Need help with new 401k

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Topic Author
Jay
Posts: 146
Joined: Wed Feb 28, 2007 12:02 pm

Need help with new 401k

Post by Jay »

Through employment changes, I have access to a new 401k. It doesn't have bad choices, but it does not offer the funds I currently prefer to use.

I like to keep things real simple. I don't typically use target date funds, but I'm not a slice-and-dicer either.

I'm hoping you very smart people can steer me towards the best approximation without getting too complicated with too many funds.

I'm not really looking to change my investment strategy, but rather implement it with these new vehicles. However, if you truly think I'm driving off a cliff, I'm open to hearing about it.

My current retirement account looks like this:
  • 40% Total Bond - VBTLX
  • 36% Total Stock - VTSAX
  • 24% Total International Stock - VTIAX
My new choices are:
  • TIAA-CREF Large-Cap Value Index (TILVX - 0.05%)
  • Vanguard Value Index (VVIAX - 0.05%)
  • TIAA-CREF Large-Cap Growth (TILIX - 0.05%)
  • Vanguard Growth Index (VIGAX - 0.05%)
  • Vanguard Mid-Cap Value ETF (VOE - 0.13%)
  • Fidelity Mid Cap Index Fund (FSMDX - 0.03%)
  • Vanguard Mid-Cap Growth ETF (VOT - 0.13%)
  • Vanguard Small Cap Value Index (VSIAX - 0.07%)
  • TIAA-CREF Small-Cap Blend Index (TISBX - 0.06%)
  • Vanguard Small Cap Growth Index (VSGAX - 0.07%)
  • Fidelity International Index (FSPSX - 0.04%)
  • Northern EM Equity Index (NOEMX - 0.14%)
  • Fidelity Real Estate Index (FSRNX - 0.07%)
  • Vanguard Balanced Index Fund (VBIAX - 0.07%)
  • State Street Ret 2020-2065 (in 5 year increments) (0.07%)
  • JH Stable Value Guaranteed Income Fund
  • DFA Intermediate Gov Fixed (DFIGX - 0.12%)
  • BlackRock US Debt Index (WBRUOX - 0.04%)
  • Vanguard Total International Bond Index (VTABX - 0.11%)

UPDATE: I've also learned of the following schedule of fees:

Record-keeping services: 0.23% pro-rata
Administration and management: 0.57% pro-rata

These seem above-average to me. Where do these fall on the spectrum of good-typical-terrible?

Our matching logic was phrased as "100% match on first 3% of compensation, 50% match on next 5%". It specifically said compensation, not contributions. That struck me as unusual, but I think it means "contributions as a % of compensation". So if I make 100,000 it's 100% on first 3k, then 50% on the next 5k, then nothing".

With this fee structure and a 24% marginal federal tax bracket this year, does it make sense to continue to contribute in excess of the match?
Last edited by Jay on Tue Dec 07, 2021 4:59 pm, edited 5 times in total.
GP813
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Joined: Wed Dec 11, 2019 9:11 am

Re: Need help with new 401k

Post by GP813 »

VTSAX is the total US stock market, so you don't confuse those responding.

Those are some weird choices as they offer small cap value(VSIAX) and small cap growth(VSGAX) but no S&P 500 or Total Stock Market from Vanguard. Are those all the choices?
Makefile
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Joined: Fri Apr 22, 2016 11:03 pm

Re: Need help with new 401k

Post by Makefile »

Suggest playing around with Morningstar Instant X-ray and look at the style box: https://www.tdameritrade.com/education/ ... -xray.html

For example, it looks like you can approximate total stock market with:
40% Value Index
45% Growth Index
7% Small Cap Value Index
8% Small Cap Growth Index

If you wanted fewer funds you could drop the small cap stuff, which would approximate something closer to S&P 500

The Fidelity International Index and the Northern EM Equity Index in an 80/20 ratio would approximate total international.

Looks like BlackRock US Debt Index is the aggregate bond index, so that would do for total bond.
Topic Author
Jay
Posts: 146
Joined: Wed Feb 28, 2007 12:02 pm

Re: Need help with new 401k

Post by Jay »

Thank you for pointing out the error. I will fix it to not continue confusing people.

Yes, that is every choice. It does seem like it has some odd inclusions/omissions for me, at least in terms of consistency.
GP813
Posts: 1243
Joined: Wed Dec 11, 2019 9:11 am

Re: Need help with new 401k

Post by GP813 »

Jay wrote: Tue Dec 07, 2021 3:02 pm Thank you for pointing out the error. I will fix it to not continue confusing people.

