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[Soroc]

OK, it looks like you have some good choices available. Unfortunately, the target date funds are bit on the expensive side, but you have good index fund options that can cover your bases.

Equity Index Fund should be your largest component no matter what you do with the rest.

You'll want to decide if you want to go for a total market approach, which would invite you to also invest in the SM Midcap Core Index fund. The rough split usually present is 3:1 Large:Mid/Small. So of your 100%, that could be 75/25.

You'll also want to decide if you want to hold international or bonds, and you can use the International Index and Bond Index funds. A target date fund might hold 30% international and, for one your age, 10% bonds. You can decide if you like those percentages or would like to go higher or lower. If you use these funds, obviously scale back your domestic but keep the 3:1 ratio on them for the large and mid-cap split.

See this recent post of mine to see how splits might look under various strategies, replacing the fund names you see mentioned with your own.

As for the Roth, Vanguard has inexpensive target date funds that allow you to truly set it and forget it, so if that's appealing to you, then investigate that option. If you want to be more aggressive than that, you can manage your own allocations to reduce bonds and do whatever with international. I'd say with the first $5500, either do the target date or go into VTSMX (total stock markey, a domestic equity fund), and then reevaluate your allocation next year when you make more contributions, and I'd generally recommend keeping the same general strategy for simplicity if you invest additional funds outside of retirement accounts.

This is all excellent advice. Really appreciate the time and effort to help me out.

Just thought of 1 more question. In regards to the 401k maximum contribution of 18.5k. Is that maximum based on only what I contribute or does that include the 5% that my employer matches? Like can I do 20% and hit 18.5k and then my employer still contribute 5% on top of that? I'm guessing no but figure I'd ask.

 

[Darren870]

This is all excellent advice. Really appreciate the time and effort to help me out.

Just thought of 1 more question. In regards to the 401k maximum contribution of 18.5k. Is that maximum based on only what I contribute or does that include the 5% that my employer matches? Like can I do 20% and hit 18.5k and then my employer still contribute 5% on top of that? I'm guessing no but figure I'd ask.

No, the employer match doesn't count. $53k is the combined limit with employer match.

However the limit is 18k, not 18.5k.

 

[Randolph Freelander]

Darren870 has you covered on your limit, and your employer can actually kick in quite a bit more. Your combined limit between yourself and your employer is $53,000 for those below 50. (Woudn't you like to work for an employer that kicked in $35,000?)

Incidentally, if you reached the age of 50 this year, you could kick in $6000 more.

 

[Icelandic_Jazz]

Hi all. My new employer's 401k has a great match (50% of my contribution up to the maximum, so a free $9000 basically). I'm definitely going to want to max it out, but I want to make sure I'm picking the right funds.

For reference I'm 26, and I've only really been investing in my Vanguard Roth IRA (100% Target Retirement 2055) and my previous employers crappy 401k with no match.


Here are my options with the new 401k (through Fidelity):

VANG RUS 1000 GR TR - Large Cap - 0.0216%
VANG RUS 1000 VAL TR - Large Cap - 0.0202%
VANG S&P 500 IDX TR - Large Cap - 0.0113%
ARTISAN MID CAP - Mid-Cap - 0.5033%
DFA SM/MD CAP VAL - Small Cap - 0.2556%
VANG RUS 2000 GR TR - Small Cap - 0.0304%
RUSSELL INTL GROWTH - International - 0.5734%
RUSSELL INTL VALUE - International - 0.5728%
PIMCO TOTAL RETURN - Bond Investments - Income - 0.27%
VANG ST BD IDX IS PL (VBIPX) - Bond Investments - Income - 0.05%

No additional fees for any of these.

There's also a Target Retirement fund, BTC Lifepath 2050, with an expense ratio of 0.1% if I were to go that route.

The Vanguard S&P 500 seems like a good deal, but I'm not crazy about the expense ratio of the international and mid cap choices.

Out of these I'm thinking I would go with a large percentage of VANG S&P 500 IDX TR, VANG RUS 2000 GR TR for a small cap, RUSSELL INTL GROWTH for an international fund, and then a small amount of VBIPX for bonds?

I see there's also an option for BrokerageLink with my 401k. Does anyone have experience with this? If I understand it correctly, I could use it as a brokerage service and invest in a much larger variety of mutual funds and not be limited to what funds I've listed above. It's a lot of information to take in though and I haven't read about it in this thread.

