Author Topic: New 401k plan. What option is better? What international fund should we use ?  (Read 1100 times)

Mrs. Healthywealth

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Hi all,

Wife just switched jobs. Transferring the money over from her old job to Nationwide. Currently, all her funds are in a Mutual of America Target Fund. Need help figuring out what fund/s to choose. The break down for the current Mutual of America Target Retirement Fund is as follows:

Equity Index (Large) 36.3
Mid Cap 20.3
Small cap value 9.7
Small Cap Growth 9.8
International 15.8
Bonds 8.1


She now has Nationwide. Either I do another target fund or break it down separately. Below are the details for each option:

Option 1:
TIAA-CREF Lifecycle 2050 (expense ratio .23%). I'm fine with the increase in International stocks since we need to increase it for our overall portfolio. The fund breaks down like this:
65% US equities
27% International
8% Bonds

Option 2: Below are the options I would choose if i were to hold the money is separate funds. The only one I need help with is which international fund:

36% Invsco Eq Wgt S P 500Y (Large)--expense ratio: .29%
20% Vngd Cap Idx FD AS (Mid)--exp ratio: .06%
20% Vngrd Sm Cap Indx Fs AS (Small)--exp ratio: .06%
8%   Vgd Total II Bond Mrkt--exp .05%

Options for International
  Plan is to hold 16% International in this account.
Vngrd Emrg Mrkt Cor Eq Inst (exp ratio: .53%)
Opp Intl Divrs Y               --(Exp ratio: 1.08%)
Vngrd Devl Mkt Indx Adm--(exp ratio: .07%)

Which International fund should I choose? If none are good options, should I go with the Target fund (option 1)?  I want to have 20% of International funds in our entire portfolio. If we don't choose it in this 401k, then i have to move a lot of things around in our other accounts to balance it out.

Thanks for your help!

Radagast

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Wife just switched jobs. Transferring the money over from her old job to Nationwide. Why can't open IRA at Vanguard etc. to transfer old money to? Currently, all her funds are in a Mutual of America Target Fund. Need help figuring out what fund/s to choose. The break down for the current Mutual of America Target Retirement Fund is as follows:
Equity Index (Large) 36.3
Mid Cap 20.3
Small cap value 9.7
Small Cap Growth 9.8
International 15.8
Bonds 8.1
The above don't seem relevant if you move to a new company

Option 1:
TIAA-CREF Lifecycle 2050 (expense ratio .23%). The fund breaks down like this:
65% US equities
27% International
8% Bonds
This seems like a nice KISS option

Option 2: Below are the options I would choose if i were to hold the money is separate funds.
I am of the opinion that people use a lot of false precision in asset allocation. If you go this route I like the thought of equal weighting the below six (but that's in isolation, really you should work out a global allocation for all your accounts together)
Invsco Eq Wgt S P 500Y (Large)--expense ratio: .29%
Vngd Cap Idx FD AS (Mid)--exp ratio: .06%
Vngrd Sm Cap Indx Fs AS (Small)--exp ratio: .06%
Vgd Total II Bond Mrkt--exp .05%
Vngrd Emrg Mrkt Cor Eq Inst--exp ratio: .53%
Vngrd Devl Mkt Indx Adm--exp ratio: .07%

Which International fund should I choose? If none are good options, should I go with the Target fund (option 1)?
Option 1 is good. Otherwise, it is hard to choose just one international fund. Developed markets is cheap and more resembles capitalization weighting, while emerging markets is a better diversifier but more expensive.

TomTX

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Why are you putting it into another 401k instead of rolling it into an IRA at a low cost provider?

Expense ratios that don't read as 0.0x% seem high to me.

Mrs. Healthywealth

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Why are you putting it into another 401k instead of rolling it into an IRA at a low cost provider?

Expense ratios that don't read as 0.0x% seem high to me.