Yes, that is every choice. It does seem like it has some odd inclusions/omissions for me, at least in terms of consistency.
I would double check and ask. I know my mom's old 401K plan did not list all the choices on certain literature. She had to ask for list of all choices. Also if you want total stock market, total international, or S&P 500 for Vanguard ask for them specifically. They might be a different shares class than the Admiral funds and have a different symbol but they'll be other Vanguard choices on many retirement accounts.
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Need help with new 401k

Post by tashnewbie »

I agree this is an odd selection of funds. There are 2 different funds each for Large Cap Growth and Large Cap Value, but no Large Cap Blend fund??

If this is truly the full selection, then I would probably use either of these options:

Option 1
Vanguard Balanced Index Fund (VBIAX - 0.07%) - This is 60/40 (edited) mix of TSM and Total Bond. Depending on what you have in other accounts, you may need to adjust the holdings slightly in this account by adding a US stock fund (I'd probably do just the Mid Cap Blend Fund) or some other asset class fund.
Fidelity International Index (FSPSX - 0.04%) - This is just Developed Markets. I would prefer simplicity and wouldn't add Emerging Markets.

Option 2
Vanguard Value Index (VVIAX - 0.05%)
Vanguard Growth Index (VIGAX - 0.05%)
Fidelity International Index (FSPSX - 0.04%)
BlackRock US Debt Index (WBRUOX - 0.04%)

I'm not sure what percentage of the Large Cap Blend is value versus growth, but I'd try to approximate that. As a user above mentioned, M* might help you identify that split.
Last edited by tashnewbie on Wed Dec 08, 2021 9:05 am, edited 2 times in total.
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retired@50
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Location: Living in the U.S.A.

Re: Need help with new 401k

Post by retired@50 »

tashnewbie wrote: Tue Dec 07, 2021 4:13 pm Option 1
Vanguard Balanced Index Fund (VBIAX - 0.07%) - This is 50/50 mix of TSM and Total Bond.
Actually, VBIAX is a 60/40 mix.

Source: https://investor.vanguard.com/mutual-fu ... file/VBIAX

You might have been thinking of the tax managed balanced fund (VTMFX), which is 50/50 with the 50% in bonds in municipal bonds.
Source: https://investor.vanguard.com/mutual-fu ... file/VTMFX

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Topic Author
Jay
Posts: 146
Joined: Wed Feb 28, 2007 12:02 pm

Re: Need help with new 401k

Post by Jay »

UPDATE: I've also learned of the following schedule of fees:

Record-keeping services: 0.23% pro-rata
Administration and management: 0.57% pro-rata

These seem above-average to me. Where do these fall on the spectrum of good-typical-terrible?

Our matching logic was phrased as "100% match on first 3% of compensation, 50% match on next 5%". It specifically said compensation, not contributions. That struck me as unusual, but I think it means "contributions as a % of compensation". So if I make 100,000 it's 100% on first 3k, then 50% on the next 5k, then nothing".

With this fee structure and a 24% marginal federal tax bracket this year, does it make sense to continue to contribute in excess of the match?
Last edited by Jay on Tue Dec 07, 2021 4:59 pm, edited 1 time in total.
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retired@50
Posts: 12826
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Need help with new 401k

Post by retired@50 »

Jay wrote: Tue Dec 07, 2021 4:46 pm UPDATE: I've also learned of the following schedule of fees:

Record-keeping services: 0.23% pro-rata
Administration and management: 0.57% pro-rata

All of a sudden this is feeling a lot worse to me. Where do these fall on the spectrum of good-typical-terrible?

Our matching logic was phrased as "100% match on first 3% of compensation, 50% match on next 5%". It specifically said compensation, not contributions. That struck me as unusual, but I think it means "contributions as a % of compensation". So if I make 100,000 it's 100% on first 3k, then 50% on the next 5k, then nothing".

I'm debating not contributing over the match, taking the tax hit now, and contributing to total stock in a taxable account. Is that an overreaction? This year's marginal bracket would be 24% federal for me.
Even though .9% is somewhere between typical and terrible, it's probably still worth it for the tax-deferral benefits.
Also, maybe you can get some of the money back through an employer match...?

See link about expensive 401k plan choices: https://www.bogleheads.org/wiki/401(k)# ... re_choices

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Topic Author
Jay
Posts: 146
Joined: Wed Feb 28, 2007 12:02 pm

Re: Need help with new 401k

Post by Jay »

retired@50 wrote: Tue Dec 07, 2021 4:58 pm
Even though .9% is somewhere between typical and terrible, it's probably still worth it for the tax-deferral benefits.
Also, maybe you can get some of the money back through an employer match...?