 

[tokkun]

Out of these I'm thinking I would go with a large percentage of VANG S&P 500 IDX TR, VANG RUS 2000 GR TR for a small cap, RUSSELL INTL GROWTH for an international fund, and then a small amount of VBIPX for bonds?

What do you see as the advantage of this proposal over just buying the target date fund? Although you didn't specify your allocations, it sounds like you want to hold a similar set of asset classes as a target date fund, but by rolling your own it will be slightly more expensive, harder to keep balanced, and less diversified.

 

[Icelandic_Jazz]

Would it be more expensive? Except for the international stock, the expense ratios are all lower individually than the target date fund. Plus I would have the flexibility to choose my allocations. I'm young and don't think I need to invest in much bonds at all yet. The target date fund doesn't seem to have the best reviews on MorningStar, though I don't know how much weight that holds.

I see myself holding about
80% S&P 500
15% International (less that normal due to the .5% expense)
4% Small Cap
1% in Bonds

I would have to rebalance the funds myself later on, but seems like I would have more flexibility and lower expenses. I'm totally open to the target date fund if it is the better option though. I just don't want something too conservative.

 

[Randolph Freelander]

Would it be more expensive? Except for the international stock, the expense ratios are all lower individually than the target date fund. Plus I would have the flexibility to choose my allocations. I'm young and don't think I need to invest in much bonds at all yet. The target date fund doesn't seem to have the best reviews on MorningStar, though I don't know how much weight that holds.

I see myself holding about
80% S&P 500
15% International (less that normal due to the .5% expense)
4% Small Cap
1% in Bonds

I would have to rebalance the funds myself later on, but seems like I would have more flexibility and lower expenses. I'm totally open to the target date fund if it is the better option though. I just don't want something too conservative.

The only thing about your blend is that you don't have a mid-cap component, which a target date fund would provide and would be included in an overall "total market" strategy. Given that you only have an expensive mid-cap option, if you added it in, it would increase your expenses above the target date fund.

With your breakdowns, I calculate that you would come in slightly under (0.09% vs. 0.10%), but if I took the liberty of adding in mid-cap and then splitting the domestic stock somewhat traditionally (63% large, 14% mid, 7% small, leaving your other components unchanged), then your expenses come to 0.15%. (This uses the Artisan Midcap fund, not the DFA, which appears to be a combined small and midcap fund).

That said, I agree you're young enough to not worry about bonds (in my opinion), so I would tend to favor not having them, which also means not having the target date fund. But I'm aggressive. The 1% you're using as an example practically asks "what's the point?"

Edit: One thing I don't like about your fund options is that, other than the large cap category, you don't have a standard index fund option for other categories, you have funds for growth or value, but not a blend. Very unfortunate.

 

[tokkun]

When I said more expensive, I was assuming you would be using a similar international allocation as in the target date fund.

I agree with the sentiment that there is no point in holding bonds if it is just 1%. It is not going to affect the performance of your portfolio (even the 10% in the target fund only has a small impact), and you shouldn't feel like you need to include it just to tick a box. I feel like a lot of people labor under the misconception that a more complex portfolio is better because it is somehow more sophisticated, but in reality it just tends to cause people to make mistakes like not rebalancing or over-representing some subsection of the market. An investor's goal should be to have the simplest possible portfolio that meets their needs for risk and diversification at a reasonable price.

 

[GhaleonEB]

When I said more expensive, I was assuming you would be using a similar international allocation as in the target date fund.

I agree with the sentiment that there is no point in holding bonds if it is just 1%. It is not going to affect the performance of your portfolio (even the 10% in the target fund only has a small impact), and you shouldn't feel like you need to include it just to tick a box. I feel like a lot of people labor under the misconception that a more complex portfolio is better because it is somehow more sophisticated, but in reality it just tends to cause people to make mistakes like not rebalancing or over-representing some subsection of the market. An investor's goal should be to have the simplest possible portfolio that meets their needs for risk and diversification at a reasonable price.

Nicely said. The end result of that line of thinking for me has been to limit my portfolio to two funds (domestic and international indexes), and balance between them. But the general principle is definitely one to follow, whether that's one fund or more. There are rapidly diminishing returns once you have adequate diversification, and as you said, risks increase with added complexity. Keep it simple should be a pillar of retirement investing.

 

[Maiden Voyage]

My 401k is through Wells Fargo. They don't have a lot of great options and for a few months, I did their managed investment option where they choose what and how much to allocate. I noticed that I was losing money on transaction fees once a month. They were moving money back and forth.

