Chosing New Funds after 401k Custodian Change

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case_of_ennui
Posts: 298
Joined: Mon Aug 17, 2020 5:07 pm
Location: Montana

Chosing New Funds after 401k Custodian Change

Post by case_of_ennui »

My employer is changing their 401k custodian in January. I posted a similar check not too long ago but I just found out today my new investment options for the 401k and I'm looking for some feedback on which to chose.

Emergency funds: I consider taxable account as emergency fund
Debt: None.
Tax Filing Status: Single
Tax Rate: 22% federal. 6.9% state
State of Residence: MT
Age: 33
Income: ~$100,000
Desired Asset allocation: 80% stocks, 10% REIT, 10% bonds
Desired International allocation: 30% of stocks

Portfolio is ~$300,000

Current assets:

Taxable:
E-Trade
9% Alphabet (GOOGL)
Vanguard
6.6% Vanguard Total International Stock Index Fund (VTIAX) 0.11% ER
12.5% Vanguard Total Stock Market Fund (VTSAX) 0.04% ER

Treasury Direct:
3.3% I-Bonds

401k:
Old Custodian/Fidelity
17% Vanguard Total Stk Market Index Fund Institutional Plus Shares (VITPX) 0.02% ER
17% Northern Trust Collective All Country World ACWI ex-US Fund 0.0455% ER
6.5% Northern Trust Collective Aggregate Bond Index Fund 0.02% ER

HSA
Fidelity
3.3% Wisdom Tree US Efficient Core Fund (NTSX) 0.2% ER

Roth IRA
Vanguard
10.2% Vanguard Total Stock Market Fund (VTSAX) 0.04% ER
14.6% Vanguard Real Estate Index Fund Admiral Shares (VGSLX) 0.12% ER

New annual Contributions:
$19,500 to 401k (plus 4% employer match)
$6000 to Roth IRA
$3000 to HSA (plus $500/yr employer contribution)
$5,000 to Taxable
$10,000 to I-Bonds


There are all of my new 401k options with the new custodian:

Life Income Strategy Fund 0.1% ER

Target Retirement Maturity Fund 0.1%ER

Target Retirement 2010 Fund 0.1% ER
Target Retirement 2015Fund 0.1% ER
Target Retirement 2020 Fund 0.1% ER
Target Retirement 2025 Fund 0.1% ER
Target Retirement 2030 Fund 0.1% ER
Target Retirement 2035 Fund 0.1% ER
Target Retirement 2040 Fund 0.1% ER
Target Retirement 2045 Fund 0.1% ER
Target Retirement 2050 Fund 0.1% ER
Target Retirement 2055 Fund 0.1% ER
Target Retirement 2060 Fund 0.1% ER
Target Retirement 2065 Fund 0.1% ER

GIC/Stable Value Income Fund 0.33% ER (YTD Return 2.44%, 1YR 3.32%, 3 Year 3.53%, 5 Year 3.50%)
Government/Credit Bond Fund 0.02% ER (BloombergBarclays U.S. Government/Credit Bond Index

US Large Equity Fund (S&P 500) 0.01% ER
Small Company Stock Fund 0.01% ER (Seeks to replicate Russell Small Cap Completeness Index)
International Equity Fund 0.03% ER (MSCI EAFE Index)
Emerging Markets Fund 0.1% ER

Real Return Fund 0.12% ER
Multi-Market Risk Parity Fund 0.45% ER
Company Stock

Questions:
1)I was happy having a Total US Stock Market fund with my old custodian but looks like that is no more. I looked at the Approximating Total Stock Market page in the wiki but there's nothing about the Small Cap Completeness Index. Reading the prospecus it includes companies in the Russell3000 index excluding those in the S&P 500. Of my US allocation in the 401k, would 90/10 or 80/20 S&P/Small Company Stock be a closer approximation of a Total Market Fund?
2)For the bond holdings I have in my 401k should I stick with the Government/Credit Bond fund? My old fund held corporates/MBS where it doesn't look like this new one does. My thoughts are it probably doesn't make a big difference. Alternatively would Bogleheads move into the Stable Value fund instead at those listed returns with that ER?
exodusNH
Posts: 10249
Joined: Wed Jan 06, 2021 7:21 pm

Re: Chosing New Funds after 401k Custodian Change

Post by exodusNH »

case_of_ennui wrote: Tue Dec 07, 2021 3:04 pm GIC/Stable Value Income Fund 0.33% ER (YTD Return 2.44%, 1YR 3.32%, 3 Year 3.53%, 5 Year 3.50%)
Government/Credit Bond Fund 0.02% ER (BloombergBarclays U.S. Government/Credit Bond Index

US Large Equity Fund (S&P 500) 0.01% ER
Small Company Stock Fund 0.01% ER (Seeks to replicate Russell Small Cap Completeness Index)
International Equity Fund 0.03% ER (MSCI EAFE Index)
Emerging Markets Fund 0.1% ER

Real Return Fund 0.12% ER
Multi-Market Risk Parity Fund 0.45% ER
Company Stock

Questions:
1)I was happy having a Total US Stock Market fund with my old custodian but looks like that is no more. I looked at the Approximating Total Stock Market page in the wiki but there's nothing about the Small Cap Completeness Index. Reading the prospecus it includes companies in the Russell3000 index excluding those in the S&P 500. Of my US allocation in the 401k, would 90/10 or 80/20 S&P/Small Company Stock be a closer approximation of a Total Market Fund?
2)For the bond holdings I have in my 401k should I stick with the Government/Credit Bond fund? My old fund held corporates/MBS where it doesn't look like this new one does. My thoughts are it probably doesn't make a big difference. Alternatively would Bogleheads move into the Stable Value fund instead at those listed returns with that ER?
https://www.investopedia.com/terms/r/ru ... -index.asp

S&P 500 & 15-20% of the completeness will come pretty close. Many here would argue that just the S&500 would be fine.

