Helping with Mom's 401k

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Superleaf444
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Helping with Mom's 401k

Post by Superleaf444 »

Hiya,

My mom is a working class type and has never been much of a saver. I finally convinced her to start contributing to her 401k. She is extremely behind and will not catch up, but at the very least she is putting some stuff away.

When she first started, I recommended a target-date fund (or whatever the Fidelity version is called) because it was the easiest thing to recommend. I know she will not allocate her assets nor would she hire a CFP to help her. She is in her late 50s, so it def needs to be more conservative considering how close she is to 'retirement' (in reality not being well enough to keep working).

Since then her company was bought out and she just agreed to rolling over her 401k into their new plan. My mother does not understand anything about this stuff. Eh, what done is done. In any case, the new 'target-date fund' they gave her is not great. Looking at 0.63 fees and invested in a medley of mediocre mutual funds. Sure, they have a Russel 2000 and a US bond index in it, but there are about 10 other funds that are, from what I can tell, ways for Fidelity to just skim with mediocre growth. I would have listed all the funds, but since it is my mother's plan, I don't have them readily available. (It has two money market funds in it, like, why?!)

Anyway, she DOES have access to a standard SP500 and total US bond both with extremely low fees. The growth, more than likely, would also exceed the newer trash target-date fund they gave her.

But, and this is a big but, I'm worried that if I tell her to switch over she will never allocate her portfolio. Worried is probably the wrong word, I'm positive she will not. And even if I help her, trying to help her allocate will be an extremely difficult task because she won't want to do it no matter how easy I make it for her.

Part of me is leaning towards just telling her the target-date fund is fine enough considering her runway is so short so the fees won't exactly destroy her nor will the growth. Another part of me is like, I should just help her make it a 50/50 portfolio and call it a day, because it will inevitably be better than that mediocre target-date fund.

Thoughts?
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CAsage
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Re: Helping with Mom's 401k

Post by CAsage »

Agree with you that a 50/50 S&P and Total Bond fund with super low expenses is a perfectly fine solution. Your mom needs to set up new contributions (just once) and do a one-time reallocation of existing, then she won't need to reallocate or fiddle with it again (as in, that's good enough). One of my favorite investing gurus is Scott Burns - and this is his basic Couch Potato portfolio. Amusingly he claims that if you can fog a mirror, you can divide by 2.
Last edited by CAsage on Mon Jul 26, 2021 8:51 am, edited 1 time in total.
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ruralavalon
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Re: Helping with Mom's 401k

Post by ruralavalon »

She is in her late 50s, so it def needs to be more conservative considering how close she is to 'retirement' (in reality not being well enough to keep working).
. . . . .
. . . a standard SP500 and total US bond both with extremely low fees. . . .
. . . . . .
I'm worried that if I tell her to switch over she will never allocate her portfolio. Worried is probably the wrong word, I'm positive she will not. . . .
I suggest a plain vanilla 60/40 asset allocation using the extremely low expense S&P 500 index fund and the total bond market index fund.

Encourage her to increase her contribution rate as high as practical.
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Statistical
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Re: Helping with Mom's 401k

Post by Statistical »

Rebalancing isn't a critical as some people make it out to be. This can be a one and done setup. She (or you helping) set the allocation to be 60/40 (or whatever allocation) for both existing balances AND contributions. Every week her contributions plus any company match will be invested 60/40. In fact many 401k plans can be setup to rebalance automatically quarterly but even if they don't honestly rebalancing isn't that critical.

If she has online access and is willing to let you assist this can be completed in 5-10 minutes and not touched again for years.

I am not really sure what you concern is. Is she current in the TDF? Then either she agrees to switch or she doesn't. Right?
Last edited by Statistical on Mon Jul 26, 2021 8:58 am, edited 1 time in total.
Jack FFR1846
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Re: Helping with Mom's 401k

Post by Jack FFR1846 »

How much does she have in there? That matters, in my opinion. If she's got $15k saved, that costs her $94 a year. Who cares? If she'll do the swap, then list all available funds by ER, lowest to highest. Choose whatever has the lowest ER, regardless of what it is.