Sorry for the delayed response.  This is not something I know a whole lot about; I didn't think about rolling it over to an IRA. So you're saying I can just roll this over to a Vanguard IRA and call it a day. This would be super easy to do, but wouldn't it take away from the compounding effect I would get from rolling this into the new employers 401k and keep adding to it?  Granted the wife will only work full time another 3-5 years max, then on to part time.

What's better:  Adding the $60k to the new 401k and get more compounding out of it, but also have the higher fees--possibly over 1% OR Transferring the $60k to a traditional IRA with Vanguard, add to the new employers 401k, then transfer that over to the traditional IRA when leave employer?

Thank you again for this idea!

Mrs. Healthywealth

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Wife just switched jobs. Transferring the money over from her old job to Nationwide. Why can't open IRA at Vanguard etc. to transfer old money to? Currently, all her funds are in a Mutual of America Target Fund. Need help figuring out what fund/s to choose. The break down for the current Mutual of America Target Retirement Fund is as follows:
Equity Index (Large) 36.3
Mid Cap 20.3
Small cap value 9.7
Small Cap Growth 9.8
International 15.8
Bonds 8.1
The above don't seem relevant if you move to a new company

Option 1:
TIAA-CREF Lifecycle 2050 (expense ratio .23%). The fund breaks down like this:
65% US equities
27% International
8% Bonds
This seems like a nice KISS option

Option 2: Below are the options I would choose if i were to hold the money is separate funds.
I am of the opinion that people use a lot of false precision in asset allocation. If you go this route I like the thought of equal weighting the below six (but that's in isolation, really you should work out a global allocation for all your accounts together)
Invsco Eq Wgt S P 500Y (Large)--expense ratio: .29%
Vngd Cap Idx FD AS (Mid)--exp ratio: .06%
Vngrd Sm Cap Indx Fs AS (Small)--exp ratio: .06%
Vgd Total II Bond Mrkt--exp .05%
Vngrd Emrg Mrkt Cor Eq Inst--exp ratio: .53%
Vngrd Devl Mkt Indx Adm--exp ratio: .07%

Which International fund should I choose? If none are good options, should I go with the Target fund (option 1)?
Option 1 is good. Otherwise, it is hard to choose just one international fund. Developed markets is cheap and more resembles capitalization weighting, while emerging markets is a better diversifier but more expensive.

This is very helpful. I've tried to keep our overall allocation pretty simple and will probably go with the Target Retirement Fund. I'm also concerned about the fees for the emerging market fund. I figure it's only for 3-5 more years of her working.

TomTX

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Why are you putting it into another 401k instead of rolling it into an IRA at a low cost provider?

Expense ratios that don't read as 0.0x% seem high to me.

Sorry for the delayed response.  This is not something I know a whole lot about; I didn't think about rolling it over to an IRA. So you're saying I can just roll this over to a Vanguard IRA and call it a day. This would be super easy to do, but wouldn't it take away from the compounding effect I would get from rolling this into the new employers 401k and keep adding to it?  Granted the wife will only work full time another 3-5 years max, then on to part time.

What's better:  Adding the $60k to the new 401k and get more compounding out of it, but also have the higher fees--possibly over 1% OR Transferring the $60k to a traditional IRA with Vanguard, add to the new employers 401k, then transfer that over to the traditional IRA when leave employer?

Thank you again for this idea!
You don't have a good grasp of compounding. Whether this money is on its own or in an account with new contributions is irrelevant.

Low expense is important.

Mrs. Healthywealth

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You don't have a good grasp of compounding. Whether this money is on its own or in an account with new contributions is irrelevant.

Low expense is important.
[/quote]

Thanks for planting the seed. I started reading more about it and decided to roll it over to Vanguard. The potential 1% (possibly lower, but who knows because they don't clearly spell it out) fees in the 401k plan will be much worse. But, i'm very sure i wouldn't have thought about it, if you didn't mention it. Appreciate your time :)