Stable value or government bonds would be fine. Be aware that the stable value fund might have withdrawal limits (e.g. 20% per year), which can make rebalancing annoying if you've got all of your FI exposure in them.

The stable value fund is going to be slow to respond to interest rate changes. Its yield right now is probably higher than the government bonds. I've usually put 20% of my bonds into the stable value fund and the rest into an intermediate bond fund. Your bond holdings are a relatively small percentage of your portfolio. It probably doesn't really matter; statistically, you're going to have several more jobs over the next few years and will probably wind up moving your 401k a couple of times. Whatever you choose for the 3 years you'll be here probably won't have a material impact over 30+ years.
tashnewbie
Posts: 4230
Joined: Thu Apr 23, 2020 12:44 pm

Re: Chosing New Funds after 401k Custodian Change

Post by tashnewbie »

case_of_ennui wrote: Tue Dec 07, 2021 3:04 pm Life Income Strategy Fund 0.1% ER
Real Return Fund 0.12% ER
What types of holdings are in those funds above? Are they passively or actively managed? If they use a benchmark index, what is it?

I would probably just use the S&P 500 index fund for US stock allocation. If you want to try to approximate TSM, you could do 80% 500 and 20% small cap (the "completion fund" is often called extended market).

For bonds, I would probably put some in the stable value fund, which is probably paying more than the other bond funds right now, but that will change when/if rates increase. The return of the stable value fund is after expenses.
Topic Author
case_of_ennui
Posts: 298
Joined: Mon Aug 17, 2020 5:07 pm
Location: Montana

Re: Chosing New Funds after 401k Custodian Change

Post by case_of_ennui »

tashnewbie wrote: Tue Dec 07, 2021 4:01 pm
case_of_ennui wrote: Tue Dec 07, 2021 3:04 pm Life Income Strategy Fund 0.1% ER
Real Return Fund 0.12% ER
What types of holdings are in those funds above? Are they passively or actively managed? If they use a benchmark index, what is it?

I would probably just use the S&P 500 index fund for US stock allocation. If you want to try to approximate TSM, you could do 80% 500 and 20% small cap (the "completion fund" is often called extended market).

For bonds, I would probably put some in the stable value fund, which is probably paying more than the other bond funds right now, but that will change when/if rates increase. The return of the stable value fund is after expenses.


Life Income Strategy Fund 0.1% ER
The ER actually changes with your age. 0.1% below 48y/o, 0.16-1.15% age 48-59, 1.19% > 60y/o
Actively Managed
Reading the prospectus it looks like an active TDF based off your age. Changing proportions of US Large/Small cap, Intl, Bonds, Inflation Protected Securities, Emerging Market, and "real assets" over time.

Real Return Fund 0.12% ER
Actively Managed
Invests in Gov issued inflation linked bonds, global real estate securities, natural resource equities, and commodities.



Thanks to both reponses it sounds like 80/20 should work for the US split. In the short term going forward I'll be maintaining my 10% target bond allocation via I-Bond purchases so I'm not sure if I'll be contributing to the Stable Value fund.
exodusNH
Posts: 10249
Joined: Wed Jan 06, 2021 7:21 pm

Re: Chosing New Funds after 401k Custodian Change

Post by exodusNH »

case_of_ennui wrote: Tue Dec 07, 2021 4:12 pm Thanks to both reponses it sounds like 80/20 should work for the US split. In the short term going forward I'll be maintaining my 10% target bond allocation via I-Bond purchases so I'm not sure if I'll be contributing to the Stable Value fund.
That's a good idea, and it's what I've been doing for about half of this year and planning for the entirety of next.

I happen to have an old whole life insurance contract that acts at the other part of my bond holdings. It's returns are (after 17 years) about 3.5%, which is reasonable. I would never recommend the product to anyone. By the time I realized it was a mistake, which was only earlier this year, it was at the point where it made a reasonable FI choice. (Had I invested the funds 80/20 instead of buying/getting sold the whole life policy, I'd have about $100,000 more wealth.)

The rest of the FI has been going into I Bonds since May.

I just liquidated a modest taxable account at American Funds to get the cash for January's I Bond purchase as well as pay off a 0% interest credit card balance. The balance of the funds will go back into the market. Between the whole life payments and the I Bond purchases, my bond allocation is set for 2021.

I'm debating on EE Bonds to start the 20-year period for doubling, which is about a 3.5% return over that period of time. That would help cover the 67-70 period between retirement and social security.
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