Investment advise for beginner

[Steven25]

Dear Community Members
I'm a beginner in Investment world and looking for short term investment options only because my project/job visibility currently is for around 3 years. I'm at 40. I might need to move out of US in case project doesn't get extension. Currently I have ~26K in 401K invested in T. Rowe Price Retirement 2050 fund in fidelity. I have cash around 25K. Kindly advise on below queries:
(1) Should I keep or take out money from 401K considering short term visibility. I know about early 10% withdrawal penalties and taxation.
(2) I was thinking about opening high yield saving account but after some research I found that since I already have fidelity account so better to open a brokerage account where I can earn 4% interest rate which is more than popular HYSA like CapitalOne 360, American express saving, Ally etc. Is opening brokerage account in fidelity is wise decision?
(3) I'm also planning to buy some Index funds so how about starting with FXAIX and how much should I start with?
(4) Any recommendation on searching low cost EFTs or T-Bills?

Any other investment recommendations would be really helpful.

Thank you!

[MustacheAndaHalf]

It looks like "T. Rowe Price Retirement 2050 (TRRMX)" has a 0.63% expense ratio. 
https://www.morningstar.com/funds/xnas/trrmx/quote

When you leave a company, you can shift your 401(k) into an Individual Retirement Account ('IRA').  At that point, you can have more choices, and you can pick a target date fund/ETF with a lower expense ratio.

"iShares® LifePath® Target Date 2050 ETF (ITDF)" charges 0.11% annual expense ratio, so you'll keep an extra 0.52% per year.
https://www.ishares.com/us/products/333566/ishares-lifepath-target-date-2050-etf#feeTable

[Telecaster]

My advice is to first follow the investment order thread:

https://forum.mrmoneymustache.com/investor-alley/investment-order/

You didn't say your age, but I assume you are young-ish.   After completing step 0, put everything else into a low cost index fund (FXAIX is a fine choice).   

[Steven25]

Thank you for sharing the link so I'll check that as well. I have updated my age in my initial post. Hope that works.

[Fru-Gal]

Normally I’d say never ever take money out of your 401k nor get a loan from it. However with leaving the country, not sure how that works… I assume you will still be able to access it? Or do you think you would come back to the US at some later date?

Regardless, a 401k is a wonderful way to let your money grow tax-free, and the penalties and taxes you pay on taking the money out before you are 59 and a half years old is just not worth it.

Personally I would choose between VTSAX/VTI, VOO, and FZROX. Or T-bills. Set it and forget it.

[ChpBstrd]

1) No. Is there some reason you'd need the money related to the move? If you are a "nonresident alien" this article offers some advice.

2) Yes, there's no reason not to have a brokerage account at Schwab, Fidelity, Vanguard, etc. There's no benefit to having a savings account instead.

3) FXAIX is a great fund with a very low 0.02% expense ratio. At your level of savings, you might as well allocate 100%. The only downside is the lack of an options market if you want to get into hedging later. However, you probably don't have enough funds invested to do so economically.

4) Your brokerage will have a research tool for ETFs if you want to concentrate in particular sectors, countries, indices, styles, themes, etc. I like VTI, SPY, QQQ, VO, and VB. These have higher expense ratios than FXAIX, but offer me the ability to hedge with options.

[MustacheAndaHalf]

You might hit problems trying to buy more mutual fund shares once you're no longer a U.S. resident.  I don't know the limitations for IRAs vs 401(k) plans, but I found this:

"Earlier this year Charles Schwab and Company, Fidelity Investment and T.Rowe Price announced that they would no longer allow Americans living overseas, even their own employees, to buy US based mutual funds. There are limited exceptions for 401k plans, but for all other accounts including IRAs and Brokerage accounts, whether self managed, with the company as the advisor or with an independent investment advisor, mutual fund purchases (including dividend re-investments) have come to a halt. The company's are not forcing clients to sell the mutual funds (forcing a capital gain or loss) and are not for the most part forcing accounts to be closed, but they are limiting new purchases."
https://www.americansabroad.org/mutual_fund_restrictions

[Steven25]

Normally I’d say never ever take money out of your 401k nor get a loan from it. However with leaving the country, not sure how that works… I assume you will still be able to access it? Or do you think you would come back to the US at some later date?

