401k & Roth IRA advice

**Like2Plan** · 05-10-2016, 03:10 PM

You have listed a lot of info, but I have a couple of questions:

1. What is your target allocation?

2. What are the expense ratios of the funds you have listed?

Usually, the target fund is designed to have 100% allocation-- it balances automatically and becomes weighted with more bonds over time.

Some folks like to make up their own combination. You might be able to replicate results with lower expenses if you make up your own with 3 or 4 (or 5) index funds.

**Jbone** · 05-10-2016, 03:35 PM

I'm not to sure what you mean by what's my target allocation? I'm invested in the target 2050. I figured I'd invest in it so I wouldn't have all my money in one fund.

Vanguard 2050 has an expense ratio of 0.16%
Vanguard 500 admiral has an expense ratio of 0.05%

I'd have to look up each individual fund that's available to me and their expense ratio.

**Like2Plan** · 05-10-2016, 04:09 PM

Originally posted by Jbone View Post

I'm not to sure what you mean by what's my target allocation? I'm invested in the target 2050. I figured I'd invest in it so I wouldn't have all my money in one fund.

Vanguard 2050 has an expense ratio of 0.16%
Vanguard 500 admiral has an expense ratio of 0.05%

I'd have to look up each individual fund that's available to me and their expense ratio.

Yup--you would.

So, your target allocation would be:
1. percentage stocks,
2. of your stocks, how much international?
3. percentage of bonds
4. of your bonds, how much international?

Your vanguard 2050 is comprised of the following index funds:
Vanguard Total Stock Market Index Fund Investor Shares 54.1%
Vanguard Total International Stock Index Fund Investor Shares 35.9%
Vanguard Total Bond Market II Index Fund Investor Shares* 7.0%
Vanguard Total International Bond Index Fund Investor Shares 3.0%

As you noted, an expense ratio of .16%

When you start adding Vanguard 500 admiral, you are tilting towards more US stocks. (Maybe that's what your goal is?)

You could also pick some other index funds from your to try to replicate what is in the L2050 for a lower expense, but you don't have the same index funds from which to choose.

You could replicate the Total Stock market fund with a combination of
Vanguard Small Cap Growth Index Admiral Small Cap Funds VSGAX, Vanguard Mid Cap Index Fund - Admiral Mid Cap Funds VIMAX and Vanguard 500 Index Admiral Large Cap Funds VFIAX. The other
categories would be not be as complete.

Here is a link that might be of interest to you:

Just a moment...

https://www.bogleheads.org/wiki/Three-fund_portfolio

**Jbone** · 05-10-2016, 04:25 PM

My allocation is... ??? I have no preference other than whatever would be necessary to be rather aggressive In my investments. (But I wouldn't want to dump everything into stocks) 80%? 90% stocks? 10-20% bonds/cash?

It seems like I don't have much to choose from in my company 401k and was curious if anyone had some advice based on what's available to me. You have some great info for me to read up on. Maybe I just have to stick it out until I have more to invest in individual index funds.

**sv2007** · 05-11-2016, 12:39 AM

Since you aren't able to max out on the Roth after 401k, I'm wondering if Roth IRA is better than 401k. If you are younger, then I think it is better; but at 32.. hmm, I don't know. Does anybody know how to run some numbers?

You'll lose the 10% match and pre-tax amount, but you don't pay tax on distribution. So would the money saved later on tax beat out the immediate 401k advantage?

Also, at 32, is that guaranteed return fund too conservative?

**jIM_Ohio** · 05-11-2016, 06:08 AM

Originally posted by Jbone View Post

Hello,
I’m new and was looking for your opinion on my current investment portfolio and maybe get some advice on what if any changes based off of what my current options are. I am 32 and currently make about 48k/yr.

VFFVX
American Funds Intl Gr And Inc R6 International Funds RIGGX
American Funds New World R6 International Funds RNWGX
Vanguard Developed Markets Index Admiral International Funds VTMGX
Vanguard Small Cap Growth Index Admiral Small Cap Funds VSGAX

Vanguard Small Cap Index Adm Small Cap Funds VSMAX

Vanguard Small Cap Value Index Admiral Small Cap Funds VSIAX
Janus Enterprise N Mid Cap Funds JDMNX

Vanguard Mid Cap Index Fund - Admiral Mid Cap Funds VIMAX
Wells Fargo Advantage Spec Md Cp Val R6 Mid Cap Funds WFPRX
American Funds AMCAP R6 Large Cap Funds RAFGX
JPMorgan Equity Income R6 Large Cap Funds OIEJX

Vanguard 500 Index Admiral Large Cap Funds VFIAX

JPMorgan Government Bond Select Bond Funds HLGAX

Metropolitan West Total Return Bond I Bond Funds MWTIX

Vanguard Interm-Term Bond Index Adm Bond Funds VBILX

Key Guaranteed Portfolio Fund Fixed

I am thinking I need to focus on my 401k options through work to take advantage of my employers match. Any thoughts on any changes or adjustments?

