ANY Help with 401K appreciated

**autoxer** · 01-07-2015, 10:46 AM

It sounds like PortfolioXpress might have a similar function to a target date fund with a glide path and automatic rebalancing, but I'm not sure about the fees involved. There may not be an obvious fee, but each fund that in invests in has an expense ratio that can be a drain on the long term return. If the PortfolioXpress is constructed of low fee index funds, then it sounds fine, but if it uses high fee actively managed funds, then I would reconsider.

**sdcarwile** · 01-07-2015, 11:08 AM

Ok, I just checked and its actually 15 different things that is invested in. (3% here, 7% there etc) Is this bad? I randomly clicked on 4 things just to check and they ranged from .85-1.29% expense ratio fees. Is this alot?

**autoxer** · 01-07-2015, 11:23 AM

Originally posted by sdcarwile View Post

Ok, I just checked and its actually 15 different things that is invested in. (3% here, 7% there etc) Is this bad? I randomly clicked on 4 things just to check and they ranged from .85-1.29% expense ratio fees. Is this alot?

It's not necessarily bad that it is invested in a lot of different funds, just more complicated and harder to understand. The expense ratio is high. My target date index fund has an expense ratio of 0.18%

**MakeAStash** · 01-07-2015, 06:20 PM

Good to see you are keeping watch on the investments and asking questions.

There is something to be said for simplicity: the fewer mutual funds across which you spread your retirement dollars, the easier it will be track. IMO something between 4 and 10 funds will achieve diversification (which reduces risk) without going overboard.

Target-date funds ("2035") automatically adjust their investment allocation toward the more conservative side as time passes. For many such funds (but not all) you pay for that help in the form of higher expensive ratios. Paying a 0.2% ratio rather than 1.0% during a few decades can give you tens, even hundreds, of thousands more dollars in the typical retirement account.

Lower expense ratios are commonly found with funds that have "index" in their name. Index funds track a certain set of stocks and over the long run produce just as well, if not better, since you are keeping more of your money.

During retirement many people say it is safe to withdraw about 4% annually. If you are paying a 1% expense ratio at that time, you will be paying 1/4, or 25% of your retirement money! So, yes, 1% is a high ratio.

Since TR Price is a second-rate outfit, most people instead choose funds from Vanguard or Fidelity, if those are available to you. At your age, you could do worse than splitting across 4 index funds to produce the following allocation:

1) 50% US stocks
2) 20% US bonds
3) 20% international stocks
4) 10% international bonds, or anything else you'd like to try so as to learn

**feh** · 01-08-2015, 04:56 AM

Originally posted by sdcarwile View Post

So lately I've been thinking about our 401K account thru husbands work. Let's just say that neither him nor I know ANYTHING about investing. He signed up thru his work and I think he just randomly picked a few things. (He's been at this job about 6 years and we have another IRA from a rollover account from his last job) We had been saving 6% each year and last year I upped it to 7 and this year to 8%. That part is easy but I have NO IDEA how these things should be "allocated".

DH is 41 and I am 38 and we have 3 sons ages 9-16....just for some background info.

I noticed he had a big chunk in bonds like 55%. And I know those are the "safe" investing so I was fooling around on our online account and turned on the "PortfolioXpress" from the TransAmerica Retirement website, and I noticed it will automatically rebalance your account and whatnot up until retirement but looking into it further it has a lot of different "investments" (sorry I know none of the lingo) Like 3% here and 5% there on at least 10-12 different things or so. And trying to google the best way to do it I heard some people say you shouldn't be in that many different things, so maybe I made the wrong choice to turn that on?

Then I notice people say to choose the thing that has close to your retirement year on it and I see a fund called T Rowe with different retirement years. Should I choose say T Rowe 2035 and that's it? If I change it to this considering I just switched it to all that other stuff last night will there be penalties or extra fees or should I wait? Or is that even the best thing to do at all?