Here are my available options. Are there any I should actively avoid? My primary investment that I currently have chosen is the BR S&P 500 Index.

 

[Randolph Freelander]

My 401k is through Wells Fargo. They don't have a lot of great options and for a few months, I did their managed investment option where they choose what and how much to allocate. I noticed that I was losing money on transaction fees once a month. They were moving money back and forth.

Here are my available options. Are there any I should actively avoid? My primary investment that I currently have chosen is the BR S&P 500 Index.

Whoever put together your fund options hates you. Just know that.

The target date funds are all high expense (0.75%), and it doesn't look like you have much else to choose from. I didn't look at everything, but it does seem that there are a lot of managed funds in there. I'd go heavy on the S&P 500 fund as you're currently doing and start screaming at the closest person who may or may not have anything to do with your offerings. For diversification, you might want to use an outside IRA (after securing your full employer match) to balance out your portfolio (by adding small and midcaps, international, or bonds to your satisfaction).

Edit: I guess looked at all the other stock funds there. They're terribly expensive, ranging from 0.5% to 1.52% expense ratios. Scream at everybody.

Edit 2: Two funds you might consider if you opened an outside IRA would be with Vanguard, VEXMX and VGTSX. The former is a blended fund for small and mid-caps that will balance out your domestic holdings, and the later is an international fund. Of course, if your 401K is just starting, there's really not much harm in being solely large cap for the time being. As your balance grows, hopefully your fund offerings will also improve and allow you to diversify inside that account.

 

[GhaleonEB]

My 401k is through Wells Fargo. They don't have a lot of great options and for a few months, I did their managed investment option where they choose what and how much to allocate. I noticed that I was losing money on transaction fees once a month. They were moving money back and forth.

Here are my available options. Are there any I should actively avoid? My primary investment that I currently have chosen is the BR S&P 500 Index.

From that list, the S&P500 is the only good option you have. What is the expense ratio in it? It looks like from this prospectus, it should be about 0.04%, which is excellent.

I'm in a similar situation with my employer; the Vanguard S&P500 index is my only good option. If you want further diversification, you might consider opening an IRA at Vanguard or Fidelity, and using the larger set of index funds there. (Making sure to maximize any employer match first.)

 

[Maiden Voyage]

Whoever put together your fund options hates you. Just know that.

The target date funds are all high expense (0.75%), and it doesn't look like you have much else to choose from. I didn't look at everything, but it does seem that there are a lot of managed funds in there. I'd go heavy on the S&P 500 fund as you're currently doing and start screaming at the closest person who may or may not have anything to do with your offerings. For diversification, you might want to use an outside IRA (after securing your full employer match) to balance out your portfolio (by adding small and midcaps, international, or bonds to your satisfaction).

Edit: I guess looked at all the other stock funds there. They're terribly expensive, ranging from 0.5% to 1.52% expense ratios. Scream at everybody.

Edit 2: Two funds you might consider if you opened an outside IRA would be with Vanguard, VEXMX and VGTSX. The former is a blended fund for small and mid-caps that will balance out your domestic holdings, and the later is an international fund. Of course, if your 401K is just starting, there's really not much harm in being solely large cap for the time being. As your balance grows, hopefully your fund offerings will also improve and allow you to diversify inside that account.

From that list, the S&P500 is the only good option you have. What is the expense ratio in it? It looks like from this prospectus, it should be about 0.04%, which is excellent.

I'm in a similar situation with my employer; the Vanguard S&P500 index is my only good option. If you want further diversification, you might consider opening an IRA at Vanguard or Fidelity, and using the larger set of index funds there. (Making sure to maximize any employer match first.)

It is .04% thankfully.

I think I will lower my overall contribution to just my employer match and switch to Vangard for an IRA. I had a sneaking suspicion that's what I would wind up doing anyway. Thank you both for the replies. This thread is extremely beneficial for me as I'm just starting to learn about investments.

 

[Icelandic_Jazz]

The only thing about your blend is that you don't have a mid-cap component, which a target date fund would provide and would be included in an overall "total market" strategy. Given that you only have an expensive mid-cap option, if you added it in, it would increase your expenses above the target date fund.

With your breakdowns, I calculate that you would come in slightly under (0.09% vs. 0.10%), but if I took the liberty of adding in mid-cap and then splitting the domestic stock somewhat traditionally (63% large, 14% mid, 7% small, leaving your other components unchanged), then your expenses come to 0.15%. (This uses the Artisan Midcap fund, not the DFA, which appears to be a combined small and midcap fund).