Regardless, a 401k is a wonderful way to let your money grow tax-free, and the penalties and taxes you pay on taking the money out before you are 59 and a half years old is just not worth it.

Personally I would choose between VTSAX/VTI, VOO, and FZROX. Or T-bills. Set it and forget it.

I might not be back to US for job but since recommendation is not to withdraw money from 401K so I'm thinking to keep it for my Kids so that they can use it in future( after I turn 60 ) when they plan to come to USA for education or job

Thank you for sharing other funds recommendation

[Steven25]

1) No. Is there some reason you'd need the money related to the move? If you are a "nonresident alien" this article offers some advice.

2) Yes, there's no reason not to have a brokerage account at Schwab, Fidelity, Vanguard, etc. There's no benefit to having a savings account instead.

3) FXAIX is a great fund with a very low 0.02% expense ratio. At your level of savings, you might as well allocate 100%. The only downside is the lack of an options market if you want to get into hedging later. However, you probably don't have enough funds invested to do so economically.

4) Your brokerage will have a research tool for ETFs if you want to concentrate in particular sectors, countries, indices, styles, themes, etc. I like VTI, SPY, QQQ, VO, and VB. These have higher expense ratios than FXAIX, but offer me the ability to hedge with options.

Well not required so most probably I'll keep it in 401K for Kids education/job and take some action after I turn 60. Thank you for sharing that article which is exactly I was looking for.

Did you mean I should allocate 100% brokerage amount to FXAIX or something else. Kindly shed some light on this. How about setting up some % amount between FXAIX, VTI , VTSAX, VOO , FZROX etc. I also found three fund portfolio approach https://www.bogleheads.org/wiki/Three-fund_portfolio so how about this?

[Steven25]

You might hit problems trying to buy more mutual fund shares once you're no longer a U.S. resident.  I don't know the limitations for IRAs vs 401(k) plans, but I found this:

"Earlier this year Charles Schwab and Company, Fidelity Investment and T.Rowe Price announced that they would no longer allow Americans living overseas, even their own employees, to buy US based mutual funds. There are limited exceptions for 401k plans, but for all other accounts including IRAs and Brokerage accounts, whether self managed, with the company as the advisor or with an independent investment advisor, mutual fund purchases (including dividend re-investments) have come to a halt. The company's are not forcing clients to sell the mutual funds (forcing a capital gain or loss) and are not for the most part forcing accounts to be closed, but they are limiting new purchases."
https://www.americansabroad.org/mutual_fund_restrictions

Thank you for sharing this article. In this case I might think about selling all funds except 401K before moving out

[Telecaster]

When you move you should have the option of rolling the 401k into an IRA, which gives you a lot more flexibility. 

[Steven25]

When you move you should have the option of rolling the 401k into an IRA, which gives you a lot more flexibility.

Oh yeah, you're right. I saw that in one of the thread in this post. Worth mentioned that. Thank you!

[MustacheAndaHalf]

After moving abroad, you can still buy ETF shares, even when you can't buy mutual fund shares.

My suggestion of $IDTF, above, both saves expense ratio and can be bought by non-U.S. residents.  But you would need to make a "trustee to trustee" transfer to a company like Schwab or Fidelity, to turn your 401(k) into a Traditional IRA.

[Steven25]

Got it. Thank you.

Are there any recommendations on 6 month / 1 year CDs or T-Bills as a short term investment?

[ChpBstrd]

Got it. Thank you.

Are there any recommendations on 6 month / 1 year CDs or T-Bills as a short term investment?

The easy way from a brokerage account is to just buy SGOV or BIL.