401K Strategy Advice

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sailor_77
Posts: 5
Joined: Sun Mar 12, 2017 9:42 pm
Location: Florida

401K Strategy Advice

Post by sailor_77 » Sun Oct 29, 2017 12:07 pm

Hello,

Thanks in advance for any tips you guys can provide.

I have been playing with a service that ICMA-RC offers to see what investing strategy would allow me a "safe" retirement.

This is what it recommended for me:

Large cap growth 14 %
Large cap value 17 %
International 25 %
Emerging Markets 12 %
Real Estate 4 %
Small cap growth 5 %
Small cap value 7 %
Mid cap growth 7 %
Mid cap value 9 %

I know it's aggressive, but I would like to know what you guys think of it.

Dennis

TravelforFun
Posts: 845
Joined: Tue Dec 04, 2012 11:05 pm

Re: 401K Strategy Advice

Post by TravelforFun » Sun Oct 29, 2017 12:52 pm

That's 100% equity. How old are you and how high is your risk tolerance level?

TravelforFun

mega317
Posts: 1114
Joined: Tue Apr 19, 2016 10:55 am

Re: 401K Strategy Advice

Post by mega317 » Sun Oct 29, 2017 1:06 pm

what investing strategy would allow me a "safe" retirement.
Do you mean to hold this portfolio during retirement? No way.

Agree, not enough bonds. It's a heavy mid- and small-cap tilt. I also don't know that 4% in real estate would make any significant difference.
Is the recommendation to hold 9 separate funds? I think managing that would be more trouble than it's worth.

sailor_77
Posts: 5
Joined: Sun Mar 12, 2017 9:42 pm
Location: Florida

Re: 401K Strategy Advice

Post by sailor_77 » Tue Oct 31, 2017 6:36 am

TravelforFun wrote:
Sun Oct 29, 2017 12:52 pm
That's 100% equity. How old are you and how high is your risk tolerance level?

TravelforFun
I'm 40 years old. My portfolio is 100 % in stocks (Large cap blend fund) My wife is 36 and her portfolio is 50% large cap growth and 50% small/mid cap growth.....So needless to say we are taking some big risks already.

But I do appreciate any information you can provide. Any constructive criticism is always welcome.


Dennis

sailor_77
Posts: 5
Joined: Sun Mar 12, 2017 9:42 pm
Location: Florida

Re: 401K Strategy Advice

Post by sailor_77 » Tue Oct 31, 2017 6:40 am

mega317 wrote:
Sun Oct 29, 2017 1:06 pm
what investing strategy would allow me a "safe" retirement.
Do you mean to hold this portfolio during retirement? No way.

Agree, not enough bonds. It's a heavy mid- and small-cap tilt. I also don't know that 4% in real estate would make any significant difference.
Is the recommendation to hold 9 separate funds? I think managing that would be more trouble than it's worth.

Thanks for your response.

I was just using a tool ICMA-RC has to see how my current investing strategy would do compared to theirs and that's what it suggested to do.

What would you do?

Dennis

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ruralavalon
Posts: 11694
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 401K Strategy Advice

Post by ruralavalon » Tue Oct 31, 2017 6:51 am

sailor_77 wrote:
Sun Oct 29, 2017 12:07 pm
Hello,

Thanks in advance for any tips you guys can provide.

I have been playing with a service that ICMA-RC offers to see what investing strategy would allow me a "safe" retirement.

This is what it recommended for me:

Large cap growth 14 %
Large cap value 17 %
International 25 %
Emerging Markets 12 %
Real Estate 4 %
Small cap growth 5 %
Small cap value 7 %
Mid cap growth 7 %
Mid cap value 9 %

I know it's aggressive, but I would like to know what you guys think of it.

Dennis
What is your age? Are you retired? If not about how far from expected retirement?

What specific funds will you use? Please give fund names, tickers and expense ratios. The generic description of the funds does not tell me very much.

Do you have any other accounts and investments?

Will you have a significant pension?

You can simply add this to your original post using the edit button.

. . . . .

