Author Topic: Need help/advice/HELP figuring out our 401k...please?  (Read 2865 times)

drp

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Need help/advice/HELP figuring out our 401k...please?
« on: October 23, 2016, 07:44:59 PM »
Howdy all. I'm totally new here...well...not to MMM. Years ago I read the blog and then life got hard and all our goals kind of just went right out the window. We're (husband and me) attempting to get back on track now with our finances, and basically  don't remember anything we learned (which...apparently wasn't much...or our brains just kinda turned to mush over the last 2 years).

As much as we'd love to retire crazy early, it's not gonna happen. Family of 4 on one income, homeschooling...and that 1 income is blue-collar and not that impressive (but it works and we're thankful for it). That said, we're not in debt and we have a 6 month emergency fund, so it could be worse. Okay. I'm rambling. My point is we'd still like to be able to retire sooner than the typical 65. I don't know how soon...but basically as soon as possible for us.

But I'm in the wrong forum for rambling endlessly, so I'll stop now. 

HERE'S OUR PROBLEM ------> We have a ROTH 401k from husband's old job (quit 2 yrs ago) just sitting in Fidelity, untouched. It has around $33k in it.

DH is just now eligible in his new job to start a 401k (also at Fidelity, not a ROTH), so we did. A mere 6% since we're just testing the waters (our income is small and we plan on increasing this rate as we whittle down our expenses).

We're not really sure what we should invest in, how we should invest, or whether or not we can/should combine our old ROTH 401k with our new regular 401k. We attempted to call Fidelity and discuss a rollover, but honestly, I don't know what language they speak. If our old 401k money was put in post-tax and therefore growing tax free, seems to my uneducated brain that by rolling it into a regular 401k we're gonna end up paying taxes on it twice (as in, when we take it out in the future).

So that's one problem.

The other is having 33 different options to invest in and not a single clue which is best. (That's excluding our old ROTH 401k which is just sitting there untouched...doing we don't know what*...) (*=see P.P.S)

CURRENT 401K CHOICES:

FID 500 INDEX PR (FUSVX)  <------We presently have 100% in this. Seemed like a good idea to us, but then again, I've already admitted we're clueless.(also 100%=$0 since we've just started)

FID BLUE CHIP GR (FBGRX)
FID CONTRAFUND (FCNTX)
FID EXPORT & MULTI (FEXPX)
FID GROWTH COMPANY (FDGRX)
FID SEL CONS DISCR (FSCPX)
FID SEL INDUSTRIALS (FCYIX)
FID SEL DEFENSE (FSDAX)
FID VALUE (FDVLX)
FID STK SEL SM CAP (FDSCX)
FID DIVERSIFD INTL (FDIVX)
FID INTL CAP APPREC (FIVFX)
FID SEL FINANCIAL (FIDSX)
FID SEL HEALTHCARE (FSPHX)
FID SEL NATURAL RES (FNARX)
FID SEL SEMICONDUCT (FSELX)
FID SEL TECHNOLOGY (FSPTX)
FID SEL UTILITIES (FSUTX)
FID FREEDOM 2005 (FFFVX)
FID FREEDOM 2010 (FFFCX)
FID FREEDOM 2015 (FFVFX)
FID FREEDOM 2020 (FFFDX)
FID FREEDOM 2025 (FFTWX)
FID FREEDOM 2030 (FFFEX)
FID FREEDOM 2035 (FFTHX)
FID FREEDOM 2040 (FFFFX)
FID FREEDOM 2045 (FFFGX)
FID FREEDOM 2050 (FFFHX)
FID FREEDOM 2055 (FDEEX)
FID FREEDOM 2060 (FDKVX)
FID FREEDOM INCOME (FFFAX)
FID INTERMED BOND (FTHRX)
FMMT RETIRE GOV II (FRTXX)


We really, truly appreciate any and all help (well, unless it's super complicated help, but I suppose I can be thankful you at least cared enough to offer it!). We did try to search the internet AND this forum before asking. The advice either didn't fit with our options, or made my brain explode/glaze over. Or all of the above. We're not trying to be lazy...but we do kind of want a lazy 401k. Just want to keep putting money in and let it grow. I know some people just happen to really really REALLY like researching this kind of thing - or have a natural knack for it and don't mind sharing their knowledge. I'm hoping that's you, new friend :-)

P.S. I just looked and saw our old ROTH 401k is invested 94.6% in VANG INST TR 2045 and 5.4% in METWEST TOT RTN BD P (when I click on "change investments" it says I am 100% invested in the VANG INST TR 2045, so, um, yeah).