That said, I agree you're young enough to not worry about bonds (in my opinion), so I would tend to favor not having them, which also means not having the target date fund. But I'm aggressive. The 1% you're using as an example practically asks "what's the point?"

Edit: One thing I don't like about your fund options is that, other than the large cap category, you don't have a standard index fund option for other categories, you have funds for growth or value, but not a blend. Very unfortunate.

Thanks for the input everyone. Would my best bet be to just go with the Target Date fund then? Maybe I could invest in both the Target Date fund and the S&P 500 to be a bit more aggressive but stay diversified? Or I can just do my diversification within my Roth IRA. Sucks having limited funds to choose from.

 

[Randolph Freelander]

Thanks for the input everyone. Would my best bet be to just go with the Target Date fund then? Maybe I could invest in both the Target Date fund and the S&P 500 to be a bit more aggressive but stay diversified? Or I can just do my diversification within my Roth IRA. Sucks having limited funds to choose from.

I'd not object to either approach. For Roth diversification, just check my reply a couple of posts above for options. But if you were to split your funds just in your 401K between the target and the S&P, that would be fine. Truth be told, if you took Warren Buffett at face value, you could just go all in on the S&P 500 index and not even worry about it.

 

[Maiden Voyage]

So, after looking things over I have come to the decision to reallocate my finances. Mrs. Voyage and I are currently contributing about 24% of our income to 401k and 50% of our net toward student loans. Once the student loans are done--this fall thankfully--we will be able to fund the Roth IRA and the other investments with the money we are currently paying on student loans.

My employer does .5% match up to 6% (so I do 6% and they will do 3%). I will do 6% in their terrible 401k (which is a few posts above).

After that we will finance a Roth IRA from Vanguard for me and one for Mrs. Voyage. That will be a total of $11,000 annually.

Any money after the 401k and Roth IRA will then be put in to Index Funds via Vanguard or through Peer-to-Peer lending.

I think this will be a better vehicle for retirement than by keeping my 401k contributions high. Is there anything else that I may be missing?

Edit: I also noticed that my employer has a Roth 401k plan. Would it be worthwhile to divert any future contributions to this instead of the traditional 401k? Or should I perhaps put any amount over 6% and after the Roth IRA contributions into the Roth 401k?

 

[Randolph Freelander]

So, after looking things over I have come to the decision to reallocate my finances. Mrs. Voyage and I are currently contributing about 24% of our income to 401k and 50% of our net toward student loans. Once the student loans are done--this fall thankfully--we will be able to fund the Roth IRA and the other investments with the money we are currently paying on student loans.

My employer does .5% match up to 6% (so I do 6% and they will do 3%). I will do 6% in their terrible 401k (which is a few posts above).

After that we will finance a Roth IRA from Vanguard for me and one for Mrs. Voyage. That will be a total of $11,000 annually.

Any money after the 401k and Roth IRA will then be put in to Index Funds via Vanguard or through Peer-to-Peer lending.

I think this will be a better vehicle for retirement than by keeping my 401k contributions high. Is there anything else that I may be missing?

Edit: I also noticed that my employer has a Roth 401k plan. Would it be worthwhile to divert any future contributions to this instead of the traditional 401k? Or should I perhaps put any amount over 6% and after the Roth IRA contributions into the Roth 401k?

I'm with you right up until it looks like you abandon your 401K completely after the employer match.

The S&P 500 Index is a good fund, and the tax advantage -- whether you go Roth or traditional -- is something you want. Yes, go ahead and fund your Roth IRAs, but then come back to the 401K and go hard at it until you reach its maximum ($18000 for individuals below 50), if you can.

I don't know what your income is, but if your employer is going to kick in 3%, I'll just say their part is $3000 for example purposes. If you were to take your Roth and split your part into the small/mid cap fund I suggested and take your wife's part and go into the international fund, and say you were to max out the 401K and go all in on the S&P 500 fund, your allocations would look like (ignoring what 401K your wife might have, which hopefully has better fund options):

21K S&P 500 (66%)
5.5K Small/Mid (17%)
5.5K International (17%)

That's actually a pretty good split. It's a bit heavy on the S&P versus what Vanguard's total market would look like (3.8 to 1, S&P 500 to small/mid, versus 3 to 1), but it's not really problematic. It's also a bit light on international versus what a target date fund might hold, but I don't think it's a huge problem, though you may differ.