Regards,
I don't know the correct terminology to use, but my interpretation of their explanation was that (assuming 100k salary for easy numbers) that if I invested $8000, I would receive an additional $5500 in of match "for free".
exodusNH
Posts: 10347
Joined: Wed Jan 06, 2021 7:21 pm

Re: Need help with new 401k

Post by exodusNH »

Jay wrote: Tue Dec 07, 2021 2:54 pm Through employment changes, I have access to a new 401k. It doesn't have bad choices, but it does not offer the funds I currently prefer to use.

I like to keep things real simple. I don't typically use target date funds, but I'm not a slice-and-dicer either.

I'm hoping you very smart people can steer me towards the best approximation without getting too complicated with too many funds.

I'm not really looking to change my investment strategy, but rather implement it with these new vehicles. However, if you truly think I'm driving off a cliff, I'm open to hearing about it.

My current retirement account looks like this:
  • 40% Total Bond - VBTLX
  • 36% Total Stock - VTSAX
  • 24% Total International Stock - VTIAX
My new choices are:
  • TIAA-CREF Large-Cap Value Index (TILVX - 0.05%)
  • Vanguard Value Index (VVIAX - 0.05%)
  • TIAA-CREF Large-Cap Growth (TILIX - 0.05%)
  • Vanguard Growth Index (VIGAX - 0.05%)
  • Vanguard Mid-Cap Value ETF (VOE - 0.13%)
  • Fidelity Mid Cap Index Fund (FSMDX - 0.03%)
  • Vanguard Mid-Cap Growth ETF (VOT - 0.13%)
  • Vanguard Small Cap Value Index (VSIAX - 0.07%)
  • TIAA-CREF Small-Cap Blend Index (TISBX - 0.06%)
  • Vanguard Small Cap Growth Index (VSGAX - 0.07%)
  • Fidelity International Index (FSPSX - 0.04%)
  • Northern EM Equity Index (NOEMX - 0.14%)
  • Fidelity Real Estate Index (FSRNX - 0.07%)
  • Vanguard Balanced Index Fund (VBIAX - 0.07%)
  • State Street Ret 2020-2065 (in 5 year increments) (0.07%)
  • JH Stable Value Guaranteed Income Fund
  • DFA Intermediate Gov Fixed (DFIGX - 0.12%)
  • BlackRock US Debt Index (WBRUOX - 0.04%)
  • Vanguard Total International Bond Index (VTABX - 0.11%)

UPDATE: I've also learned of the following schedule of fees:

Record-keeping services: 0.23% pro-rata
Administration and management: 0.57% pro-rata

These seem above-average to me. Where do these fall on the spectrum of good-typical-terrible?

Our matching logic was phrased as "100% match on first 3% of compensation, 50% match on next 5%". It specifically said compensation, not contributions. That struck me as unusual, but I think it means "contributions as a % of compensation". So if I make 100,000 it's 100% on first 3k, then 50% on the next 5k, then nothing".

With this fee structure and a 24% marginal federal tax bracket this year, does it make sense to continue to contribute in excess of the match?
Odd choices for sure. Your easiest bet is 50/50 vanguard large cap growth and value. You can add 15% fidelity mid cap. Or maybe 10% mid and do 5% small cap value and growth.

Those matching percents are for safe harbor status. I think it should be that they match you 1:1 up to 3% of salary and then 1:2 up to 5%, meaning a total match of 4.5% of your salary. That's a standard elective safe harbor.

1% get 1%
2% get 2%
3% get 3%
4% get 3.5%
5% get 4%

You need to contribute 5% to get your max match.

And yes, maxing out the $19.5k is worth it.

One final more, your company may only match when you contribute. Be careful maxing out the $19.5 before your final paycheck. You might lose the match on the final paychecks of the year. You'll have to ask how they handle it. My company will not true you up of you hit your threshold early.
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retired@50
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Re: Need help with new 401k

Post by retired@50 »

Jay wrote: Tue Dec 07, 2021 5:03 pm
retired@50 wrote: Tue Dec 07, 2021 4:58 pm
Even though .9% is somewhere between typical and terrible, it's probably still worth it for the tax-deferral benefits.
Also, maybe you can get some of the money back through an employer match...?