Thank you all (or just you, singular) for taking the time to read...and hopefully help.

Des



*P.P.S
Just looked up our old ROTH 401k and these are our choices (please don't ask why they are pretty much all "vanguard" but through fidelity. No clue.
VANG PRIMECAP ADM (VPMAX)
VANG WINDSOR II ADM (VWNAX)
VANGUARD INST INDEX (VINIX)
GS MIDCAP VALUE INST (GSMCX)
TRP MID CAP GROWTH (RPMGX)
GS SM CAP VALUE INST (GSSIX)
VANG EXPLORER ADM (VEXRX)
AF EUROPAC GROWTH R6 (RERGX)
OPPHMR INTL GROWTH I (OIGIX)
VANG INST TR 2010 (VIRTX)
VANG INST TR 2015 (VITVX)
VANG INST TR 2020 (VITWX)
VANG INST TR 2025 (VRIVX)
VANG INST TR 2030 (VTTWX)
VANG INST TR 2035 (VITFX)
VANG INST TR 2040 (VIRSX)
VANG INST TR 2045 (VITLX)
VANG INST TR 2050 (VTRLX)
VANG INST TR 2055 (VIVLX)
VANG INST TR 2060 (VILVX)
VANG INST TR INCOME (VITRX)
VANG WELLINGTON ADM (VWENX)
METWEST TOT RTN BD P (MWTSX)
« Last Edit: October 23, 2016, 07:52:38 PM by drp »

letired

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #1 on: October 23, 2016, 07:58:31 PM »
Congrats! It looks like you picked the right one! (I can't 100% tell since you didn't include the expense ratios...)

Fidelity makes it slightly easy to pick funds, if you go to the right section. If you can find the page that lists all the options, and then find the tab with the expense ratios, it will usually also include a high level description of what the fund is invested in. That makes it pretty reasonable to go through and find the cheapest ones for the asset allocation you want, which are what you want 99% of the time.

For the old 401k, if you want to switch what fund the money is in, you'll want to look for words like 'exchange' or 'buy and sell'. Change investments is usually for changing how new money coming in is allocated.

I don't think it makes sense to roll over the Roth 401k into a traditional one. Someone here with more knowledge about these things can chime in! If you aren't happy with the current options available in the Roth 401k plan, you could roll it over to a Roth IRA. That keeps the tax stuff less complicated.

MDM

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #2 on: October 23, 2016, 08:08:39 PM »
Congrats! It looks like you picked the right one! (I can't 100% tell since you didn't include the expense ratios...)
Agreed, both on the kneejerk reaction to the fund choice and the need to see expense ratios to make any substantive suggestions.

You don't need complexity for success.  E.g., see Three-fund portfolio - Bogleheads.

You should have at least some invested in traditional accounts, so the lack of a Roth 401k now is not a problem. 

Your uneducated brain is smart enough to realize that putting a Roth into a traditional is not wise.  See Traditional versus Roth - Bogleheads for more.

drp

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #3 on: October 23, 2016, 08:18:03 PM »
Thanks for the fast responses! Apparently the rumor that mustachians rock was correct :-D

Glad to hear it was wise to not let fidelity dude convince us a rollover was the thing to do. We're fine just letting it sit there. It's still going up little by little with us doing nothing. Besides, I'm pretty sure when I took a personal finance class in college a decade ago, I heard a story of somebody who put $5,000 in a retirement account then left it sitting there forever and became rich. Or something like that.