Here is a tool I pull data from

Download | The Flexible Retirement Planner | A financial planning tool powered by Monte Carlo Simulation

http://www.flexibleretirementplanner.com/wp/download/

First, at age 32, saving only 6% is not going to get you very far, get it to 10% and preferably 20-30%.

You are spending 94% of what you make, and that is not a retirement plan, that is a retirement hope.

I bolded the funds to look at

at age 32, I would recommend one of 4 investing styles
1) put 100% of your money in a target date fund, and error on side of retiring late (you are only putting in 6%, so the likelihood you could retire before age 75 is a pipedream).
2) Invest in 80% stocks and 20% bonds. 9.5% annual return expected with a 14.3% deviation (as likely to get -4.8% return and +23.8% returns in a given year)
3) Invest in 60% stocks and 40% bonds. 8% return with a 9.9% deviation (ranges expected are -1.9% to +17.9%)
4) Invest in 40% stocks and 60% bonds. 7% returns with a 7.1% deviation (-1.% to 14.1% returns expected)

The word expected means within any 10 year period, 7 of the years will likely have a return within range given. 3 of the years could be outside the range and still fit historical trends- those 3 years could be above or below the deviations given.

If you choose option 4, the target savings rate should be above 25% (meaning save 25% of pay into 401k and Roth).
If you stay at 6% I would focus on options 1 or 2.

For stocks
80% stocks I would hold US Large cap, US Mid Cap, US small cap, Foreign large cap and foreign small cap.
for 60% stocks I would hold same 5
for 40% stocks, make sure you hold US large cap and foreign large cap, the other 3 depends.

For bonds
20% bonds hold US government, US corporate and foreign corporate at minimum. Add emerging markets bond, US junk bond and mortgage backed securities as available.
for 60% bonds make sure you have between 4-6 types of bonds/ fixed income investments (US Corporate bond, US junk bonds, US government bonds, inflation protected bonds, foreign corporate bonds, foreign government bonds and emerging market bonds).

**feh** · 05-11-2016, 08:15 AM

Originally posted by Jbone View Post

Any thoughts on any changes or adjustments?

Read this page before doing anything: https://www.bogleheads.org/wiki/Bogl...g_start-up_kit

PS - you have excellent funds available to you in your 401K

**Jbone** · 05-11-2016, 08:30 AM

Thank you all for your responses. jIM_Ohio you have been really helpful and I appreciate it. I know currently I am only saving 6% of my income. I was up to 8% but backed down to have some extra cash to help double up on my car payment. (Unless that was a bad move? Would the money be better off being invested rather than going towards a car payment? My interest rate on the car loan is 4.94% and I owe $8250 with 4 years left on the loan)

Currently that is my only expense outside of the usual utilities and living expenses. I rarely spend my money on anything else. After I get my yearly pay raise I have been bumping up my contribution 1%. (I started with only 3%) After I paid off my car I planned on around doubling my contribution. 10-12% and then forcing myself to live around my paycheck after that.

As a side note. My parents recently told me that I should be receiving a sizeable inheritance. (Possibly close to 7 figures, if not a bit over 7 figures.) But I really do not want to rely on that for retirement as I do not know when that money will become available. I would like act like that money doesn't exist and save up on my own. I almost wish that they didn't tell me.

**Jluke** · 05-11-2016, 09:09 AM

Originally posted by Jbone View Post

I know currently I am only saving 6% of my income. I was up to 8% but backed down to have some extra cash to help double up on my car payment. (Unless that was a bad move? Would the money be better off being invested rather than going towards a car payment? My interest rate on the car loan is 4.94% and I owe $8250 with 4 years left on the loan)

this is kind of turning into a budget thread too.

Do you have an Emergency Fund?

After expenses, how much money is left on a monthly basis?

One general rule of thumb for 401k balance has been noted as having 3x gross salary saved by the time you're 40. So almost 150k. How does seeing that number make you feel?

If it's easy to change your 401k amount, go ahead and try out 10%. see how that impacts your monthly budget.

As for the car, seems reasonable enough that you may be better off directing your funds to the 401k or a ROTH if not the 401k.

One thing you will never get back is TIME. since 401k and ROTH contributions are yearly, you can never go back and add more for a previous year.

**Petunia 100** · 05-11-2016, 09:21 AM

Originally posted by Jbone View Post

Thank you all for your responses. jIM_Ohio you have been really helpful and I appreciate it. I know currently I am only saving 6% of my income. I was up to 8% but backed down to have some extra cash to help double up on my car payment. (Unless that was a bad move? Would the money be better off being invested rather than going towards a car payment? My interest rate on the car loan is 4.94% and I owe $8250 with 4 years left on the loan)

Currently that is my only expense outside of the usual utilities and living expenses. I rarely spend my money on anything else. After I get my yearly pay raise I have been bumping up my contribution 1%. (I started with only 3%) After I paid off my car I planned on around doubling my contribution. 10-12% and then forcing myself to live around my paycheck after that.