In general:

1) The portfolio is 100% stocks, which is inherently very risky at any stage of life. "Aggressive" isn't the right word to label this. The portfolio should include a fixed income (bond) allocation; and

2) I see no sense in both value and growth funds in each stock size. Simply use blend funds, or total stock market and total international funds. Nine stock funds is unnecessarily complex, with no readily apparent benefit.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

JW-Retired
Posts: 6471
Joined: Sun Dec 16, 2007 12:25 pm

Re: 401K Strategy Advice

Post by JW-Retired » Tue Oct 31, 2017 7:17 am

sailor_77 wrote:
Sun Oct 29, 2017 12:07 pm
I have been playing with a service that ICMA-RC offers to see what investing strategy would allow me a "safe" retirement.

This is what it recommended for me:

Large cap growth 14 %
Large cap value 17 %
International 25 %
Emerging Markets 12 %
Real Estate 4 %
Small cap growth 5 %
Small cap value 7 %
Mid cap growth 7 %
Mid cap value 9 %

I know it's aggressive, but I would like to know what you guys think of it.
The 100% stocks doesn't bother me to much since I'm guessing you are young and just starting out. (ps: I see you are 40.....that's still young!)

I think you would be better off with just total US and total international stock mkt funds. Mainly because (1) a whole bunch of funds usually means they are picking ones with significantly higher expenses ratios, and these are a huge drain on your investment over many years, and (2) another reason for the "service" to do this is to make investing very mysterious and complicated so you need them.

What are these funds they want you to choose, i.e., including trading symbols and expense ratios?

Welcome to the Forum!
JW
Retired at Last

goingup
Posts: 2781
Joined: Tue Jan 26, 2010 1:02 pm

Re: 401K Strategy Advice

Post by goingup » Tue Oct 31, 2017 7:23 am

This is for your 401K? Often the best strategy in 401K is to either use a Target Retirement fund or broad low-cost index funds. If you list your options (with expense ratios - ERs) you may get more specific feedback.

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ruralavalon
Posts: 11694
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 401K Strategy Advice

Post by ruralavalon » Tue Oct 31, 2017 7:37 am

Contributions.
In your first post back in March you said your investments were barely $160k combined.

One of the most important things you can do to ensure a comfortable retirement is to increase your contributions. Don't limit yourselves to contributing just enough to get the employer matches. You have some excellent funds offered in his 401k and governmental 457 plans, you are fortunate.

Contribute as much as is practical for you every year. At ages 35 and 39 you have plenty of time.


Bonds.
At ages 35 and 39 I suggest around 20% in bonds. That is expected to substantially reduce portfolio volatility(risk) with only a relatively small impact on portfolio performance. Please see the wiki article Boglehead's Investment Philosophy, part 3 "Never bear too much or too little risk".

In see from your last post back in March that bond funds you could use in his 401k or 457 plans include:
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.06%; and
Dodge & Cox Income Fund (DODIX) ER 0.43%.

Either would be a good choice for a bond investment, in general I would prefer the index fund.


U.S. stocks.
For U.S. stocks I suggest in his 401k more simply using just VT Vantagepoint Broad Market Index Fund ER 0.18%, instead of the 6 U.S. stock funds that you indicated in your first post here.


International stocks.
I suggest around 20-30% of stocks in international stock. Historically that has captured about 84-99% of the maximum diversification benefit. For a pdf of a Vanguard paper on the subject Google "Considerations for Investing in Non-U.S Equities", see pp. 5-6.

For international stocks I suggest using both developed markets and emerging markets funds. Both are available in his 457, but the VT Vantagepoint Overseas Equity Index Fund in his 401k is a MSCI EAFE index fund, and covers only larger companies only in developed markets, excluding Canada. Using a combination of the Vanguard Developed Markets and Vanguard Emerging Markets funds offered in his 457 plan will be better in my opinion.


Questions.
1) Apparently there are 4 accounts namely --
her 401k;
her governmental 457;
his 401k; and
his governmental 457.
Is that correct?

2) The last post back in March seems to list the funds offered in his 2 accounts. Is that correct?

3) Will you please list the funds offered in her 401k and governmental 457 plans? Please give fund names, tickers and expense ratios.

4) What are the relative sizes of all 4 accounts, in other words what percentage of total portfolio is currently in each account?

5) About how much (in dollars) do you feel that you might be able to contribute to investing annually (total, all accounts)?

6) How much (in dollars) is the maximum annual employer match in each of the 4 accounts?

It's often important to treat all accounts together as a single unified whole, and to coordinate the investments among all of a couple's accounts.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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