I'm not sure if this is what you mean (it probably is, since it actually says expense ratio...but sometimes simple things are not this simple...) but for the FID 500 INDEX PR (FUSVX) the expense ratio, gross and net, are both 0.045% with no additional fees. The other plans aren't that low. (The bottom three on the list are all just under .50% with no additional fees).

We just saw the low expenses, high returns, and 5 star rating...and figured okay. That, and it was at the top of the list. Oh, and one of the MMM forum posts recommended a fidelity fund that wasn't an option for us and after a little internet search this one seemed fairly similar. So we were hoping...
« Last Edit: October 23, 2016, 08:25:47 PM by drp »

MDM

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #4 on: October 23, 2016, 08:25:20 PM »
I'm not sure if this is what you mean (it probably is, since it actually says expense ratio...but sometimes simple things are not this simple...) but for the FID 500 INDEX PR (FUSVX) the expense ratio, gross and net, are both 0.045%.
Yes, that's it.  E.g., see http://www.morningstar.com/funds/XNAS/FUSVX/quote.html (and either .045% rounds to .05%, or Fidelity dropped their fees recently and Morningstar hasn't caught up).

drp

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #5 on: October 23, 2016, 08:27:31 PM »
Great. Thank you.

I modified my last post, but probably should just add it here - the other plans don't even come close, expense wise. The lowest expense ratio are the bottom 3 plans that are all around .50% with no additional fees. (And they're not rated as good...)

drp

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #6 on: October 23, 2016, 08:32:47 PM »

You don't need complexity for success.  E.g., see Three-fund portfolio - Bogleheads.


Thanks for the links! I'm bookmarking them for DH to read (he used to enjoy learning about all this stuff, so I'm sure he can rekindle that love a lot easier than I, considering I never had that love - I'm more of a penny pincher than investor. But he's free to invest the pennies I pinch! ;-)

Frankies Girl

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #7 on: October 23, 2016, 08:44:33 PM »
What's your asset allocation? Without knowing what you are comfortable with, it makes it a bit harder to make suggestions.

BUT the fact that you've got your investments currently going 100% into the Fido 500 fund which is 100% stock/equity, means you might be comfortable with volatility? Or you're not watching the market so you're not seeing the ups and downs and therefor might still be okay with 100% stock allocation?

The fund you've got currently selected is fine. Fidelity 500 Index Fund (FUSVX) has an 0.045% expense ratio which is great, and will be the closest thing you have to a index fund out of all the choices available. Shame they didn't include the Fidelity Total Stock Market Index Fund (FSTVX) but the 500 is still great out of the rest of that group - and you could ask the plan manager to consider includig the FSTVX at some point!

As far as what you have in your old 401k, you should probably get out of the Vanguard and other fund as they'll be charging you there own expense ratio for managing that fund in addition to whatever the funds themselves charge, which isn't a huge amount considering, but still no reason to pay anyone a penny more than needed of your hard earned money.

In your Roth, the Vanguard VTIVX is a target retirement fund that rebalances automatically meaning it will start out heavy in stocks and light on bonds but as the target date gets closer, it switches the ratios to be more bond, less stock so you get more stability right when you need to start drawing off of it. Target date funds aren't bad, but they do tend to be more expensive than just doing it yourself - buying say 70% stock mutual fund and 30% bond mutual fund and then in 5 years changing it to be 65%/35% and so on... it is MUCH cheaper to just do it yourself in terms of expense ratios. But since it isn't a native Fidelity fund, they'll charge you to own it. If you look at this link to that fund on Fido's site, you should see a little red "FEE" tab right under the name of the fund. So the expense ratio is .16% which is good, but they tack on a transaction fee of $75 every time you buy or sell. Not good, and not necessary if you just buy Fido's version(s) of their in house funds which will carry no transaction fees.

Metropolitan West Total Return Bond (MWTRX) isn't that good, and has a 12-1b fee which is crap (it's a marketing cost they kick over to the stock holders - so you're paying for them to wine and dine and advertise their stupid stock). Dump it ASAP. At least it won't cost a transaction fee to get out of it. ;)

Fidelity has virtual clones of all of Vanguard's index funds that are free to invest in (other than the very low expense ratios that all funds are charged). If you had the account with Vanguard, it would make sense to hold Vanguard funds, but you have it with Fido, so sell that Vanguard and trade it in for Fido funds.