I'd say go with something like that. And if you don't get to the point where you completely max out your 401K, that's fine, just work with your IRA holdings to get the overall allocations you desire. And again, hopefully your wife has a good 401K (or similar) plan that you can factor into these allocations.

As for whether or not you want to do Roth or Traditional in your 401K, that's hard to pin down. That's really a question of would you like to pay the tax now or later. The general rule of thumb is that the higher your top marginal rate is now, the more you'd like to avoid it. However, nobody knows what future tax rates might be, and if you take a pessimistic approach and assume they're going to be higher, maybe you want to avoid them regardless of what your top rate is now. Nobody can tell you with certainty which way you want to go on that. But if you're the sort who has the ability to actually max out your IRA and 401K, then you're someone who probably stands to gain from avoiding taxes now (suggesting a traditional 401K) as long as marginal rates do not look vastly different when you retire. You just need to understand that it's a gamble.

 

[Maiden Voyage]

I'm with you right up until it looks like you abandon your 401K completely after the employer match.

The S&P 500 Index is a good fund, and the tax advantage -- whether you go Roth or traditional -- is something you want. Yes, go ahead and fund your Roth IRAs, but then come back to the 401K and go hard at it until you reach its maximum ($18000 for individuals below 50), if you can.

I don't know what your income is, but if your employer is going to kick in 3%, I'll just say their part is $3000 for example purposes. If you were to take your Roth and split your part into the small/mid cap fund I suggested and take your wife's part and go into the international fund, and say you were to max out the 401K and go all in on the S&P 500 fund, your allocations would look like (ignoring what 401K your wife might have, which hopefully has better fund options):

21K S&P 500 (66%)
5.5K Small/Mid (17%)
5.5K International (17%)

That's actually a pretty good split. It's a bit heavy on the S&P versus what Vanguard's total market would look like (3.8 to 1, S&P 500 to small/mid, versus 3 to 1), but it's not really problematic. It's also a bit light on international versus what a target date fund might hold, but I don't think it's a huge problem, though you may differ.

I'd say go with something like that. And if you don't get to the point where you completely max out your 401K, that's fine, just work with your IRA holdings to get the overall allocations you desire. And again, hopefully your wife has a good 401K (or similar) plan that you can factor into these allocations.

As for whether or not you want to do Roth or Traditional in your 401K, that's hard to pin down. That's really a question of would you like to pay the tax now or later. The general rule of thumb is that the higher your top marginal rate is now, the more you'd like to avoid it. However, nobody knows what future tax rates might be, and if you take a pessimistic approach and assume they're going to be higher, maybe you want to avoid them regardless of what your top rate is now. Nobody can tell you with certainty which way you want to go on that. But if you're the sort who has the ability to actually max out your IRA and 401K, then you're someone who probably stands to gain from avoiding taxes now (suggesting a traditional 401K) as long as marginal rates do not look vastly different when you retire. You just need to understand that it's a gamble.

Thanks for the reply. I think you are correct with putting the rest of my money toward the 401k and having my IRA spread in that manner. I will keep the focus on my 401k up until the max limit per year and then find outside investments from there. We make really good money and live fairly inexpensively so we're able to save the majority of our income, or rather, we will be able to once we pay off our student loans.

I'm pessimistic when it comes to future taxes. Though, because we live inexpensively, the amount we need to retire to maintain our lifestyle will be much lower than what we currently take home (50% goes to student loans), so our income level at retirement may be in a lower tax bracket. Plus, my current retirement funds are all in my traditional 401k and I would hate to move them to a Roth 401k simply for the tax bill next year. I will have to talk with the wife to see what her thoughts are before I pull the trigger on most of these plans. Your advice and this thread have been extremely enlightening. Thank you!

 

[Chris R]

Is that $18,000 cap JUST for 401k? Or would that include a SEP account?

 

[Randolph Freelander]

Is that $18,000 cap JUST for 401k? Or would that include a SEP account?

SEP IRAs can be funded up to $53,000 for 2016 by employers (including if you're self-employed). This is similar to the combined employee + employer limit for the 401K.

https://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-SEPs-Contributions

 

[Chris R]

SEP IRAs can be funded up to $53,000 for 2016 by employers (including if you're self-employed). This is similar to the combined employee + employer limit for the 401K.

https://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-SEPs-Contributions

But if I'm just getting it through my employers I can't add to it beyond my $5,500 yearly IRA cap right? But I can contribute to an Individual 401k, up to $18,000?