As a side note. My parents recently told me that I should be receiving a sizeable inheritance. (Possibly close to 7 figures, if not a bit over 7 figures.) But I really do not want to rely on that for retirement as I do not know when that money will become available. I would like act like that money doesn't exist and save up on my own. I almost wish that they didn't tell me.

You're passing up a guaranteed return of 10% (in the form of your match) in order to pay down 4.94% debt faster.

It's wonderful that your parents expect to leave you such a large inheritance. However, one expensive prolonged illness could radically change those plans. Plan as if you will receive no inheritance. Then, anything you do receive is a bonus.

Do you have other goals? Do you wish to buy a home? Travel? other?

**Jbone** · 05-11-2016, 09:58 AM

Sorry for turning this thread into somewhat of a budget thread. I figured if I got my 401k funds in check I could adjust my living life style and budget.

I just changed my contribution to 10%. And decided ill back down on the extra car payments. I feel like I am beginning to run out of time to have x3 my salary by the time im 40.. I never thought I'd be in this position.

After all expenses what's left generally is $200-$300/mo. and that goes directly to savings/emergency fund.

I currently do have about 6 months worth of expenses in an emergency fund.

I am already a home owner.. one can say I am a bit house poor. I do concede that I bought too big of a house. As my pay increased over the last few years it definitely has gotten easier and I have "grown" into the house a bit. But as you can see I am behind with saving for retirement.

I have a combination of 3 options. Increase my income, cut expenses even further, and downsize on my home. I do concede if something doesn't change I will probably end up selling the house and downsizing.

I did have a goal of retiring around the age of 60. I saw how hard my dad worked until he retired at 68 and I really don't want to follow his footsteps. That's no way to live. But as of right now that goal is put on hold.

**Jluke** · 05-11-2016, 10:39 AM

Originally posted by Jbone View Post

Sorry for turning this thread into somewhat of a budget thread.
I did have a goal of retiring around the age of 60. I saw how hard my dad worked until he retired at 68 and I really don't want to follow his footsteps. That's no way to live. But as of right now that goal is put on hold.

That's the thing about personal finances, there are so many factors that go into it (income, expenses, savings, retirement planning, etc). Having a firm grasp on your overall financial picture helps to prioritize and see where you need to focus your efforts.

Watching your parents can really lead to an "ah-ha" moment.

I wouldn't stress about the 3x right now. I think one key in retirement is to minimize your expenses - so you can retire with less.

**Petunia 100** · 05-11-2016, 11:58 AM

Originally posted by Jbone View Post

Sorry for turning this thread into somewhat of a budget thread. I figured if I got my 401k funds in check I could adjust my living life style and budget.

I just changed my contribution to 10%. And decided ill back down on the extra car payments. I feel like I am beginning to run out of time to have x3 my salary by the time im 40.. I never thought I'd be in this position.

After all expenses what's left generally is $200-$300/mo. and that goes directly to savings/emergency fund.

I currently do have about 6 months worth of expenses in an emergency fund.

I am already a home owner.. one can say I am a bit house poor. I do concede that I bought too big of a house. As my pay increased over the last few years it definitely has gotten easier and I have "grown" into the house a bit. But as you can see I am behind with saving for retirement.

I have a combination of 3 options. Increase my income, cut expenses even further, and downsize on my home. I do concede if something doesn't change I will probably end up selling the house and downsizing.

I did have a goal of retiring around the age of 60. I saw how hard my dad worked until he retired at 68 and I really don't want to follow his footsteps. That's no way to live. But as of right now that goal is put on hold.

I don't think you are in bad shape. It's just a matter of deciding what your priorities are and making a plan.

I like your decision to increase 401k contributions to 10% going forward. I like that you are looking at your investment choices and considering what you should do. I like that you have no debt but your mortgage and your car. I like that you have a 6 month emergency fund. You have a lot going for you.

**JBinKC** · 07-17-2016, 06:18 AM

I would contribute to your 401k to get the full benefit of your employer match but be aware most plan investment options for most companies really are substandard with high fees and low returns. Hopefully your employer offers Vanguard funds with lower management fees and I would play it close to the vest and stick to investing in index funds.

This is just me but if you are in order for a large inheritance my first priority and automatic expense and save enough to make a full contribution every year to your Roth IRA and at a 10 k balance start to pick individual stocks on your own. Since you already have a safety net I would use this account to attempt to accumlate as much tax free wealth and take prudent risks with it. This is really your only chance in life to own something where you are fully independent of the current slavery system created by government and living in the past during the guilded age. Just be aware that this account you cannot take the buy and hold forever approach to investing as most pundits preach. It has to be actively managed.

401k & Roth IRA advice