I'm sorry to sound so infantile but DH could care less about this stuff nor does he really pay attention to things like that. It was my idea to refinance our home loan 2 years ago. Went from 6.375% to 3.5% and he thought it was going to be too much trouble and left it up to me. Shaved 6 years off our loan and payments stayed the same, so he's not much help with this type of stuff. lol.

Thanks in advance

Here's what you need to do: educate yourself. It's good that you're asking these questions; now do some reading so that you can feel confident in your decisions. Investing is really not that complicated; just a few hours of your time will remove most of the mysteries.

Start here: http://www.bogleheads.org/wiki/Bogle...g_start-up_kit

**sdcarwile** · 01-08-2015, 05:56 AM

Thank you so much for all the replies! Unfortunately I had already researched for several hours before commenting here and alls that did was make me more confused! lol. I might as well been reading a foreign language. Being thrifty is my thing, unfortunately investing is not! I ended up looking at several of the funds available and I didn't see anything under .8 or .75 around in there and several were over 1%. I will look later to see if there are "index" funds available. I checked several of the target date funds and they were all over 1% as well.

Again thanks for all the help. I've been lurking on here for a while but haven't posted much!

**Like2Plan** · 01-08-2015, 08:07 AM

sdcarwile,
You and your DH have done really good things for yourselves by investing in a systematic approach. It is also good that you are looking at tweaking your investment allocation.
You are off to a great start in that you are educating yourself on investing. Keep with it and before long you will be feeling confident in your choices.

feh's link is a really good one. Another link (same web site) titled Asking Portfolio Questions has a really good template for asking portfolio questions. It is a really good exercise even if you just fill in the answers on a spread sheet for yourself.

One thing that you have to provide is your desired asset allocation. This is not something that someone can provide for you because it is based on your goals, your time horizon and your risk tolerance. For example, someone who is risk averse planning to retire in 2 years should have a different asset allocation than someone who is planning to retire in 60 years and is risk tolerant.

Another piece of the puzzle which you touched on in your last post are expenses. Over time, higher expenses will take a bigger bite out of your earnings. So it is best to pick a fund/funds that accomplishes your goal at the lowest cost.

I think it probably possible to accomplish a balanced portfolio with a target fund (provided the expenses aren't too high) or maybe 3 or 4 index funds across your asset allocation.

**sdcarwile** · 01-08-2015, 10:04 AM

Short Bonds/Stable/MMkt

Prudential Guaranteed Income 3% 11%
Interm./Long-Term Bonds

Loomis Sayles Bond Retail 8% 14%
Metropolitan West Total Return Bond M 9% 14%
PIMCO Real Return A 8% 13%
Aggressive Bonds

Federated High Yield Trust Service 5% 8%
Large-Cap Stocks

BlackRock Equity Dividend R 17% 11%
Franklin Growth R 16% 11%
Small/Mid-Cap Stocks

JHancock Disciplined Value Mid Cap I 4% 3%
Voya MidCap Opportunities A 3% 1%
Target Small Capitalization Value R 4% 3%
ClearBridge Small Cap Growth A 3% 1%
Voya Real Estate A 3% 1%
International Stocks

American Funds EuroPacific Gr R3 6% 3%
American Funds New Perspective R4 7% 4%
Oppenheimer Developing Markets R 4% 2%
Multi-Asset/Other

American Funds American Balanced R4 0% 0%
T. Rowe Price Retirement Balanced R 0% 0%
T. Rowe Price Retirement 2010 R 0% 0%
T. Rowe Price Retirement 2015 R 0% 0%
T. Rowe Price Retirement 2020 R 0% 0%
T. Rowe Price Retirement 2025 R 0% 0%
T. Rowe Price Retirement 2030 R 0% 0%
T. Rowe Price Retirement 2035 R 0% 0%
T. Rowe Price Retirement 2040 R 0% 0%
T. Rowe Price Retirement 2045 R 0% 0%
T. Rowe Price Retirement 2050 R 0% 0%
T. Rowe Price Retirement 2055 R 0% 0%
PIMCO All Asset A 0% 0%

Ok so I just copied and pasted from the retirement website. I don't see anything that says Vanguard, Fidelity, or Index. Maybe I'm still confused......Left side is the amounts they have for now and the right is investments at retirement (that is with this portfolio xpress on)

**feh** · 01-08-2015, 10:16 AM

Originally posted by sdcarwile View Post

Ok so I just copied and pasted from the retirement website. I don't see anything that says Vanguard, Fidelity, or Index. Maybe I'm still confused......Left side is the amounts they have for now and the right is investments at retirement (that is with this portfolio xpress on)

I'll repeat my advice to do some reading. You need to understand how this stuff works.