IMPORTANT NOTE: Have you discussed rolling the Roth 401k into a rollover Roth IRA ? I don't mean a traditional IRA or lumping into the new company's traditional 401k, this would need to be a Roth IRA for sure. You might need to investigate doing this if you haven't already. It shouldn't cost you anything but they'll have to create a new account for a direct rollover (a brand new Roth IRA for your husband since the 401k Roth is in his name if he does not already have an existing Roth IRA he can roll that Roth 401k into) and it will no longer be classified as a 401k - the greatest advantage is that you are no longer restricted to the old 401k's selections for funds - you can buy any funds you'd like, so that would simplify your investment selections going forward for this. But if he has to establish a new Roth IRA, you will have to restart the clock on the Roth to meet the five-year rule for qualified distributions. But I wouldn't think is a big concern as you're not looking at taking any qualified distributions in the next 5 years. Otherwise, I'd get on that as soon as things make sense to do so.

My suggestion is to do a direct rollover of the old Roth 401k to a Roth IRA, then sell off the old stuff (which will incur the $75 fee to sell off the VTIVX), and invest in a combo of:

Fidelity Total Stock Market Index Fund (FSTVX)
FIDELITY U.S. BOND INDEX (FSITX)

In whatever ratio fits your asset allocation. If you don't want any bonds, then super, but just know that bonds will smooth out the ride a bit when things get bumpy, so if you start watching your accounts every day/week/month, it could be disturbing to see it jumping around sometimes.

You could add if you wanted an international stock (I don't have any because I agree with those that say that most U.S. countries are already pretty international, but there are some good ones if you eventually want to add them in).

Many folks will tell you to get over to Vanguard if possible with the old Roth; I actually like Fido and have all my accounts with them by choice (I have no work ties any more). They have great customer service, great, low cost funds and they are very invested in keeping up with Vanguard so I see no downside whatsoever to staying with Fidelity. And there are plenty of others that feel the same. Vanguard is awesome but Fidelity is pretty great too, so don't feel the least bit worried about staying with them.

https://www.bogleheads.org/wiki/Fidelity
^Bogleheads guide to comparing Vanguard funds to Fido



I would suggest before making all these decisions, you do some more research on how the market works, and figure out what asset allocation and your investment policy statement should look like. It will make all of this much easier to figure out. :)

http://jlcollinsnh.com/stock-series/
^either read his book (check if your library might have!) or read on the website

https://www.bogleheads.org/wiki/Investment_policy_statement
^investment policy statement is your blueprint for how you invest

https://www.bogleheads.org/wiki/Asset_allocation
Very important to figure out so you know how much of what you want to hold

https://www.bogleheads.org/wiki/Lazy_portfolios
^great examples of "lazy" portfolios - non complicated and easy index investing

Good luck and do not be afraid of asking for help here - there are some really wonderfully smart and kind folks here that can help out with just about anything you could think of investing-wise.

And have to say, do not let this stuff intimidate you; I knew NOTHING about investing about 3 years ago. The Collins stock series I linked to and many amazing folks here gave me a crash course education and I'm doing fantastic now. If I could figure this out, anyone can. :)
« Last Edit: October 23, 2016, 08:49:57 PM by Frankies Girl »

drp

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #8 on: October 23, 2016, 08:56:30 PM »
Frankies Girl - Okay, you had me to my maximum total intimidation level until you told me not to be intimidated! Seriously, thank you. So much to read and learn, and it is overwhelming - but thank you for sharing you knew nothing about investing 3 years ago. That definitely gives me hope for my family!

I think I'm gonna have to create a new folder of things to read...or perhaps I'll just print 'em all out so I can highlight and circle or whatnot (the whatnot part is hide them in DH's lunchbox for some light lunch-time reading).

I highly doubt our tiny, open like 3 times a week library has that book, but I'll read it online (my first instinct was to just buy it...but I'm attempting to turn over a new leaf and resist that instinct, so yeah!).

