A few retirement questions

[Elgin526]

One of the retirement threads got me thinking...

I'm trying to figure out if I am saving enough for retirement and I'm working with a retirement calculator.

What is the yearly max a married person can put into a single 401k account? And does this limit include emloyer contributions, or is it just for what the employee is allowed to funel in and the employer can put in more on top of it? DH has a pension plan and has no access to a 401k so this only applies to my 401k through my company.

Also, my 401k plan has about a dozen options for investments, of which three are mutual funds. I'm 100% invested in a single mutual fund, the Vanguard LifeStrategy Growth Fund (VASGX), the most aggressive of the three. I'm 30 and have 30-35 years to retirement, so I wanted to be as agressive as possible while still being diversified, which as far as I can tell, this fund is. But not having any real idea of what the heck I'm doing, here are my other options. If anyone has any advice, I'm all ears (of course I wont' do anything soley based on advice here, I'm more looking for a starting point for research). I can mix and match any percentage into as many or as few of these options as I'd like. Thanks in advance for any help you may be able to offer!


Lifecycle Portfolios

LifeStrategy I
Vanguard LifeStrategy Growth Fund

LifeStrategy II
Vanguard LifeStrategy Moderate Growth Fund

LifeStrategy III
Vanguard LifeStrategy Conservative Growth Fund

Money Market
Advantus Money Market

Fixed Income
Intermediate-Term Bond Index I
Vanguard Intermediate-Term Bond Index Fund, Investor Shares

Specialty Funds
Real Estate
Ivy Real Estate Securities Fund Class Y

Domestic Equities

Large Value Equity Index I
Advantus S&P 500®/Citigroup Value Index

Large Value Equity VII
Van Kampen Comstock Fund, Class A Shares

Large Equity Index I
Advantus S&P 500® Index

Large Equity II
Fidelity VIP Contrafund Portfolio

Large Growth Equity Index I
Advantus S&P 500®/Citigroup Growth Index

Large Growth Equity V
Fidelity Advisor Equity Growth Fund, Class T

Small Value Equity V
Allianz NFJ Small-Cap Value Fund, Institutional Shares

Small Value Equity IX
Wells Fargo Advantage Small Cap Disciplined Fund, Institutional Class

Small Equity III
DFA U.S. Small Cap Portfolio

Small/Mid Growth Equity II
Vanguard Explorer Fund

International Equities
International Core I
GMO International Core Equity Fund, Class III

[sweeps]

Max 401k contribution for someone under 50 is $15,000. Maximum including the company match is 100% of your total compensation or $44,000, whichever is less.

The Life Strategy Growth Fund is a good, fairly aggressive choice. You could get slightly more aggressive by choosing a mix of the other funds, but I would stick with VASGX.

[meaghanchan]

I think the most important thing, no matter what you're investing in, is to fully understand it. So, though I assume you've already looked through the prospectus and any other relevant documents, I just want to point out a couple things about the fund you're currently in (VASGX, Vanguard Lifecycle Growth).

First, check out the holdings:

1 Vanguard Total Stock Market Index Fund 50.0%
2 Vanguard Asset Allocation Fund 24.8%
3 Vanguard Total International Stock Index Fund 15.3%
4 Vanguard Total Bond Market Index Fund 9.9%

Vanguard Total Stock Market fund, is, like it says, an index of the total US stock market. Likewise, the Total International Stock Index Fund is an index of international stocks, and the total bond market index is an index of bonds.

The other one in there is Vanguard's Asset Allocation Fund, which is kind of a weird fund because it doesn't have a set percentage invested in stocks or bonds. Instead, the manager of the fund moves the money around based on whether he/she thinks stocks or bonds are going to do well. The problem with the Asset Allocation Fund is that if you have a set allocation (80% stocks/20% bonds, for example) you won't be able to keep it where you want it, it will always be unstable because of this fund. But it sounds like you don't have a set allocation plan in mind, other than 'aggressive'.

Right now, you're very aggressive, with 90% of your holdings in stocks and only 10% in bonds (roughly). If you're sure you wouldn't sell in a down market- that's fine. I don't know your previous investment history... If you held or bought rather than sold during the 2000-2002 bear market at this allocation, you're probably fine. If you weren't in the market during that period (I wasn't) it can be hard to predict your behavior... It's one thing to know intellectually that your portfolio will go up eventually, but when you see your hard-earned savings disappear, it can be tough to stay in the market. The highest loss in a single year for a portfolio allocated 90% stocks/10% bonds is about 25%. Again, if you're OK with this that's fine- just understand that a loss this high or greater could easily happen again.

Also, your allocation to international seems a bit low if you want to be really diversified. I don't know anything about the international fund in your portfolio- if it's not a good fund (high expenses or poor performance relative to its benchmark, or both) you might want to put an international fund in an IRA/ Roth IRA if you're eligible.

Overall it's a good fund- good performance, low expenses, decent diversification, and though I don't know a lot about the other funds in your portfolio, it seems like a good core holding. As you get older, you might want to increase your bond allocation over time (roughly 1% a year), or just switch to the moderate growth fund in a few (5-10) years. 20% of bonds at 40 would still be very aggressive.

[Elgin526]

Thanks, both of you.!

I started at my job in '99 and started the 401k at that time. For awhile I was in the Moderate growth but switched to the aggresive fund at some point (don't remember when) when I kept reading that when you are young you should be in higher risk stuff to get the most gain (plus if you take a loss you have more time to recover, being decades from retirement). At first I wasn't big on risk, but overtime I've realized that if I want to retire and not eat cat food, I'm going to have to take more risk, and these days I'm much more comfortable looking at the larger picture, that the stock market has historicly beaten all other forms of investment. Now, I'm actually looking forward to the stock market going down a bit (not a crash, of course, but a little cooling off), the cheaper stocks are when I buy them the more money I'll make in the long run. I see a dip in the stock market the same way as I see a sale at the mall, it's time to go shoping!

Someday I'd like to start buying individual stocks and see what I can do with that, but that's a few years off, we've got debt we have to pay off first before we invest more than what we already do.

[LuxLiving]

Elgin526 - so in the meantime while you are getting that debt paid off start paper-trading and keep reading so that when you are ready financially, you'll also be prepared mentally! I think the other posts gave you some good info on your mutual fund selection.

[instantinfo4you]

That comment you made about not eating cat food, makes me think that you have also been through the transforming debt into wealth program. Is this true? What did you think of it? Don't forget that you can also have an IRA, in which a percentage of what you put into it, can be written off of your taxes.

[disneysteve]

Originally Posted by Elgin526

my 401k plan has about a dozen options for investments, of which three are mutual funds.

Just wondering what you meant by this comment. You say there are 3 mutual funds but then give a list of 17 mutual funds that are available to you.