 

[Randolph Freelander]

But if I'm just getting it through my employers I can't add to it beyond my $5,500 yearly IRA cap right? But I can contribute to an Individual 401k, up to $18,000?

There's no individual 401K, unless you are self-employed.

If you're an employee under a SEP-IRA plan, you can make regular IRA contributions to it, but nothing more, it's supposed to be an employer-funded plan. If your employer is going ham, that's awesome. If not, you would wish you had a 401K instead, as your employer is doing you a disservice. Though, apparently it's possible for an employer to offer both the 401K and the SEP-IRA at the same time. I'm not sure why they would, but what do I know.

 

[anonymous_abc]

Can someone in the US tell me if you are able to buy European based index funds?
e.g.
Fund WKN ISIN
CS.-STX.EU.600 NR U.ETF I ETF060 LU0378434582
DB X-TR.MSCI USA INDEX 1C DBX1MU LU0274210672
ISHSVII-CO.S+P 500 UC.ETF A0YEDG IE00B5BMR087

If yes, that might open up the possibility to move my investment account over to the US when I move as opposed to have to sell everything when leaving Germany.

 

[Chris R]

There's no individual 401K, unless you are self-employed.

If you're an employee under a SEP-IRA plan, you can make regular IRA contributions to it, but nothing more, it's supposed to be an employer-funded plan. If your employer is going ham, that's awesome. If not, you would wish you had a 401K instead, as your employer is doing you a disservice. Though, apparently it's possible for an employer to offer both the 401K and the SEP-IRA at the same time. I'm not sure why they would, but what do I know.

They aren't doing terrible, but I'll ask if I can have more matched. I want to say it's 5% now.

 

[Randolph Freelander]

Can someone in the US tell me if you are able to buy European based index funds?
e.g.
Fund WKN ISIN
CS.-STX.EU.600 NR U.ETF I ETF060 LU0378434582
DB X-TR.MSCI USA INDEX 1C DBX1MU LU0274210672
ISHSVII-CO.S+P 500 UC.ETF A0YEDG IE00B5BMR087

If yes, that might open up the possibility to move my investment account over to the US when I move as opposed to have to sell everything when leaving Germany.

I don't want to let this dangle, and I don't know much, but you can trade international stocks and ETFs, I'd think you'd be able to do mutual funds (or whatever the European equivalent is), though I don't know for sure.

https://www.fidelity.com/stock-trading/faqs-international
https://www.fidelity.com/stock-trading/international-stock-trading

More commonly applicable to US investors are US-based index funds that cover international markets, such as the one below that covers the European market

https://personal.vanguard.com/us/funds/snapshot?FundId=0079&FundIntExt=INT

Perhaps someone with more international trading experience can answer more directly.

 

[anonymous_abc]

I don't want to let this dangle, and I don't know much, but you can trade international stocks and ETFs, I'd think you'd be able to do mutual funds (or whatever the European equivalent is), though I don't know for sure.

https://www.fidelity.com/stock-trading/faqs-international
https://www.fidelity.com/stock-trading/international-stock-trading

There's also US-based index funds that cover the European market

https://personal.vanguard.com/us/funds/snapshot?FundId=0079&FundIntExt=INT

Perhaps someone with more international trading experience can answer more directly.

Thanks, I'm just weighing my options now that expatriation is looming ever closer.

 

[Randolph Freelander]

I bought into VTI yesterday in a taxable account.

You're welcome, everyone!

 

[giga]

I thought you were a fidelity guy?

 

[anonymous_abc]

So I have some new information from my future employer in the US.

Regarding 401k they work with Fidelity NetBenefits

Dassault Systèmes offers you the opportunity to help save
money for your future through the 401(k) Employee Savings
Plan. This plan provides a way to set aside eligible earnings
(including base salary, bonus, commissions, and overtime) for
your retirement on a pre-tax or post-tax basis, and provides a
number of advantages over a traditional savings plan.
You can contribute between 1% and 75% of your eligible pay
to your plan account, up to the annual federal limit of $18,000.

If you are or will be age 50 or older in 2016, you may make an
additional “catch-up” contribution of $6,000.