You don't want to trust your life savings to some strangers on the internet, do you?

**sdcarwile** · 01-08-2015, 10:26 AM

LOL. I have been doing a ton of reading. Not sure why it seems so confusing to me. This is just something I have never gotten into. I usually research EVERYTHING (ask my family) but have never understood investments at all. I'm actually still reading right now and have been for a few days now. I won't trust my life savings to strangers, but....if I get some solid advice (and talk to me like I'm 5 in easy words I can understand. lol) at least I can feel like I'm on the right path.

I think for now I will keep it the way it is. Since I don't see anything that says Index, Fidelity, or Vanguard I guess I don't know what else to do.

**JulieAlbright** · 01-08-2015, 01:53 PM

Rather than talk about your funds specifically, I just walk through the process my husband and I went through.

I read around a lot and came up with an allocation I was comfortable with based on our age. Our allocation is broken down into these categories

US Stock
Foreign Stock
Emerging Markets (similar to Foreign Stock but concentrates more outside of Europe etc)
Real Estate (We do have a Real Estate fund, many plans don't)
Bonds

I then used the Morning Star website to look up past performance, expense ratios and ratings of each mutual fund and chose the fund I wanted for each category - we ended up with two funds for a couple of the categories because it was hard to choose. There were also some cases such as with US Stock then I wanted a split between Small Cap and Large Cap. We pretty much ended up ignoring the "Target Date Funds" offered in our plan because they all had really high expense ratios. We usually just went with Index funds where available. For instance, for the US Stock Category I primarily chose an S&P 500 Index fund with a low expense ratio.

Then using the allocation we'd chosen, we rebalanced our current holdings and directed our future contribution to match that allocation. As we age, I'll alter the allocation amounts to better match our risk tolerance.

It was pretty much an afternoon's worth of work for me, but I had a really impressive massive spreadsheet to show at the end.

**sdcarwile** · 01-08-2015, 02:19 PM

Thank you and that does help somewhat! I think I've come to the conclusion that DH 401K does not offer any of the index funds/Vanguard etc recommended and I think that's what I was so confused. As far as I can tell I only have crappy things to choose from with higher expenses so I guess I won't be any worse off than before but not sure I've made it any better. But thank you!

**snafu** · 01-08-2015, 04:15 PM

I too plead that you not give up on understanding the investment process as you're really close to 'getting it.' I'm sure you did't learn your thrifty ways overnight, and you're doing good job. We're happy to talk you through the investment side which helps you make more effective use of the money saved. I'm sure you were a bit nervous about taking steps to change your mortgage and hope you give yourself a big pat-on-the-back for shaving 6 years off your mortgage.

I'd also suggest some easy to understand readings. Your library likely offers electronic books like The Automatic Millionaire [ D. Bach] or The Wealthy Barber [Chilton]. It's free and you don't need to leave the house. I see you're restricted in the 401K retirement account offered by DH's employer. You've increased his contribution but I'm not clear whether there is any contribution from the employer. Is there any matching money?

I'm sure you understand that 'stocks' are units of public companies that meet government rules in order to raise money for their stated procedures. The value of a stock is what a willing buyer will pay to a wiling seller. It's like a roller coaster in my opinion, goes up, goes down, and you've no control. Emotion plays a major role, world events, weather...

Experience has taught you that a Mortgage [loan] operates differently from an ordinary loan for a car or Line of Credit. Bonds are major loans similar to your mortgage where a business applies mainly to a financial institution with the institution rating the company's ability to pay the loan on agreed terms. High Yield Bonds are the loans of greatest risk.