When someone has less than $100k, none of this AA stuff really matters. Once her account exceeds this, which from the tone of your post, she never will do, then she could look into AA. Or she could leave it alone and be fine. Saving anything is what's important for her. You don't want to complicate things and have her give up and just click the "stop investing" button.
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Wiggums
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Re: Helping with Mom's 401k

Post by Wiggums »

Jack FFR1846 wrote: Mon Jul 26, 2021 8:56 am How much does she have in there? That matters, in my opinion. If she's got $15k saved, that costs her $94 a year. Who cares? If she'll do the swap, then list all available funds by ER, lowest to highest. Choose whatever has the lowest ER, regardless of what it is.

When someone has less than $100k, none of this AA stuff really matters. Once her account exceeds this, which from the tone of your post, she never will do, then she could look into AA. Or she could leave it alone and be fine. Saving anything is what's important for her. You don't want to complicate things and have her give up and just click the "stop investing" button.
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RickBoglehead
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Re: Helping with Mom's 401k

Post by RickBoglehead »

Statistical wrote: Mon Jul 26, 2021 8:53 am Rebalancing isn't a critical as some people make it out to be. This can be a one and done setup. She (or you helping) set the allocation to be 60/40 (or whatever allocation) for both existing balances AND contributions. Every week her contributions plus any company match will be invested 60/40. In fact many 401k plans can be setup to rebalance automatically quarterly but even if they don't honestly rebalancing isn't that critical.

If she has online access and is willing to let you assist this can be completed in 5-10 minutes and not touched again for years.

I am not really sure what you concern is. Is she current in the TDF? Then either she agrees to switch or she doesn't. Right?
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Topic Author
Superleaf444
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Re: Helping with Mom's 401k

Post by Superleaf444 »

Jack FFR1846 wrote: Mon Jul 26, 2021 8:56 am How much does she have in there? That matters, in my opinion. If she's got $15k saved, that costs her $94 a year. Who cares? If she'll do the swap, then list all available funds by ER, lowest to highest. Choose whatever has the lowest ER, regardless of what it is.

When someone has less than $100k, none of this AA stuff really matters. Once her account exceeds this, which from the tone of your post, she never will do, then she could look into AA. Or she could leave it alone and be fine. Saving anything is what's important for her. You don't want to complicate things and have her give up and just click the "stop investing" button.
Yeah, I hear ya'. She doesn't have much. TBH I think I'm more worried about the growth vs the ER. And touche about the lack of importance of AA with such low numbers. I've been in the higher threshold for awhile, so I forget it matters way less when you are in the 5 figures.

Thx
Topic Author
Superleaf444
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Re: Helping with Mom's 401k

Post by Superleaf444 »

Statistical wrote: Mon Jul 26, 2021 8:53 am Rebalancing isn't a critical as some people make it out to be. This can be a one and done setup. She (or you helping) set the allocation to be 60/40 (or whatever allocation) for both existing balances AND contributions. Every week her contributions plus any company match will be invested 60/40. In fact many 401k plans can be setup to rebalance automatically quarterly but even if they don't honestly rebalancing isn't that critical.

If she has online access and is willing to let you assist this can be completed in 5-10 minutes and not touched again for years.

I am not really sure what you concern is. Is she current in the TDF? Then either she agrees to switch or she doesn't. Right?
Yeah, I could totally set it up for her that way. I think I was more worried about the AA when it becomes out of sync from whatever market conditions. But in reality, after reading a few other posts, I think my concern should be more on a better fund/low fee rather than AA. Which totally makes sense.
delamer
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Re: Helping with Mom's 401k

Post by delamer »

What are the mechanics of making a chamge to her current allocation and to the allocation of future contributions?

You indicated that you don’t think she’d do anything, but can you help her create an online account and sit with her while she makes the changes?
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Kenkat
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Re: Helping with Mom's 401k

Post by Kenkat »

Depending on the plan, many will allow you to set up an auto rebalance feature that will periodically take your portfolio back to a set percentage of each fund. Mine has this, although I do not use it myself.
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