Author Topic: Starting 401k at work, looking for feedback on asset allocation  (Read 4798 times)

ketchup

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Starting 401k at work, looking for feedback on asset allocation
« on: December 16, 2012, 04:07:16 PM »
I am in the process of enrolling in the 401k plan at work.  It will begin for me on 1/1/13.  Our plan is from American Funds.

The funds I have to choose from are the following.

EuroPacific Growth https://www.americanfunds.com/funds/details/eupac/a.html
Growth Fund of America https://www.americanfunds.com/funds/details/gfa/a.html
New World Fund https://www.americanfunds.com/funds/details/nwf/a.html
American Mutual Fund https://www.americanfunds.com/funds/details/amf/a.html
Cap World Growth & Income https://www.americanfunds.com/funds/details/wgi/a.html
Investment Co of America https://www.americanfunds.com/funds/details/ica/a.html
Capital Income Builder https://www.americanfunds.com/funds/details/cib/a.html
American Balanced https://www.americanfunds.com/funds/details/ambal/a.html
US Government Securities https://www.americanfunds.com/funds/details/gvt/a.html
Intermediate Bond Fund of America https://www.americanfunds.com/funds/details/ibfa/a.html
Money Market Fund https://www.americanfunds.com/funds/details/mmf/a.html

along with a bunch of Target Date Funds.

I can choose any number of them in any percentages I wish.  What I have come up with is this:

Growth Fund of America - 60%
EuroPacific Growth - 30%
US Government Securities - 7%
Intermediate Bond Fund of America - 3%

Does this seem reasonable?  I am going to be contributing enough to my 401k to max out the employer match (in this case 6%).  I am 21 years old, and my long term goals are to finish my electrical engineering degree in the next few years, and hopefully hit financial independence around 30-35 or so.

Any advice is appreciated.  Thanks.

mlipps

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Re: Starting 401k at work, looking for feedback on asset allocation
« Reply #1 on: December 16, 2012, 04:39:48 PM »
Can you provide the expense ratios for those funds?

ketchup

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Re: Starting 401k at work, looking for feedback on asset allocation
« Reply #2 on: December 16, 2012, 04:44:38 PM »
Each of the links has all the information about each of the funds, including the expense ratios. Here are the expense ratios for the ones I chose:

Growth Fund of America - 0.71%
EuroPacific Growth - 0.84%
US Government Securities - 0.60%
Intermediate Bond Fund of America - 0.61%

Honest Abe

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Re: Starting 401k at work, looking for feedback on asset allocation
« Reply #3 on: December 16, 2012, 04:47:51 PM »
Freakin American Funds... I had a 403b with them through work once. Once you add the provider's fees you're looking at over 1%.

Are you planning on staying there long? If not then I would roll your 401k over to a Traditional IRA with Vanguard or Betterment the second you get out.

And also, CHEERS on starting your savings so soon

ketchup

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Re: Starting 401k at work, looking for feedback on asset allocation
« Reply #4 on: December 16, 2012, 04:50:25 PM »
Freakin American Funds... I had a 403b with them through work once. Once you add the provider's fees you're looking at over 1%.

Are you planning on staying there long? If not then I would roll your 401k over to a Traditional IRA with Vanguard or Betterment the second you get out.

And also, CHEERS on starting your savings so soon
Thanks for the heads up and info. All the expenses do seem extremely high considering most of what I've read in the past have been Vanguard numbers.  I plan on working there until I finish my electrical engineering degree, which should be two to three years from now.

Honest Abe

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Re: Starting 401k at work, looking for feedback on asset allocation
« Reply #5 on: December 16, 2012, 04:58:18 PM »
In that case I would contribute at least up to the match... the tax savings and free money from the match obviously make this a great deal for you.

ketchup

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Re: Starting 401k at work, looking for feedback on asset allocation
« Reply #6 on: December 16, 2012, 04:59:54 PM »
In that case I would contribute at least up to the match... the tax savings and free money from the match obviously make this a great deal for you.
That's the plan. It seems to me that any savings past the match are better destined for a Roth IRA, which I hope to open this year as well.

sherr

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Re: Starting 401k at work, looking for feedback on asset allocation
« Reply #7 on: December 18, 2012, 06:55:46 AM »
In that case I would contribute at least up to the match... the tax savings and free money from the match obviously make this a great deal for you.
That's the plan. It seems to me that any savings past the match are better destined for a Roth IRA, which I hope to open this year as well.

This is likely true while you are a student, and likely untrue once you have graduated and are in a higher tax bracket. If you plan on continuing to contribute to a Roth account after you graduate make sure you understand exactly why you are doing so. Do the math for yourself. It is amazing to me the number of financial advisor types that either cannot or do not do the math to see if a Roth or Traditional IRA is better for an individual.

As another EE who is hoping to reach FI by 35, I wish you luck. :)

ketchup

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Re: Starting 401k at work, looking for feedback on asset allocation
« Reply #8 on: December 18, 2012, 09:49:44 AM »
Thank you. 

And yes, I meant for me personally in my current situation, it makes more sense beyond a match to use a Roth. Likely in the future it will make more sense to max the 401k first (assuming I wind up in such a tax bracket to which I aspire).

sherr

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Re: Starting 401k at work, looking for feedback on asset allocation
« Reply #9 on: December 18, 2012, 10:47:05 AM »
Or even maxing out your 401k and then maxing out our Traditional IRA, contributing nothing to a Roth (like I am currently doing).

ketchup

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Re: Starting 401k at work, looking for feedback on asset allocation
« Reply #10 on: December 18, 2012, 12:52:40 PM »
I'm sure I'll crunch the numbers and figure out what makes most sense for me tax-wise in the future regardless of income. :)