Thanks!

MustacheAndaHalf

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #9 on: October 23, 2016, 11:15:09 PM »
I'd strongly recommend reading books from the library so that you are willing to stick with investments if the markets get rough.  When your money drops -20%, only your confidence that you picked correctly can prevent you from selling... right before the market recovers back the loss.  The classic book "A Random Walk Down Wall Street" should be available in any library, and will reinforce what you already picked, which is a plus.

drp

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #10 on: October 24, 2016, 01:24:46 PM »
Good plan. I think I will avoid looking at our account in general, and let DH do that if he feels comfortable with what we picked. (Which we'll know better once we read all these bogleheads links I have bookmarked and the articles/book linked by Frankiesgirl!).

You are correct - my library actually does have that book. A whopping 3 copies throughout our county. I'm impressed. Now, to get a library card! We've been here two years and have yet to get one (I grew up here and deemed it not worthy of our time. We had one when we lived in our college town/city. Our present library mostly makes me want to cry). We'll go on Friday. It'll make a good date.

Waterbug

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Re: Need help/advice/HELP figuring out our 401k...please?
« Reply #11 on: October 27, 2016, 12:21:07 PM »

As far as what you have in your old 401k, you should probably get out of the Vanguard and other fund as they'll be charging you there own expense ratio for managing that fund in addition to whatever the funds themselves charge, which isn't a huge amount considering, but still no reason to pay anyone a penny more than needed of your hard earned money.

... But since it isn't a native Fidelity fund, they'll charge you to own it. If you look at this link to that fund on Fido's site, you should see a little red "FEE" tab right under the name of the fund. So the expense ratio is .16% which is good, but they tack on a transaction fee of $75 every time you buy or sell. Not good, and not necessary if you just buy Fido's version(s) of their in house funds which will carry no transaction fees.

...

Fidelity has virtual clones of all of Vanguard's index funds that are free to invest in (other than the very low expense ratios that all funds are charged). If you had the account with Vanguard, it would make sense to hold Vanguard funds, but you have it with Fido, so sell that Vanguard and trade it in for Fido funds.
...

Many folks will tell you to get over to Vanguard if possible with the old Roth; I actually like Fido and have all my accounts with them by choice (I have no work ties any more). They have great customer service, great, low cost funds and they are very invested in keeping up with Vanguard so I see no downside whatsoever to staying with Fidelity. And there are plenty of others that feel the same. Vanguard is awesome but Fidelity is pretty great too, so don't feel the least bit worried about staying with them.

https://www.bogleheads.org/wiki/Fidelity
^Bogleheads guide to comparing Vanguard funds to Fido

I would suggest before making all these decisions, you do some more research on how the market works, and figure out what asset allocation and your investment policy statement should look like. It will make all of this much easier to figure out. :)

http://jlcollinsnh.com/stock-series/
^either read his book (check if your library might have!) or read on the website

https://www.bogleheads.org/wiki/Investment_policy_statement
^investment policy statement is your blueprint for how you invest

https://www.bogleheads.org/wiki/Asset_allocation
Very important to figure out so you know how much of what you want to hold

https://www.bogleheads.org/wiki/Lazy_portfolios
^great examples of "lazy" portfolios - non complicated and easy index investing

Good luck and do not be afraid of asking for help here - there are some really wonderfully smart and kind folks here that can help out with just about anything you could think of investing-wise.

And have to say, do not let this stuff intimidate you; I knew NOTHING about investing about 3 years ago. The Collins stock series I linked to and many amazing folks here gave me a crash course education and I'm doing fantastic now. If I could figure this out, anyone can. :)

Woah, making this note to myself cause you just blew my mind. I too have a 401k through Fidelity and went through and updated my asset allocation and picked the funds I thought were the best.  Of course the Vanguard ones stood out to me because of the low expense ratios and because I know they are mentioned often on this blog and forum as being great to have. Now I need to go back through and look for those fees, like the one you linked to in this post. Thank you for such an informative post. I will need to read those links too.

OP I'm glad you asked these questions :)