Rule #1 As stock value goes up, bond value goes down. Right now, bonds are low value for a number of reasons, 1st of which is because interest rates are so low.

50% US stocks
20% US bonds
20% international stocks
10% international bonds are a standard division of the different classes of investment. Some of us have included a Real Estate segment [offered by my companies identified as REIT]

There are endless companies who sell stocks & bonds and they charge any fees they like but must disclose. SA participants like Vanguard, Fidelity and a few others because they are well known as excellent guardians of your money, operating their organizations without scandal, keeping costs to clients low.

Perhaps you can send a letter to DH's company, under his signature, to HR, asking if they offer any Index Stock Funds and any Index Bond Funds. They may offer these with a name that isn't readily identified.

If you're willing to continuing to ask questions there are some very experienced responders here at SA. You might look at some questions and answers from last year or through that horrid 2010-2011 history.

**Like2Plan** · 01-09-2015, 04:05 AM

Originally posted by sdcarwile View Post

Short Bonds/Stable/MMkt

Prudential Guaranteed Income 3% 11%

Interm./Long-Term Bonds

Loomis Sayles Bond Retail 8% 14%
Metropolitan West Total Return Bond M 9% 14%
PIMCO Real Return A 8% 13%

Aggressive Bonds

Federated High Yield Trust Service 5% 8%

Large-Cap Stocks

BlackRock Equity Dividend R 17% 11%
Franklin Growth R 16% 11%

Small/Mid-Cap Stocks

JHancock Disciplined Value Mid Cap I 4% 3%
Voya MidCap Opportunities A 3% 1%
Target Small Capitalization Value R 4% 3%
ClearBridge Small Cap Growth A 3% 1%
Voya Real Estate A 3% 1%

International Stocks

American Funds EuroPacific Gr R3 6% 3%
American Funds New Perspective R4 7% 4%
Oppenheimer Developing Markets R 4% 2%

Multi-Asset/Other

American Funds American Balanced R4 0% 0%
T. Rowe Price Retirement Balanced R 0% 0%
T. Rowe Price Retirement 2010 R 0% 0%
T. Rowe Price Retirement 2015 R 0% 0%
T. Rowe Price Retirement 2020 R 0% 0%
T. Rowe Price Retirement 2025 R 0% 0%
T. Rowe Price Retirement 2030 R 0% 0%
T. Rowe Price Retirement 2035 R 0% 0%
T. Rowe Price Retirement 2040 R 0% 0%
T. Rowe Price Retirement 2045 R 0% 0%
T. Rowe Price Retirement 2050 R 0% 0%
T. Rowe Price Retirement 2055 R 0% 0%
PIMCO All Asset A 0% 0%

Ok so I just copied and pasted from the retirement website. I don't see anything that says Vanguard, Fidelity, or Index. Maybe I'm still confused......Left side is the amounts they have for now and the right is investments at retirement (that is with this portfolio xpress on)

It looks like you also cut and pasted the category of each of these assets. (I bolded them for you). These are various funds and target retirement date funds. (I don't know what the % pertain to, though. ) The amount that you would want to invest in would depend on your risk tolerance, how soon plan to retire and also the expenses.

The T. Rowe Price Retirement funds are target retirement funds--for example the 2055 would be a retirement target date. This product is somewhat complicated because there is no standard--so the asset allocations will not necessarily be the same for a given target date from one company to the next (ie T. Rowe Price, Vanguard, fidelity etc) . If you examine the fund itself you will notice there is a percentage of stocks (across large, mid and small cap and international categories ) and it would also have a percentage of cash and bonds. As you get closer to your retirement date, the fund becomes more conservative and the asset allocation changes to more bonds and fewer stocks.
The problem is that some of these target date asset allocations may not be in line with your risk tolerance. The other problem is the expenses for these funds are generally higher than if you picked 3 or 4 index funds yourself (and you manage the balancing of the fund yourself).

ANY Help with 401K appreciated