on: April 20, 2013, 07:30:05 AM »
I'm curious as to the holdings/description of the Real Asset fund since it actually has the lowest expenses of the group ... even though it isn't labeled as an index fund.

hoppy08520

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Re: Need Help with 401K Choices
« Reply #6 on: April 21, 2013, 06:06:47 AM »
I agree with what the fixer wrote, although I'd split your US stock holdings as 75% with 500 index and 25% small cap for more diversification.

Also agree with the others who wrote that you should look at 401(k) in conjunction with other investments, and not in isolation.

http://www.spdrsmobile.com/product/RLY is about the Real Asset fund. It's a mix of TIPS, REIT and commodities intended to be an inflation hedge. I see this type of fund in a lot of 401(k) plans. In the all-in-one solutions, you'll often see around a 5% allocation to these sorts of funds.

frugalcoconut

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Re: Need Help with 401K Choices
« Reply #7 on: April 21, 2013, 08:04:11 PM »
Depending on the composition of your outside investments (if any) and the terms of the Class C shares (back-end load?), I might allocate a small portion of my portfolio to the Real Asset Fund due to the low expense ratio and added diversification.

Otherwise I would probably mix it up amongst everything else except for the Moderate Strategic Balanced Fund.

If you have holdings besides your 401k though, you're likely to get lower expense ratios on the domestic funds through Vanguard or a similar firm ... so I might weight more heavily on the international in the 401k since the expense ratio isn't that far off from what you would get on your own anyway.