Dassault Systèmes matches your contributions 50 cents on
the dollar, up to the first 8% of your eligible compensation
that you contribute based on match eligibility criteria. The
maximum employer contribution is equal to 4% of your eligible
compensation. You are always fully vested in your contributions;
you become vested in company match

Is that any good? Sounds reasonable to me.
Will Fidelity have those sweet sweet ultra cheap ETFs we all love?

 

[Randolph Freelander]

I thought you were a fidelity guy?

Fidelity has my Roth. This is just independent investing through a different brokerage (Merrill Lynch, associated with my regular Bank of America accounts).

 

[Randolph Freelander]

So I have some new information from my future employer in the US.

Regarding 401k they work with Fidelity NetBenefits


Is that any good? Sounds reasonable to me.
Will Fidelity have those sweet sweet ultra cheap ETFs we all love?

I'm not familiar with NetBenefits, but generally speaking, 401K plans are more limited than what you can do in other investing. Plans usually offer a small selection of funds, no more than a couple dozen, and that count is usually inflated by the number of different target date funds. If you're lucky, that selection will include the broad, low-cost index funds that we like to recommend, though that's not always the case. Some plans are better than others, in other words. However, it's possible you'll be on a platform that's much more open, I just can't say.

As for Fidelity and ETFs, they're better with mutual funds, they are not quite as good with their own ETFs as Vanguard. However, they offer several iShares ETFs commission-free that can hit the notes we like. I can't say if any of these options will be included in your 401K offerings, though.

 

[anonymous_abc]

I'm not familiar with NetBenefits, but generally speaking, 401K plans are more limited than what you can do in other investing. Plans usually offer a small selection of funds, no more than a couple dozen, and that count is usually inflated by the number of different target date funds. If you're lucky, that selection will include the broad, low-cost index funds that we like to recommend, though that's not always the case. Some plans are better than others, in other words. However, it's possible you'll be on a platform that's much more open, I just can't say.

As for Fidelity and ETFs, they're better with mutual funds, they are not quite as good with their own ETFs as Vanguard. However, they offer several iShares ETFs commission-free that can hit the notes we like. I can't say if any of these options will be included in your 401K offerings, though.

Ok, so the funds on offer vary from employer to employer?
And a 4% match is that decent?

 

[Randolph Freelander]

Ok, so the funds on offer vary from employer to employer?
And a 4% match is that decent?

Yes, they can vary. In this thread, even on the last few pages, you can get a sense of the variety. Some plans offer great funds, others leave a lot to be desired.

4% isn't a bad match. The top result on searching for "average 401K match," for example, says the average is 2.7, so 4 clearly beats it. But this is another case where some companies are better than others. If your company is doing 4, and still others go even higher, that also suggests that quite a few companies are coming in quite low in order for the average to be where it is.

Given the realities of living in the US, I think retirement benefits should be high on the priority list in a job search, particularly for folks established within their career fields. To anyone looking for a job, don't hesitate to ask about these things, especially if you have multiple options in your job search. This is part of your compensation package, after all.

 

[anonymous_abc]

Yes, they can vary. In this thread, even on the last few pages, you can get a sense of the variety. Some plans offer great funds, others leave a lot to be desired.

4% isn't a bad match. The top result on searching for "average 401K match," for example, says the average is 2.7, so 4 clearly beats it. But this is another case where some companies are better than others. If your company is doing 4, and still others go even higher, that also suggests that quite a few companies are coming in quite low in order for the average to be where it is.

Given the realities of living in the US, I think retirement benefits should be high on the priority list in a job search, particularly for folks established within their career fields. To anyone looking for a job, don't hesitate to ask about these things, especially if you have multiple options in your job search. This is part of your compensation package, after all.

Well I am staying in my company and just moving to the US and getting a local contract there. So there is no choice in employer at this point.

 

[Lethal]

I have a question directly related to the OP. I live in Hong Kong and its more expensive for me to invest in US stocks.

Does anybody know of an Index Fund that I could invest in locally? There are a lot of ETF funds here but I'm not sure if they are the same thing.

 

[anonymous_abc]

I have a question directly related to the OP. I live in Hong Kong and its more expensive for me to invest in US stocks.

Does anybody know of an Index Fund that I could invest in locally? There are a lot of ETF funds here but I'm not sure if they are the same thing.

imho for all intents and purposes it makes little difference for us small time investors. Go with what is available and cheapest.

 

[iamblades]

I have a question directly related to the OP. I live in Hong Kong and its more expensive for me to invest in US stocks.

Does anybody know of an Index Fund that I could invest in locally? There are a lot of ETF funds here but I'm not sure if they are the same thing.

