Author Topic: Vanguard 401k Advice  (Read 3266 times)

Lindzo

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Vanguard 401k Advice
« on: May 24, 2014, 02:14:33 AM »
Some background info. I'm 31 and my company just started offering a 401k program with a match. 100% match for the first 3% and then a 50% match for the next 2%. My plan is to contribute 10% to get the full match and since I haven't been contributing to a 401k since my last job. Speaking of, I have funds from my previous 401k that I rolled into an IRA and have been contributing to an IRA in place of no 401k offering.

My main question is what funds I should choose. The default for me is the Vanguard Target Retirement 2050 Fund. According to my Investor Questionnaire, I should have a 70%/30% between stocks and bonds. My first instinct is to pick the Vanguard Total Stock Market Index Fund for the stock portion but I know nothing about bonds. I do tend to be on the conservative side, but also have quite a bit of time until I can withdraw anything so I'm not too concerned.

Here are the Stock options available to us:
Vanguard 500 Index Fund
Vanguard Emerging Mkt Stock Index Fund
Vanguard Growth Index Fund
Vanguard Mid-Cap Growth Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Mid-Cap Value Index Fund
Vanguard REIT Index Fund
Vanguard Small-Cap Growth Index Fund
Vanguard Small-Cap Index Fund
Vanguard Small-Cap Value Index Fund
Vanguard Total Intl. Stock Index Fund
Vanguard Total Stock Market Index Fund
Vanguard Utilities Index Fund
Vanguard Value Index Fund

Bond Choices:
Vanguard Short-Term Bond Index Fund
Vanguard Total Bond Market Index Fund
Vanguard Total Intl. Bond Market Index Fund

When I originally enrolled in my first 401k, I'll admit I was pretty ignorant in terms of how to invest and how much to contribute, and what to invest in. I want to make sure this time I make good decisions. Thanks in advance, and let me know if I can provide any more info!

wtjbatman

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Re: Vanguard 401k Advice
« Reply #1 on: May 24, 2014, 03:16:09 AM »
Based on your fund options (fantastic for a 401k, btw), and what you've said is a desirable asset allocation, you have a few options. I would do something like one of these...

Easy Portfolio
60% - Vanguard Total Stock Market Index Fund
30% - Vanguard Total Bond Market Index Fund
10% - Vanguard Total Intl. Stock Index Fund

Super Easy Portfolio
70% - Vanguard Total Stock Market Index Fund
30% - Vanguard Total Bond Market Index Fund

Slightly More Risky Portfolio
60% - Vanguard Total Stock Market Index Fund
30% - Vanguard Total Bond Market Index Fund
10% - Vanguard REIT Index Fund

Contribute as much as you can to your 401k. At the very least get all of the matching (free money!), try to max it out if you can. Rebalance every six months to a year. Enjoy watching your stash grow, don't panic if it goes down, just keep at it. I'm jealous of your options, the only index fund in my 401k is the total stock market, so I put 100% into that. Some people around here have even worse 401k plans.

aj_yooper

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Re: Vanguard 401k Advice
« Reply #2 on: May 24, 2014, 06:43:07 AM »
I am happy that you have good choices for your 401k.  I  recommend that you read the Bogleheads investing start up kit at:  http://www.bogleheads.org/wiki/Bogleheads_investing_start-up_kit and figure out your investment policy statement and your asset allocation.  Spend some time reading the kit and you will do fine.  Other good reads are Rick Ferri's All About Asset Allocation and William Bernstein's Four Pillars of Investing.  Bogleheads also has a good personal finance startup kit too.

nereo

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Re: Vanguard 401k Advice
« Reply #3 on: May 24, 2014, 07:29:11 AM »
Quote
Some people around here have even worse 401k plans.

Like me!  I've never had a 401(k) option.  At any of the jobs that I've worked.  Had a 403(b) once for a single year but the match wasn't half as good as yours (50% up to 3% match, and all my options were with a full-service/high-fee brokerage company.).
Be suuuuuper grateful for what you have any like wtjbatman said, try to max it out every year!

Lindzo

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Re: Vanguard 401k Advice
« Reply #4 on: May 24, 2014, 01:09:30 PM »
Yeah, I've gone through some sub-par 401k programs before, so I definitely know how good I have it now. Thanks for the advice and the links, I'll definitely give it some good consideration!

Zoot Allures

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Re: Vanguard 401k Advice
« Reply #5 on: May 24, 2014, 08:25:20 PM »
Super Easy Portfolio
70% - Vanguard Total Stock Market Index Fund
30% - Vanguard Total Bond Market Index Fund

That's what my 403(b) portfolio looks like, except with an 80/20 AA. I like the simplicity of it. And I, too, am grateful to have an employer that gives us Vanguard instead of some crappy high-fee company.

kyleaaa

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Re: Vanguard 401k Advice
« Reply #6 on: May 25, 2014, 07:45:05 AM »
To keep it simple, I'd just put 1/3 each in the Total Stock Market Index fund, the Total International Stock Market Index fund, and the Total Bond Market Index fund. That's pretty close to your desired 70/30 allocation and has the advantage of being the simplest split: you don't have to bother with thinking about how much to put in international vs domestic or any of that other stuff.