Regards,
I don't know the correct terminology to use, but my interpretation of their explanation was that (assuming 100k salary for easy numbers) that if I invested $8000, I would receive an additional $5500 in of match "for free".
That sounds pretty good to me (the matching plan).

As exodusNH suggests above, get familiar with the 401k plan rules and regulations to ensure that you understand everything, especially the company matching rules and the fees.

Regards,
Last edited by retired@50 on Tue Dec 07, 2021 6:10 pm, edited 2 times in total.
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Makefile
Posts: 2657
Joined: Fri Apr 22, 2016 11:03 pm

Re: Need help with new 401k

Post by Makefile »

I wonder why an employer would go to all the expense of paying the 4% match on a safe harbor 401(k), only to structure it with such burdensome fees on the participant balances.

Might it be a case of you (labor market competition) can make us provide a 401(k) plan, but you can't make us like it?
Topic Author
Jay
Posts: 146
Joined: Wed Feb 28, 2007 12:02 pm

Re: Need help with new 401k

Post by Jay »

Makefile wrote: Tue Dec 07, 2021 6:01 pm I wonder why an employer would go to all the expense of paying the 4% match on a safe harbor 401(k), only to structure it with such burdensome fees on the participant balances.

Might it be a case of you (labor market competition) can make us provide a 401(k) plan, but you can't make us like it?
I didn't even know we were switching until today. My honest guess is they simply don't know any better. If I was on the committee I would have fought really hard for a better plan. I successfully overturned something similar about 15 years ago by illustrating to the CEO that the plan provider was going to make more money than the contributing employees did on average (it was a LOT worse than this 0.9% and had funds with high ERs, funds with loads, etc etc) but I don't have the same kind of sway today I guess.
Makefile
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Joined: Fri Apr 22, 2016 11:03 pm

Re: Need help with new 401k

Post by Makefile »

The funny thing is, isn't part of the point of a safe-harbor plan is that avoiding nondiscrimination testing reduces administration expenses?
exodusNH
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Re: Need help with new 401k

Post by exodusNH »

Makefile wrote: Tue Dec 07, 2021 6:25 pm The funny thing is, isn't part of the point of a safe-harbor plan is that avoiding nondiscrimination testing reduces administration expenses?
Safe harbor allows your highly compensated people to max out their 401k. It isn't about the administration overhead, or at least mostly not.
exodusNH
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Joined: Wed Jan 06, 2021 7:21 pm

Re: Need help with new 401k

Post by exodusNH »

Jay wrote: Tue Dec 07, 2021 6:14 pm
Makefile wrote: Tue Dec 07, 2021 6:01 pm I wonder why an employer would go to all the expense of paying the 4% match on a safe harbor 401(k), only to structure it with such burdensome fees on the participant balances.

Might it be a case of you (labor market competition) can make us provide a 401(k) plan, but you can't make us like it?
I didn't even know we were switching until today. My honest guess is they simply don't know any better. If I was on the committee I would have fought really hard for a better plan. I successfully overturned something similar about 15 years ago by illustrating to the CEO that the plan provider was going to make more money than the contributing employees did on average (it was a LOT worse than this 0.9% and had funds with high ERs, funds with loads, etc etc) but I don't have the same kind of sway today I guess.
Honestly, it's probably a lot less work for the HR staff. They can fob it off on the provider. Maybe the reporting is better. Maybe the payroll integration is simpler.

Our HR staff spends soooooo much time every freaking year trying to figure out healthcare that any time and money savings here allows them to do better with healthcare.

It's insane.
tashnewbie
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Re: Need help with new 401k

Post by tashnewbie »

retired@50 wrote: Tue Dec 07, 2021 4:22 pm
tashnewbie wrote: Tue Dec 07, 2021 4:13 pm Option 1
Vanguard Balanced Index Fund (VBIAX - 0.07%) - This is 50/50 mix of TSM and Total Bond.
Actually, VBIAX is a 60/40 mix.

Source: https://investor.vanguard.com/mutual-fu ... file/VBIAX

You might have been thinking of the tax managed balanced fund (VTMFX), which is 50/50 with the 50% in bonds in municipal bonds.
Source: https://investor.vanguard.com/mutual-fu ... file/VTMFX

Regards,
Good catch. I don't know what I was thinking of.

Maybe the 60/40 split of VBIAX would make using it easier for the OP?
tashnewbie
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Joined: Thu Apr 23, 2020 12:44 pm

Re: Need help with new 401k

Post by tashnewbie »

OP: Looks like the administrative fees are 0.80%, not 0.90%.
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