An ETF is just a fund you can buy in an exchange. The index should be in the name of the ETF though, and if not the prospectus will tell you what the investment strategy of the fund is.

As far as the index ETFs I can find listed for trading in the Hong Kong exchange, most are asian indexes, though there is a Nasdaq index fund it looks like.

I'd imagine people who know more about that market should have better options for you to look at though.

 

[Lethal]

Ok cool. My main concern was that ETFs were an entirely different thing.

I just wanted to find something similar to what was suggested in the OP since I can't really invest in the suggested index funds due to higher fees. I mean, I can set up a US Stocks account but I dont wanna get burned on the higher fees.

 

[Makai]

SEP IRAs can be funded up to $53,000 for 2016 by employers (including if you're self-employed). This is similar to the combined employee + employer limit for the 401K.

https://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-SEPs-Contributions

Oh man, that is absurd.

 

[Xirj]

Any thoughts on a GOOG/GOOGL stock split? The price has been high for a year ~$700.

 

[GhaleonEB]

Any thoughts on a GOOG/GOOGL stock split? The price has been high for a year ~$700.

Probably a better question for the stock thread.

 

[iamblades]

Any thoughts on a GOOG/GOOGL stock split? The price has been high for a year ~$700.

I mostly agree with Warren Buffet on the subject of stock splits. They attract short term investors and speculators.

That said, I don't see a huge downside to a split of the non-voting C shares.

 

[Barkley's Justice]

This is currently what I'm rocking with Vanguard. What do you guys think? I'm interested in long term, 20 years:

VFIAX Vanguard 500 Index Fund Admiral Shares

VGTSX Vanguard Total International Stock Index Fund Investor Shares

VTSMX Vanguard Total Stock Market Index Fund Investor Shares

 

[Randolph Freelander]

This is currently what I'm rocking with Vanguard. What do you guys think? I'm interested in long term, 20 years:

VFIAX Vanguard 500 Index Fund Admiral Shares

VGTSX Vanguard Total International Stock Index Fund Investor Shares

VTSMX Vanguard Total Stock Market Index Fund Investor Shares

VFIAX and VTSMX are going to overlap. If that's your intention, well, OK. But VTSMX is 73% large cap (S&P 500). Adding another S&P 500 index fund is driving the weight of that category up in your portfolio, and driving the weight of mid- and small-caps down. Again, if that's your intent, stick with it. If not, I'd consolidate VFIAX and VTSMX into VTSAX, the admiral shares version of the total stock market fund.

 

[Barkley's Justice]

VFIAX and VTSMX are going to overlap. If that's your intention, well, OK. But VTSMX is 73% large cap (S&P 500). Adding another S&P 500 index fund is driving the weight of that category up in your portfolio, and driving the weight of mid- and small-caps down. Again, if that's your intent, stick with it. If not, I'd consolidate VFIAX and VTSMX into VTSAX, the admiral shares version of the total stock market fund.

Cool, thanks. And no, I didn't intend for that overlap.

Any others you recommend I pickup?

 

[Randolph Freelander]

Cool, thanks. And no, I didn't intend for that overlap.

Any others you recommend I pickup?

I'm kind of anti-bond for people decades out from retirement and will state that up front, but I'm also not responsible for your retirement or peace of mind.

There are plenty of opposing opinions, however. If you want to heed the advice of others from earlier in the thread, then maybe you want to pick up a bond fund such as VBMFX or VBTLX. Just go the OP and check the links in the very first sentence for arguments on that.

For that matter, if you decide to add in bonds and want to follow a traditional allocation, you could forego all the funds you're in and use a Vanguard target date fund that is in line with your timeframe for retirement.

 

[Kelsdesu]

Is there a lite version of this thread for novices?

 

[chaosblade]

Is there a lite version of this thread for novices?

That's basically what this thread is.

Have you read the OP? If so, what's not clicking for you?

 

[Barkley's Justice]

For that matter, if you decide to add in bonds and want to follow a traditional allocation, you could forego all the funds you're in and use a Vanguard target date fund that is in line with your timeframe for retirement.

Ohw, thanks. I wasn't even aware those existed.

 

[Chris R]

Ohw, thanks. I wasn't even aware those existed.

My Roth IRA is using the 2050, but I'm thinking of ditching it for VTSAX. Better returns and lower expense ratio, but I'd have zero bonds so a tank would hurt more I guess :/